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Understanding the Fair Labor Standards Act (FLSA): A Guide for Houston Business Owners

As a business leader in Houston, it’s crucial to have a comprehensive understanding of the Fair Labor Standards Act (FLSA). This federal law, enacted in 1938, serves as the cornerstone of employee rights and protections in the United States labor market. Compliance with the FLSA is not just a legal obligation but also a fundamental aspect of fostering a fair and equitable workplace environment. Let’s delve into various aspects of the FLSA that are pertinent to businesses operating in Houston:

What is the Fair Labor Standards Act?

At its core, the Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. It sets the federal minimum wage, currently $7.25 per hour, and mandates that covered non-exempt employees be paid overtime pay at a rate of at least one and one-half times their regular rate of pay for hours worked over 40 in a workweek.

Exempt vs. Non-Exempt Status

One of the critical distinctions under the FLSA is between exempt and non-exempt employees. Exempt employees are not entitled to overtime pay, while non-exempt employees are. To qualify for exempt status, employees must meet certain criteria regarding their job duties and salary level. The FLSA outlines specific exemptions, such as executive, administrative, professional, outside sales, and computer-related occupations. However, it’s essential to note that job titles alone do not determine exempt status; rather, it’s the nature of the job duties and how the employee is paid.

In 2023, the DOL announced a Notice of Proposed Rulemaking (“NPRM”) recommending significant changes to overtime and minimum wage exemptions. Key changes include:

  • Raising the minimum salary threshold: increasing the minimum weekly salary for exempt executive, administrative, and professional employees from $684 to $1,059, impacting millions of workers;
  • Higher Highly Compensated Employee (HCE) compensation threshold: increasing the total annual compensation requirement for the highly compensated employee exemption from $107,432 to $143,988; and
  • Automatic updates: automatically updating earning thresholds every three years.

These proposed changes aim to expand overtime for more employees and update salaries to reflect current earnings data.

Salary Level and Salary Basis Tests

Under the FLSA, exempt employees must meet both the salary level test and the salary basis test. The salary level test requires employees to be paid a predetermined salary amount that meets or exceeds the minimum threshold set by the Department of Labor. Currently, this threshold is $684 per week (equivalent to $35,568 annually). The salary basis test mandates that exempt employees receive their full salary for any week in which they perform work, regardless of the quality or quantity of work performed.

Minimum Wage Provisions under FLSA

The FLSA sets the federal minimum wage, but states and localities may have their own minimum wage rates that exceed the federal standard. In Houston, Texas, the minimum wage is aligned with the federal rate of $7.25 per hour. However, it’s essential for employers to stay informed about any changes in minimum wage laws at the federal, state, or local levels, as failure to comply can lead to legal repercussions.

Repercussions of FLSA Non-Compliance

Non-compliance with the FLSA can result in severe consequences for businesses, including costly fines, back pay obligations, and legal liabilities. The Department of Labor may initiate investigations into alleged violations, and employees have the right to file complaints or lawsuits against employers for FLSA violations. Additionally, non-compliance can damage a company’s reputation, erode employee morale, and lead to turnover and recruitment challenges.

Equal Pay Provisions under FLSA

The FLSA contains provisions aimed at ensuring equal pay for equal work, regardless of gender. It prohibits wage discrimination based on sex, whereby employees performing substantially similar work must be compensated equally. This means that gender-based wage differentials are unlawful unless they can be justified by factors such as seniority, merit, productivity, or other bona fide factors unrelated to gender.

Get Guidance for FLSA Compliance

Achilles Group’s HR services are designed to empower businesses in Houston and beyond to achieve and maintain FLSA compliance. By guiding through the nuances of exempt vs. non-exempt status, salary level and basis tests, minimum wage provisions, repercussions of non-compliance, and equal pay provisions, we help minimize the risk of costly penalties and litigation. Through our expertise and tailored solutions, we serve as a valuable partner because our clients stay informed, stay compliant, and prioritize smart people decisions for long-term success.

Are you concerned about HR compliance in your business?  We will listen to your concerns and unique situation through a no-risk conversation. 

Contact us today to get peace of mind:

Phone: 281-469-1800

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