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Support Grows For Overhauling FLSA's Principles

The federal Fair Labor Standards Act turns 72 years old this year. Even though today's working world is radically different from that of 1938, the FLSA's principles remain largely unchanged and have become increasingly counterproductive in a global economy. Many believe that it is imperative to harmonize this strict, unforgiving law with modern realities, including by making it more flexible, more adaptable, and better-attuned to the practical concerns and preferences of present-day employers and employees.

Further evidence of this growing sentiment surfaced last week in the form of a letter from the HR Policy Association to U.S. Labor Secretary Hilda Solis. In that correspondence, the organization advocated a reform-oriented collaboration among the Labor Department, the HRPA, and other interested parties. This would be a good starting point, but any meaningful success will depend in substantial part upon whether fundamental legislative changes in the FLSA itself can be brought to fruition.

Any list of proposed FLSA statutory revisions would be a long one, but high priorities should include:

  • A provision assigning at least some legal responsibility to non-exempt employees to report their worktime accurately. Today, employees sometimes claim months or years after-the-fact that their records reflect less time than they actually worked. The absence of any FLSA "give" on this means that such claims are routinely credited by the courts and by U.S. Labor Department investigators, even in cases where an employer has in place a policy designed to produce accurate time records, and even when there is room to question whether an employee is being truthful. Perhaps this could be addressed by, for example, creating a legal presumption that an employee's time records are accurate, if (i) the employee records his or her own hours worked each workday and each workweek; (ii) the employee reviews those records each workweek and certifies that they are correct; and (iii) the employer maintains, enforces, and in practice actually observes a written policy both stating how hours worked are to be recorded and requiring that all hours worked be accurately and correctly recorded each workday and each workweek.
  • An amendment stating that employees may be classified as exempt from the FLSA's minimum-wage, overtime, and timekeeping requirements based upon the amount of their compensation alone. Even though the FLSA directs the U.S. Labor Department to establish the parameters for certain exemptions, historically the agency has taken the position that it is not currently authorized to adopt any exemption that is based solely upon an employee's compensation level.
  • A modification saying that many, most, or even all bonuses and incentive pay may be excluded from the "regular rate of pay" used to compute FLSA overtime compensation. At present, overtime must be calculated on most such payments, including even non-cash prizes or awards of various kinds. The added costs and complications this entails lead many employers to reduce the amounts they are prepared to offer or to forgo offering bonuses or incentives altogether.
  • A section authorizing private-sector employers and employees to have an agreement or understanding permitting the use of compensatory time off in lieu of overtime pay. At the moment, this is not permitted under the FLSA for non-exempt employees in the private sector – most must receive overtime premium pay for all hours worked over 40 hours in a single workweek, even if they would rather have paid time off instead. There have been some proposals in this area in recent years, but they have tended to be unduly complicated and/or too narrowly focused, and in some ways they threatened adverse consequences that outweighed the advantages. One possibility would be to adopt an appropriate version of the current FLSA public-sector compensatory-time provision to cover private employers. Another might be to allow employees and employers to reach an understanding or agreement that overtime compensation will be due only after the employee has worked more than 160 hours in four consecutive workweeks.
  • An increase in the annual-dollar-volume threshold for FLSA "enterprise" coverage to a level higher than $500,000. This current minimum amount was first set in 1989, and a combination of inflation and other economic developments over the last 20 years means that this sum no longer serves Congress's purpose of excluding many small businesses from the FLSA's requirements. Consequently, the financial, regulatory, and claims-related burdens of the FLSA fall heavily upon a much-larger segment of small employers than Congress intended.

Of course, many details must be worked through before initiatives like these could be proposed or adopted. In addition, politically speaking, the FLSA has proven to be especially difficult to change. But perhaps high unemployment and the still-ailing economy provide atypical motivation for a coalition drawn from employees, employers, and government representatives who favor bringing the law into the 21st century.

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