The Fair Labor Standards Act: An Old Law Getting New Attention

The Fair Labor Standards Act of 1938 ("FLSA") and the Act's implementing regulations were adopted against the backdrop of the Great Depression. The policies and purposes of the FLSA were:

  • To curb deflationary forces, by establishing a minimum wage, thus increasing the purchasing power of the nation's work force, and improving its standard of living;
  • To spread employment by providing for overtime compensation, thus making it more expensive for employers to work a few employees for longer hours than more employees for shorter hours and discouraging excessive hours of employment, improving the health and well-being of workers;
  • To eliminate the use of oppressive child labor; and
  • To reduce the causes of labor disputes, by correcting oppressive labor conditions, thus eliminating unfair competition based on substandard labor costs, and reducing the burden of governmental relief.

Since its enactment, the FLSA has been amended several times to try to adapt to the changes in the social, economic and political landscape of the United States. For the last couple of years, the FLSA has once again been under increased scrutiny to modernize its provisions.

In the midst of the extensive debate surrounding proposed changes to the FLSA, enforcement actions are also reaching record levels. The Wage and Hour Division of the U. S. Department of Labor (DOL) is the agency tasked with enforcing the FLSA. According to the DOL's website, the Wage and Hour Division recovered approximately $212,000,000 in back wages in 2003. This is a 21% increase over the record amount that was recovered in the 2002 fiscal year.

While the DOL collects substantial monetary sums through its enforcement efforts, this is only a fraction of the total amount collected by private litigants. For instance, the California Court of Appeals recently decided Bell v. Farmers Ins. Exchange, Feb. 9, 2004. This was a class action that was brought by former and current claims representatives for unpaid overtime compensation. These employees argued that they had been misclassified and should have been paid overtime. The trial court agreed with the employees and awarded them approximately $90 million in unpaid overtime. Notably, in affirming the trial court, the court of appeals refused to find persuasive a DOL opinion letter which had found that claims representatives were exempt from FLSA overtime provisions based upon administrative functions performed by such employees.

In an effort to diminish the confusion concerning the FLSA, the DOL issued its long-awaited final version of its "FairPay" rules on April 20, 2004. The new rules were designed to update overtime regulations. The new rules emphasize the importance of specific job duties (as opposed to job titles) in determining whether an employee is exempt. Once the final regulations are published in the Federal Register, employers will have 120 days to comply. This is a perfect opportunity for employees to re-examine their FLSA classifications and re-classify employees where necessary to avoid liability.

For further information on FLSA compliance, please contact Eric B. Johnson at (602) 229-5425 or your Quarles & Brady attorney.

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