Are Your Employees Covered by the FLSA?

I talk a lot about the Fair Labor Standards Act. And it’s important for most businesses to pay attention to the provisions of the FLSA, because many (most?) employees are covered by the provisions of this law. But not all employees…

There are two different set of criteria used to determine if an employee is covered by the FLSA: “enterprise coverage” and “individual coverage.”

Enterprise Coverage

Enterprise coverage applies when the entire organization is subject to the FLSA. Generally speaking, for this to happen, two things must be true:

  • The business must be involved in interstate commerce.
  • The business must gross more than $500,000 per year.

(There are some organizations that are automatically covered by the FLSA even if they don’t meet those two criteria. For instance, schools, hospitals, nursing homes and other residential care facilities, and all governmental entities regardless of size.)

Individual Coverage

Even if the entire business does not meet the criteria for FLSA coverage, individual employees within the business may be covered if their work affects interstate commerce. For example, if an employee delivers products across state lines, processes credit card payments from out-of-state banks or accept payments from out-of-state customers, or loads/unloads or uses products shipped from out-of-state suppliers, that employee would be covered by the FLSA.

No Coverage Doesn’t Mean No Risk

So, if your business has gross revenue of less than $500,000 and all your business is conducted strictly within your home state, you might think that you don’t need to worry about the FLSA’s minimum wage and overtime provisions… but you very well might be wrong.

If you truly are not covered by the FLSA, you might not need to worry about federal liability. But you may still be covered by state overtime and minimum wage rules. Many states do not exempt businesses on the same basis as the federal rules. Some states do not allow for any exemptions at all.

So even if you’ve been told you’re exempt from FLSA coverage, it’s not safe to assume that means you don’t need to worry about overtime or minimum wage at all. Better safe than sorry — consult with your employment law attorney to make sure you are meeting your state obligations as well as the federal.

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