Crime And A Half

Learn what the Fair Labor Standards Act says about wages and overtime-and avoid breaking the law.

Life at home was a bit disjointed for a Michigan funeral director and embalmer, who found he was handling 15 to 20 phone calls every night when the funeral home's phone line was routed to his house. His employer wasn't paying him the overtime he should have been earning-his employer wasn't paying him for that time at all. Fed up, the funeral director quit and sued under the Fair Labor Standards Act (FLSA). In July, the 6th U.S. Circuit Court of Appeals ruled that handling so many phone calls was more than typical on-call time. The funeral director was working, albeit from home, and should have been paid for his time and for any overtime he accrued.

The case points out the basic principle of the FLSA, which has governed wages and work hours in the United States since 1938. Covering more than 80 million full- and part-time workers in both the public and private sectors, the FLSA encodes a deceptively simple concept: You have to pay employees for every hour they work. And, unless they're properly classified as exempt from the regulations, employees who work more than 40 hours per week must be paid time and a half for their overtime. That seems easy enough, but the devil is in the details. Because of the complexities of the modern workplace, most employers, if they looked closely enough, would find that somehow or other they're violating this often confusing law. Violations can lead to fines of up to $10,000 per employee and further investigation by the U.S. Department of Labor, so you need to understand the requirements and make sure your own marginal cases comply with the law.

Does the FLSA apply to your company? The original act applied only to factory workers, but it now applies to every business with two or more employees and a gross income of $500,000 or more. (It also applies to public agencies, hospitals, schools and health-care facilities.) Even if your business has a lower gross income, your employees are subject to the law if they engage in interstate commerce-and that term is interpreted rather broadly. Your employees are covered if they produce goods for interstate commerce, travel to other states on business, make frequent phone calls out of state, do janitorial work in a building where the goods produced are shipped out of state, or even type letters that will be sent out of state. And the child labor and minimum wage provisions of the FLSA apply to virtually every employee.

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

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This article was originally published in the February 2001 print edition of Entrepreneur with the headline: Crime And A Half.

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