Year end is a good time to review employee wage compliance.

The Fair Labor Standards Act (FLSA) which is regulated under the Department of Labor (DOL) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards. Employers should take the time to review those policies to ensure full compliance with FLSA. Anything short of full compliance places employers at risk of lawsuits and fines. Here is a short summary of those guidelines.

FLSA Minimum Wage: The federal minimum wage is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. In cases where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage.

FLSA Overtime: Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days.

Hours Worked: Hours worked ordinarily include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.

Recordkeeping: Employers must display an official poster outlining the requirements of the FLSA. Employers must also keep employee time and pay records.

Child Labor: These provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being

As an example, some employers may assume that any employee who is salaried, rather than hourly, is exempt from overtime. But that is not necessarily the case. The DOL looks at job duties, rather than payment type, when deciding whether an employee is eligible for overtime.

According to the DOL, exempt employees include executive, administrative, and professional employees, as well as outside sales employees and some computer professionals. Some positions, like a CEO, are clearly exempt, but others can be less obvious. Even large companies get tripped up on classification issues.

In 2008, when the DOL collected $140.2 million in FLSA back wages, nearly $12.8 million was collected for approximately 9,600 employees who were improperly classified as exempt. According to the DOL, companies were most likely to misclassify executive-level employees as exempt. The DOL also found nearly 3,000 cases where employees were classified as administrative exempt employees although those people were actually eligible for overtime.

Even when companies have properly classified employees as not exempt from overtime, they can still make mistakes. One Company paid nearly $2 million in back wages for overtime violations to more than 15,000 workers. According to the DOL, most of the violations occurred when the company failed to pay for breaks that were less than 30 minutes. If the breaks had been properly factored in, the employees should have received overtime for some of the hours the

The DOL offers information to help guide this process at http://www.dol.gov/whd/flsa/. Although this is a good starting point, there can be state and local regulations in place the employer should also be aware of. To add in avoiding lawsuits and investigations, employers should be proactive to pay attention to be protected from charges of FLSA or state wage and hour violations.