What you need to know about labor laws

By Megan Sullivan September 5, 2019

The U.S. Department of Labor (DOL) regulates and enforces laws that protect American workers and business owners. The federal agency’s most prominent set of regulations is the Fair Labor Standards Act (FLSA), which regulates employee pay, overtime, and more. It also details any penalties and fines for violating the act.

Make sure you’re following the rules and fairly paying your employees by looking at FLSA’s fundamental elements. Let’s start with defining which workers the act covers, which ones it doesn’t, and when exemptions to the FLSA apply.

Issuing a pay stub

Employees are covered as part of a sufficiently large business or as individual workers. If you own a business with 2 or more employees and make an annual revenue of $500,000 or more, all of your employees are covered.

If your work supports a business that engages in interstate commerce, you’re generally covered. This can be as apparent as regularly crossing state lines, or as subtle as routinely corresponding with people in different states. If your employees are covered, you need to determine whether or not they’re exempt or non-exempt from all or none of the FLSA’s provisions.

Exempt vs. non-exempt

If your employees are covered it doesn’t necessarily mean every single FLSA provision applies to them. Depending on an employee’s job description, work schedule, pay schedule, and age, an employee can be partially or wholly exempt from FLSA regulations. The FLSA covers minimum wage, overtime, and child labor regulations. Covered workers can be either exempt or non-exempt from 1 or all regulations.

A substantial portion of the U.S workforce is classified as non-exempt from the FLSA. Therefore, your business will be responsible for following the relevant regulations for your employees’ wages, overtime rules, and child labor regulations. Unless your employees fall into the categories provided by the FLSA, they are likely non-exempt.

However, some workers are exempt from the FLSA in part or as a whole. Exemptions are made based on your business’ industry, including job description, schedule, and age. Some exemptions are broad, such as the overtime exemption for “computer professionals” and certain workers that are paid on commission. Some are really specific, like the exemption for newspaper delivery. Because children delivered newspapers in the early 20th century, there are exemptions for minimum wage, overtime, and certain child labor regulations.

Now that you have an idea of how coverage and exemptions work, let’s see how the following regulations might apply to your workforce.

Minimum wage

The FLSA provides parameters for the federal minimum wage, which is the minimum per-hour amount that non-exempt workers can be paid for work performed. The current federal minimum wage is $7.25 per hour. Some states also have a minimum wage law that might be higher than the federal rate. In all instances, a worker must be paid whichever rate is higher, whether it’s the state or federal rate.

Minimum wage exceptions are made for specific worker types, including workers with disabilities, full-time students, workers under the age of 20, tipped employees, and student learners.

What’s not covered under the FLSA? Pay raises above the federal minimum wage, as well as extra compensation for night, weekend, or holiday work are not covered. Any such increase is generally determined by an agreement between the employer and the employee.

Tipped employees

A tipped employee regularly receives at least $30 in tips over the course of 1 month. In this case, employers are not required to pay these employees the federal or state minimum wage. The FLSA mandates that employers of tipped employees must pay them an hourly rate of $2.13 per hour. The intention is that any tips received by the employee will supplement the federal hourly tipped minimum wage pay to equal a rate of $7.25 per hour.

Many states have provisions in place specifically for compensating tipped employees. If you employ tipped workers, be sure to carefully review these rules. As with the normal minimum wage, tipped employees are entitled to the highest rate, whether mandated by the federal or state government.

Time off

The FLSA does not contain provisions for paid time off, including vacation, sick days, or holidays. There is no federal requirement for small businesses to offer these benefits to their employees, but some state legislatures have discussed doing so. Offering paid time off is your choice, and by doing so you can attract and retain top talent.

Paid breaks

No federal law requires businesses to provide paid breaks to employees. The FLSA states, however, that short breaks (periods between 5 and 20 minutes) should be included in an employee’s regular working hours as compensable time. In contrast to the federal government, many states require workers to receive a certain number of paid breaks per hours worked. Currently, these states include California, Colorado, Illinois, Kentucky, Minnesota, Nevada, Oregon, Vermont, and Washington. Check with your state’s labor office as these laws may change.

Paid meal periods

No federal law requires companies to provide workers with paid meal periods, but many states do have such laws. These states are California, Colorado, Connecticut, Delaware, Illinois, Kentucky, Maine, Massachusetts, Minnesota, Nebraska, New Hampshire, New York, North Dakota, Rhode Island, Tennessee, Vermont, and Washington. Many of these states have implemented separate regulations for different industries, so be sure to read all the requirements carefully.

Overtime

The FLSA mandates that a non-exempt worker receive time-and-one-half (50% more than their regular hourly pay) for hours worked after 40 hours within a week. Additionally, there is no federal law that requires double-time pay for hours worked. There are some exceptions for certain industries. These are relevant for public services such as police officers and firefighters employed by public agencies and hospitals and nursing homes. In addition to FLSA overtime regulations, some states have further provisions regulating overtime compensation and rules.

Child labor

Children under the age of 14 cannot be employed for most jobs. However, many exceptions exist. At any age, children are permitted to deliver newspapers, perform in radio, television or movies, work in businesses owned by their parents (except mining or hazardous work), babysit, or perform minor chores in a private residence. There are special considerations outlined for agricultural employment. Many states also have specific age requirements for child labor.

When making hiring and compensation decisions, be sure to closely examine your state’s labor laws as well as the FLSA to make sure you’re in compliance. Failure to do so may result in hefty fines and can open up your business to possible legal action by current and former employees.

6 labor law tips to help you stay in compliance

By Cathie Ericson September 5, 2019

When you started your business, you probably thought you’d spend all your time doing what you love—like sell jewelry, build apps, or run a bakery. Whatever your craft, one things is certain. You’re established and now you need to hire employees. It’s a big responsibility. You want to treat your staff well and retain great talent but you also want to make sure you’re following labor laws.

It can be tricky to navigate, which is why we’ve put together 6 labor laws tips you must consider when hiring on employees:

Accurately classify your workers—1099 vs. W-2

Under the Fair Labor Standards Act (FLSA), which also includes guidelines on minimum wage, overtime, and child labor, there are 2 ways to classify the people who work for you.

1099: These workers are independent contractors who are responsible for handling their own taxes. As an employer, you are not responsible for paying the employer’s portion of Social Security or Medicare taxes, nor do you have to pay the premiums for workers’ compensation or unemployment insurance. You are not responsible for paying overtime, unless that is part of the agreement with your contractor. However, you are responsible for reporting the contractor’s income through a 1099 form filed at the end of the year.
W-2: These employees are guaranteed various protections that 1099 contractors are not. For W-2 employees, you are responsible for handling Social Security and Medicare withholdings, paying state and federal taxes and other applicable payroll taxes, and paying for workers compensation and unemployment insurance. You are also required to pay at least minimum wage and overtime. Failure to meet any of these requirements can result in fines and sanctions from the IRS.

The IRS has a detailed description of employer responsibilities to W-2 employees. If you’re unsure of the status of your current workers, check out the 1099 vs. W-2 employee calculator. If you don’t know which type of worker is better for your business, here’s a detailed breakdown of the difference between 1099 and W-2 employees.

Make sure labor law posters are visible

Businesses of all sizes are required to display federal and state labor law posters at every location. Posters must be placed in a highly-visible location where someone might work. This includes your garage, home office, or anywhere else work might happen. Many business owners use a Poster Compliance Service to get automatic deliveries of up-to-date federal and state posters when laws change. With an average of 75 law changes a year, it’s nice to have someone else tracking the ones that apply to you.

Follow all anti-discrimination laws

Anti-discrimination laws must be considered through the hiring, management, and termination lifecycle of an employee. Violation of these laws come with hefty fines. The United States Equal Employment Opportunity Commission (EEOC) protects employees from discrimination based on:

Race
Color
Religion
Sex (including pregnancy, gender, and sexual orientation)
National origin
Age (40 or older)
Disability or genetic information

Maintain workplace safety

The OSH Act requires employers to provide safe workspaces that are free of any known dangers. Depending on the business, this can include providing safe equipment, protective wear, and safety training, or installing compliant emergency stations. OSHA provides free consultations to make sure your working environment is safe.

Find a great workers’ comp policy

Workers’ compensation is there in the unfortunate event of an emergency. Most states require you carry workers’ comp insurance, which can protect you and provide for your employee(s) in the event someone is hurt on the job. This handy chart tells you how to be compliant in your state, and Intuit’s Workers’ Comp Service can help you choose the right plan for your business.

Inform employees about affordable healthcare

While the “individual mandate” component has been removed from the Affordable Care Act (ACA or Obamacare), there are still a number of requirements in effect for small business. You need to supply your employees with information about the Health Insurance Marketplace, regardless of whether or not you provide health insurance. Learn more about how the ACA affects small businesses.

Your employees are worth it

There’s a lot to celebrate about hiring and paying employees! It’s also a lot of responsibility—they depend on you for their livelihoods and you depend on them to help your business thrive. By following the advice above, you’ll be on the right path to set your employees and your business up for success.

Labor law poster subscription service

How it works

Know when labor laws change in your state

Know your legal responsibility

Frequently asked questions

Poster requirements

Poster subscription service

For current customers

What you need to know about labor laws

Issuing a pay stub

Exempt vs. non-exempt

Minimum wage

Tipped employees

Time off

Paid breaks

Paid meal periods

Overtime

Child labor

6 labor law tips to help you stay in compliance

Accurately classify your workers—1099 vs. W-2

Make sure labor law posters are visible

Follow all anti-discrimination laws

Maintain workplace safety

Find a great workers’ comp policy

Inform employees about affordable healthcare

Your employees are worth it

How to save big and protect your business with updated labor posters

Small businesses are more compliant than big businesses

Many businesses simply don’t know the regulations

Being non-compliant comes at a price

English labor law poster service

Labor law poster subscription service

How it works

Know when labor laws change in your state

Know your legal responsibility

Frequently asked questions

Poster requirements

Poster subscription service

For current customers

Issuing a pay stub

Exempt vs. non-exempt

Minimum wage

Tipped employees

Time off

Paid breaks

Paid meal periods

Overtime

Child labor

Accurately classify your workers—1099 vs. W-2

Make sure labor law posters are visible

Follow all anti-discrimination laws

Maintain workplace safety

Find a great workers’ comp policy

Inform employees about affordable healthcare

Your employees are worth it

Small businesses are more compliant than big businesses

Many businesses simply don’t know the regulations

Being non-compliant comes at a price