Frequently Asked Questions

The Fair Labor Standards Act (FLSA) was enacted in 1938, during the Great Depression, to establish standards for fair wages and to ensure employees were protected from substandard wages and oppressive working hours. Courts in the United States interpret the act in such a way that protects vulnerable workers who may lack sufficient bargaining power to protect themselves from the harmful or unfair practices of their employers. The FLSA establishes minimum wage, overtime pay, recordkeeping, and child labor requirements for full-time and part-time workers in the private sector and in federal, state, and local governments. The FLSA protects employees who are the victims of illegal pay practices, regardless of immigration status.

The Fair Labor Standards Act does not require:

• vacation, holiday, severance, or sick pay;
• meal or rest periods, holidays off, or vacations;
• premium pay for weekend or holiday work;
• pay raises or fringe benefits; or
• a discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.

The FLSA contains specific exemptions from these basic standards. Some exemptions apply to particular types of businesses; others apply to specific kinds of work. While the FLSA does set basic minimum wage and overtime pay standards, and regulates the employment of minors, there are a number of employment practices that the FLSA does not regulate.

Some common exemptions are:

• The Motor Carrier Act Exemption (usually for employees who are interstate drivers);
• Exemptions for Farmworkers (usually for employees in agriculture);
• Exemptions for Commissioned Outside Sales employees;
• Exemptions for Executive, Administrative, or Professional (highly paid) employees;
• Exemptions for Computer Professionals; and
• Exemptions for employees of seasonal or recreational establishments.

For more information on exemptions, please visit: https://webapps.dol.gov/elaws/whd/flsa/screen75.asp

The FLSA applies only to employers whose annual dollar volume of sales or business done of $500,000 or more, or who are engaged in interstate commerce.

Though the FLSA typically covers large corporations, it also offers coverage for any business involved in “interstate commerce,” or companies that work, travel, or keep locations in multiple states. The courts generally interpret this loosely enough to even consider letters and mailings between states, or accepting phone calls from other states, as grounds for coverage under the FLSA.

Covered, nonexempt workers are entitled to a minimum wage of $7.25 per hour, effective July 24, 2009. Nonexempt workers must be paid overtime pay at a rate of not less than one and one-half times their regular rate of pay for any hours worked over forty (40) in a single workweek.

Wages required by the FLSA are due on the regular payday for the pay period covered. Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of employees below the minimum rate required by the FLSA, or reduce the amount of overtime pay due under the FLSA. For more information on coverage for deductions under the FLSA, visit: https://www.dol.gov/whd/regs/compliance/whdfs16.htm

The FLSA does not provide wage payment or collection procedures for an employee’s usual or promised wages, or commissions more than the minimum amount required by the FLSA. However, under North Carolina law, such claims (sometimes including fringe benefits) may be filed.

Under North Carolina law, an employer may withhold or divert any portion of an employee’s wages when the amount or rate of the proposed deduction is known and agreed upon in advance. No reductions may be made to overtime wages owed. The employer must have written authorization from the employee which:

1. is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made;
2. indicates the reason for the deduction; and
3. states the actual dollar amount or percentage of wages which shall be deducted from one or more paychecks. Provided, that if the deduction is for the convenience of the employee, the employee shall be given a reasonable opportunity to withdraw the authorization; or

When the amount of the proposed deduction is not known and agreed upon in advance, the employer must have written authorization from the employee which

1. is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made; and
2. indicates the reason for the deduction.

Prior to any deductions being made under this section, the employee must

1. receive advance written notice of the actual amount to be deducted;
2. receive written notice of their right to withdraw the authorization; and
3. be given a reasonable opportunity to withdraw the authorization in writing.

In order for the FLSA’s minimum wage and overtime provisions to apply to a worker, the worker must be an “employee” of the employer, meaning that an employment relationship must exist between the worker and the employer. Applying the FLSA’s definition, workers who are economically dependent on the business of the employer, regardless of skill level, are considered to be employees, and most workers are employees. On the other hand, independent contractors are workers with economic independence who are in business for themselves.

While the factors considered can vary, and while no one set of factors is exclusive, the following factors are generally considered when determining whether an employment relationship exists under the FLSA (i.e., whether a worker is an employee, as opposed to an independent contractor):

1. The extent to which the work performed is an integral part of the employer’s business;
2. Whether the worker’s managerial skills affect his or her opportunity for profit and loss;
3. The relative investments in facilities and equipment by the worker and the employer;
4. The worker’s skill and initiative;
5. The permanency of the worker’s relationship with the employer; and
6. The nature and degree of control by the employer.

For more information on employment relationships under the FLSA, visit: https://www.dol.gov/whd/regs/compliance/whdfs13.htm

Tipped employees are individuals engaged in occupations in which they customarily and regularly receive more than $30 per month in tips. Employers may consider tips as part of wages, but employers must still pay at least $2.13 an hour in direct wages.

An employer who elects to use the tip credit provision must inform the employee in advance, and must be able to show that the employee receives at least the applicable minimum wage (see above) when direct wages and the tip credit claimed are combined. If an employee’s tips, combined with his/her direct wages of at least $2.13 an hour, do not equal the statutory minimum hourly wage, the employer must make up the difference. Also, when the tip credit is taken, employees are entitled to keep all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement. In order for a tip pooling or sharing arrangement to be valid, it must consist entirely of customarily tipped employees, and cannot include individuals such as owners, managers, or back-of-the-house employees.

For more information on tipped employees, visit: https://www.dol.gov/whd/regs/compliance/whdfs15.htm

The FLSA requires employers to keep records on wages, hours, and other items, as specified in DOL recordkeeping regulations. Most of the information is of the kind generally maintained by employers in ordinary business practice and in compliance with other laws and regulations. The records do not have to be kept in any particular form, and time clocks need not be used. With respect to an employee subject to the minimum wage provisions or both the minimum wage and overtime pay provisions, the following records must be kept:

1. personal information, including employee’s name, home address, occupation, gender, and birth date if under 19 years of age;
2. hour and day when workweek begins;
3. total hours worked each workday and each workweek;
4. total daily or weekly straight-time earnings;
5. regular hourly pay rate for any week when overtime is worked;
6. total overtime pay for the workweek;
7. deductions from or additions to wages;
8. total wages paid each pay period; and
9. date of payment and pay period covered.

Records required for exempt employees differ from those required for nonexempt workers. Special information is required for homeworkers, for employees working under uncommon pay arrangements, for employees to whom lodging or other facilities are furnished, and for employees receiving remedial education.

Hours Worked: Covered employees must be paid for all hours worked in a workweek. In general, “hours worked” includes all time an employee must be on duty, on the employer’s premises, or at any other prescribed place of work, from the beginning of the first principal activity of the workday to the end of the last principal work activity of the workday. Also included is any additional time the employee is allowed (i.e., suffered or permitted) to work.

Workweek: A workweek is a period of 168 hours during seven consecutive 24-hour periods. It may begin on any day of the week and at any hour of the day, as established by the employer. Generally, for purposes of minimum wage and overtime payments, each workweek stands alone; there can be no averaging of two or more workweeks. Employee coverage, compliance with wage payment requirements, and the application of most exemptions are determined on a workweek basis.

For more information on “Hours Worked” under the FLSA, visit: https://www.dol.gov/whd/regs/compliance/whdfs22.htm

Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in a workweek in excess of the maximum allowable in a given type of employment. Generally, the regular rate includes all payments made by the employer to or on behalf of the employee (except for certain statutory exclusions). The following examples are based on a maximum forty (40)-hour workweek applicable to most covered nonexempt employees.

1. Hourly rate (regular pay rate for an employee paid by the hour)-If more than forty (40) hours are worked, at least one and one-half times the regular rate for each hour over forty (40) is due.
2. Piece rate-The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over forty (40), plus the full piecework earnings.
3. Salary-The regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate. The employee is entitled to an additional one-half times this regular rate for each hour over forty (40), plus the salary.

For more information on Overtime pay under the FLSA, visit: https://www.dol.gov/whd/regs/compliance/whdfs23.htm

Employees who have filed complaints or provided information related to cannot be discriminated against or discharged on account of such activity. If adverse action is taken against an employee for engaging in protected activity, the affected employee or the Secretary of Labor may file suit for relief, including reinstatement to his/her job, payment of lost wages, and damages.

For more information on coverage for retaliation under the FLSA, visit:

https://www.dol.gov/whd/regs/compliance/whdfs77A.htm

Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, to the employee for compliance with a statute.

Determining if Joint Employment Exists

The most likely scenarios for joint employment are:

• Where the employee has two or more technically separate but related or associated employers. Joint employment exists where two (or more) employers benefit from the employee’s work, and they are sufficiently related to or associated with each other. For example:

1. The employers have an arrangement to share the employee’s services;
2. One employer acts in the interest of the other in relation to the employee; or
3. The employers share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.

• Where one employer provides labor to another employer and the workers are economically dependent on both employers.

Joint employment also exists where a worker is, as a matter of economic reality, economically dependent on two employers. This type of joint employment is common not only in agriculture, but also in other industries that use subcontracting, staffing agencies, or other intermediaries, such as construction, warehouse and logistics, and hotels.

The six factors most heavily considered when determining whether a joint employment relationship exists are:

1. whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
2. whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to, directly or indirectly, hire or fire the worker or modify the terms or conditions of the worker’s employment;
3. the degree of permanency and duration of the relationship between the putative joint employers;
4. whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
5. whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
6. whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.

Responsibilities of Joint Employers

Under the FLSA, each of the joint employers must ensure that the employee receives all employment-related rights under the FLSA (including payment of at least the federal minimum wage for all hours worked, and overtime pay at not less than one and one-half the regular rate of pay for hours worked over forty (40) in a workweek, unless an exception or exemption applies). Furthermore, joint employers must combine all of the hours worked by the employee in a workweek to determine whether the employee worked more than forty (40) hours and is due overtime pay.

The North Carolina Wage and Hour Act (NCWHA), with amendments, covers minimum wages; overtime; wage payments; payments of promised wages and benefits, such as vacation, holiday and sick pay; and youth employment. Minimum wage and overtime provisions of the Act generally apply to all North Carolina businesses that are not subject to the FLSA. Wage payment provisions cover all employees in North Carolina, except those employed in federal, state or local government.

The Wage and Hour Act’s basic requirements are:

• Payment of the minimum wage,
• Overtime pay for time worked over forty (40) hours in a workweek,
• Youth employment guidelines for employees under age 18,
• Wage payment provisions, and
• Record Keeping.

While the Wage and Hour Act does set basic wage payment standards and regulates the employment of youth under 18 years of age, there are a number of employment practices that the Wage and Hour Act does not regulate.

Listed below are a few items the Wage and Hour Act does not require:

• A discharge notice or reason for discharge.
• Immediate payment of final wages upon discontinuance of employment.
• Work breaks or meal periods for employees age 16 or older.
• The number of hours in a day or days in a week an employee may be required or scheduled to work, including overtime hours, if the employee is 16 years of age or older.

Employers covered under the FLSA are exempt from the minimum wage provisions of the NCWHA. The NCWHA establishes the current minimum wage rate at $7.25 per hour for all hours worked in a single workweek, including hours accumulated through pre- and post-shift activities, if such activities are required by the employer.

• An example of this would include loading and unloading time, if an employer requires employees to pick up equipment from a warehouse or other area, travel time other than from an employee’s home to their place of work, and time accumulated for donning and doffing personal protective/safety equipment.

Unless otherwise exempted from this requirement, employers must insure that all employees receive the equivalent of the minimum wage for all hours worked in any workweek.

The NCWHA regulates wage rates for overtime pay. Unless specifically exempted, employees who work more than forty (40) hours during any workweek must be paid time and one-half based on an employee’s regular rate of pay, except that overtime begins after forty-five (45) hours during any workweek for employees of seasonal amusement or recreational establishments.

In computing overtime pay, the employer must use the regular rate of pay, not the minimum wage rate. When computing overtime pay for tipped employees for whom the employer is taking the tip credit, the regular rate of pay is the current minimum wage. The regular rate of pay cannot be less than the current minimum wage.

• Hourly Employees: When an employee is paid by the hour, the regular rate of pay and the hourly rate are the same.
• Salary/Commission Employees: When an employee is paid a salary or commission, the employee’s pay must be converted to an hourly rate to compute overtime. The hourly rate is obtained by dividing the employee’s pay for the week by the number of hours worked in a workweek. This rate must be equal to or greater than minimum wage; if not, the employer must bring the rate of pay to minimum wage. Additionally, the salary compensates for all hours worked, and therefore only the half-time premium is due on the overtime hours.

The time and one-half overtime pay requirement of the Wage and Hour Act applies on a workweek basis. Each workweek stands alone. Averaging hours for two or more weeks is not permitted, regardless of the length of the pay period. The overtime requirement may not be waived by agreement between the employer and employees.

The NCWHA provides wage payment requirements and collection procedures for an employee’s promised wages. These requirements include the following:

• Wages are due on the regular payday as set by the employer. Paydays may be daily, weekly, biweekly, semimonthly or monthly.
• If requested, final paychecks must be mailed.
• When the amount of wages is in dispute, the employer must pay the undisputed amount on the regular payday, and payment of the undisputed portion cannot restrict the right of the employee to continue his or her claim for the rest of the wages.
• Employees must be notified at the time of hiring of the paydays, pay rates, and all policies/practices with regard to promised wages including vacation, sick leave, commissions, bonuses and other pay matters.
• Employers must make available to their employees, either in writing or through a posted notice accessible to employees on a continuing basis, employment policies or practices with regard to promised wages.
• Employers must notify employees in writing or through a posted notice accessible to employees of any changes in promised wages prior to the effective date of the change. Changes, which result in retroactive increases in wages, do not require prior notification.
• A statement of deductions from pay must be given each time payment is received, and all deductions must be authorized, unless otherwise provided for by law.

Under the NCWHA’s wage payment provisions, wages, in addition to hourly pay, piece-rate pay and salary, may include sick pay, vacation pay, holiday pay, severance pay, commissions, bonuses and other amounts promised when the employer has a policy or a practice of making such payments.

If an employer provides such wages to employees, the employer shall pay (on the regular payday) such wages as required by company policy or practice.

Employees must be notified in writing or through a posted notice of any company policy or practice that results in the loss or forfeiture of promised wages in the form of commissions, bonuses or other forms of calculation. Sick leave pay is excluded from this requirement. Employees not notified are not subject to such loss or forfeiture.