Fair Compensation Under the Fair Labor Standards Act

By Paula M. Singer & Linda Goldberg

Transport back in time to the world of work in 1930s America. Emerging slowly from the Great Depression, people are leaving the farms in droves to look for any work possible. Children are unable to attend school due to their families' reliance up their meager wages, most of which is earned at pitiful rates and in dangerous situations. People are so desperate for work that they bid for hourly work, each person underbidding the next until their wage rate is at pennies per hour. The dust bowl climate in the Midwest has ruined crops: starvation is secondary to desperation in ravaging the spirits of the average citizen.

Out of this set of circumstances, Congress passed the Fair Labor Standards Act (FLSA) in 1938. Since that time, the provisions of the Act have remained essentially unchanged. The FLSA sets a minimum wage, which has been amended many times since the Act was passed. The FLSA requires that overtime pay be provided for any time worked over 40 hours in a work week. Certain types of records are required to be kept by employers. The Act also, quite importantly, includes child labor restrictions designed to ensure educational opportunities of youth and prohibit them from being employed in jobs and conditions detrimental to their health and safety.

For many employers, including libraries, the most confusing aspect of the FLSA pertains to which employees are exempt from the overtime requirements and which are nonexempt from required overtime pay. The FLSA requires that overtime be paid at the rate of one and one-half times the employee's regular rate of pay for all hours worked in excess of 40 in the work week. The only exemption to overtime requirements applies to State and Local governments who may, under certain prescribed conditions, provide compensatory time off in lieu of cash overtime. Overtime is potentially a huge cost issue for most employers, and even more so for organizations, such as libraries, who are constantly battling to control labor costs.

There are two key issues in complying with these legal requirements. The first pertains to determining which employees are exempt from the overtime provisions. The second issue is determining whether your library falls under the Public Agency exemption from overtime.

The trickiest aspect of complying with the FLSA surrounds determining nonexempt and exempt status. Luckily, there are some readily available on-line tools employers can access. FLSA is enforced by the U.S. Department of Labor's Wage and Hour Division. They provide easily accessible information and compliance fact sheets at . Unfortunately, sometimes the information is as dense and difficult to interpret as James Joyce!

Clearer guidance is available, however, through what are called the "Long Test" and the "Short Test". These are rules which help an employer (and the agency enforcing the law) if a job is exempt from the overtime provisions. Essentially, this is a process of exclusion: all jobs are presumed to be nonexempt with respect to overtime unless there is a provision that pushes the position into the exempt category. Jobs are exempt based on the nature of the job (Executive, Administrative, Professionals, Computer, Outside Sales), the specific duties performed by the position, and the salary (seen largely to be irrelevant since it has not been updated or indexed to current rates). The parameters of the Short Test are shown below: (Outside Sales has been omitted for lack of relevance to libraries.)

By reviewing each position carefully against the test parameters, employers can determine which jobs, if any, are exempt from the overtime provisions. If not specifically exempted, the job is subject to overtime requirements and must be paid at a rate of one-and-one-half times the regular rate of pay for every hour worked over 40 in a work week.

In recent years, some libraries have adopted work practices which deviate from the FLSA prescribed overtime provisions. Compensatory time has been used in many places as a cost-effective alternative that also provides employees with additional discretionary time off. In many settings, especially for salaried professional employees working extensive overtime hours, this is a great unpaid benefit. However, for hourly employees in the nonexempt categories (i.e., not specifically exempted under the FLSA regulations), this is specifically not allowed. While, on the face of it, it seems to be a relatively benign practice designed to manage overtime expenses, create a spirit of people "pitching in" and providing a means to earn more time off, it may be, in effect, in violation of the law. The only exception to this is for employees of public agencies.

The Act is very specific (but still possibly ambiguous) as to what constitutes a public agency. Public agencies are State and Local government employers. According to the Wage and Hour Division of the U.S. Department of Labor, "State and local government employers consist of those entities that are defined as public agencies by the FLSA. "Public Agency" is defined to mean the Government of the United States; the government of a State or political subdivision thereof; any agency of the United States, a State or a political subdivision of a State, or any interstate governmental agency." Some libraries may ostensibly straddle the line between public agency and private employer in that they receive state or local funding but its employees are not employees of State or Local government.

For those libraries which fall under the definition, compensatory time off may be an option. Even then, there is an explicit requirement for the awarding of compensatory time off to nonexempt employees. Compensatory time off must be at a rate of not less than one and one-half hours for each overtime hour worked, and awarded in lieu of cash overtime pay. The employer must keep records of compensatory time off awarded and used, same as records of overtime cash payments.

For exempt employees, libraries have no regulatory limitations on the use of compensatory time off. Libraries can adopt those policies on compensatory time off best designed to attract, retain and motivate exempt staff. Policies can be used to effectively "stretch" benefit and work practice packages to allow employees additional flexibility and discretionary time off with little increase to payroll costs.

FLSA compliance is a slippery slope, however, with alligators lurking at the bottom of the swamp. Just this past February, a federal jury in Oregon decided that Wal-Mart Stores had violated overtime provisions in one of more than three dozen similar lawsuits pending against the retailer. The company will be required to provide back pay for overtime employees were asked to perform "off the clock" and may be liable for attorney's fees. According to attorneys for the former and current employees involved in the lawsuit, employees reported being locked inside stores until other workers completed their jobs, and then told to pitch in off the clock, or asked to work through meal breaks.

While extensive rewriting of the overtime rules has been a priority of the Bush administration, no changes have been passed as of this writing. For the time being, libraries can take this time to review each and every job against the FLSA rules and make sure that jobs are appropriately classified. Consultants can help in this task, and attorneys should be consulted to ensure that libraries stay far away from the edge of that slippery slope as possible.

Copyright 2004–2008 ALA-APA. Contact Jenifer Grady, 50 E. Huron, Chicago, IL 60611, 312-280-2424, jgrady@ala.org for more information.