Consumer Fraud

Fair Labor Standards Act: Minimum Wage and Overtime Pay

This Is The Second Installment in : Fair Labor Series

the fraud list fair labor edition1 370x210 Fair Labor Standards Act:  Minimum Wage and Overtime PayThe Fair Labor Standards Act (FLSA) outlines many facets of our nation’s labor pay system, but two of the most controversial topics in the news today are minimum wage and overtime pay. With the ever-fluctuating state of the American economy taking its toll on everyday citizens, some believe the current statutes on overtime pay and minimum wage are out-of-date and cannot properly sustain a working family, while others feel proposed changes may put small businesses in jeopardy and lay waste to the American Dream.

Since 2009, the minimum wage in the U.S. has been $7.25; however, in order to meet inflation, minimum wage has been raised 22 times. This is because the minimum wage was not established to automatically increase with inflation. Instead, the U.S. Congress must work out and approve a reasonable increase as needed.

While this plan has worked in the past, the war between Republicans and Democrats in Congress and around the country has put the minimum wage issue into stalemate. The majority of Democrats in Congress have chosen to side with labor unions in the minimum wage debate, essentially stating that an increase in minimum wage would decrease poverty and income inequality and perhaps even boost the American economy. The opposition is made up of the majority of Republicans and business owners, who claim that a rapid increase of the minimum wage would not only lead to layoffs and reduced hours for low-income employees, but could even put some companies out of business.

As a result of the Congressional impasse, multiple cities and businesses are taking it upon themselves to raise their minimum wage as they see fit, creating a cataclysm of different minimum wages throughout the country.

The overtime pay debate is intertwined with the minimum wage argument. For years, American workers have had to work longer hours for lower pay that hasn’t kept pace with inflation. Under the current rules, implemented by President George W. Bush in 2004, salaried workers must earn less than $455 per week, or $23,600 per year, to be eligible for overtime pay.

However, President Obama recently signed an executive order currently before Congress to change the FLSA to increase the minimum income threshold in order for a worker to be exempt from overtime pay. At this time, the only workers guaranteed overtime pay are those that work more than 40 hours a week and earn less than $23,660 a year. The new legislation would require employees to make between $42,000 and $52,000 per year before they could be considered eligible for overtime exemption.

The plan, which could take effect as early as 2016, aims to restore healthy overtime protections that American workers generally haven’t seen in decades. Although the exact amount is still up for debate, the new law would make millions of middle class workers who are paid less than the minimum income threshold eligible for overtime pay. Not everyone is happy about that.

In an excerpt from congressional testimony focused on the proposed FLSA overtime law changes, Jamie Richardson, the Vice President of fast-food chain White Castle,  stated he believes the new rules “would impose immense costs on chain restaurants and would stifle opportunities for career advancement for hourly associates who wish to manage our restaurants.” Richardson continued, “Rather than providing more opportunities for individuals to earn overtime pay, it appears that the new regulations will only result in a more complicated law, requiring outside legal advice for small businesses, and more litigation.”

Roman Shaul, a lawyer in Beasley Allen Law Firm’s Consumer Fraud section, was not surprised leaders in the retail and chain restaurant industry would come out against the Obama Administration’s plan to alter federal overtime rules.

“As an industry, chain restaurants and retailers have been one of the biggest violators of the FLSA for decades,” Shaul said. “They notoriously require people to work off the clock, won’t give them a fair share of the tips they have collected, and/or classify employees in such a way as to deprive these hard-working individuals of overtime pay.

“The FLSA designed overtime pay to act as a penalty – which is why a worker gets time and one-half,” Shaul explains. “The law is supposed to encourage employers to hire more people rather than work one person an oppressive amount of hours. In short, what the chain restaurant industry is looking for is a way to make less workers do more work, legally.”

For more information on the provisions of the FLSA, visit the Department of Labor’s Wage and Hour Division website at

Next Week:

Each Thursday we will examine a topic of employment law. This is a complex area of law that covers federal and state statues, as well as administrative issues and judicial precedents. Next week, our topic will be How Open-Source Businesses Like Uber Are Challenging Employee Classifications. To be informed of the latest post in this series, follow us on Facebook, Twitter and Google+ by searching for #TheFraudList.

Righting Injustice
Department of Labor
National Retail Federation
Beasley Allen