Summer is here. The solstice may have been last week, but it has been hot in the Valley of the Sun for a while.
Here is a hot topic – overtime pay. In the 1990s, a young business owner asked me if President Clinton invented overtime. I reminded him that the Federal Fair Labor Standards Act (FLSA) had been around since 1938 – longer than both of us!
The FLSA mandates overtime pay after 40 hours worked in a workweek. The FLSA also provides for minimum wage and severely curtails child labor. It is enforced by the U.S. Department of Labor’s Wage and Hour Division (USDOL).
Back in 1938, there was a 48-hour workweek and minimum wage was 25 cents per hour. Since the end of World War II, the 40 hour workweek has been the standard. Minimum wage under the FLSA is now $7.25 per hour and $7.90 per hour in Arizona (if the state minimum wage is higher, it controls). For federal contracts since in 2015, minimum wage increased to $10.10 per hour.
Almost all employees and most employers are covered by the FLSA. There are many industry exemptions and several “white collar” employee exemptions (e.g. professional, executive, administrative, outside sales) but the employer has the burden of proving these exemptions. Misclassification of employees as “independent contractors” or “exempts” is so common in our state that the USDOL has a special “Arizona Initiative.”
Independent contractors are vendors to a business; not workers. USDOL uses the economic realities test, not the IRS 20-Question test, to differentiate between a W-2 and a 1099. Employers who utilize independent contractors need to be aware that they are under intense scrutiny from USDOL and every tax-collecting governmental entity.
Employers should consider all employees to be non-exempt, that is, entitled to overtime unless there is sufficient proof that the employee’s job – or the employer enterprise – fits into one of the exemptions. Just because an employee receives a salary (a set single payment for a period of time) rather than an hourly wage does not mean that the employee is not entitled to overtime pay. Just because an employee works overtime without permission does not mean that the employer does not have to pay the overtime. On the other hand, just because an employee works a Saturday does not mean s/he is entitled to overtime pay. If s/he took a day off during the Monday through Friday workweek for a holiday or vacation, that day does not “count” toward the 40 hours for overtime purposes.
There are many misunderstandings about the FLSA. Check out www.dol.gov/whd or ask a professional. Yes, Arizona has overtime – and minimum wage, too.
Until next time….
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