Most employer’s pay practices are governed by The Fair Labor Standards Act ("FLSA"), which was enacted in 1938. The FLSA was enacted not only to provide minimum labor standards, but also to increase employment. Generally, the FLSA sets minimum wage, overtime pay, equal pay, record keeping, and child labor standards. The FLSA mandates, among other things, the 40-hour workweek and overtime at time and one half for all nonexempt employees.

The Wage and Hour division of the Department of Labor (DOL) is the government entity responsible for the enforcement of the rules and regulations of the FLSA. The FLSA applies in every state. However, states are free to enact similar statutes to give employees greater benefits and protections. It is imperative for all employers working in multiple states to examine each states’ wage and hour laws to understand the differing compliance obligations.

The FLSA applies to companies conducting interstate commerce. Generally, an employee may be covered by the FLSA through either enterprise or employee coverage. Specifically, the employees of an enterprise are covered if the enterprise meets a minimum business volume threshold, and has two or more employees engaged in interstate commerce. A specific employee is covered if such employee is directly engaged in interstate commerce. The FLSA is interpreted broadly, and these coverage requirements have been greatly simplified for this article. The key is to remember that practically all businesses and staffing firms are covered under the FLSA.

Co-employment
Some recruiters who concentrate their practice making permanent placements are not familiar with the term co-employment. However, co-employment is an important area of concern for both clients and staffing firms in the temporary and contract areas. Co-employment is a legal relationship in which multiple employers have legal rights and obligations with respect to the same employee or group of employees. Usually, two employers will act in concert with respect to certain employees in such a way that they are, in effect a single employer or joint employer of the employee in question. Co-employment has far reaching ramifications in all aspects of employment law, and it is crucial to understand how co-employment is treated by the DOL in applying the rules of the FLSA.

The DOL has applied the wage and hour regulations to situations involving contract staffing. Contract staffing firms have the primary responsibility for record keeping and making proper payments under the FLSA. However, the DOL has also determined that contractors assigned to clients of contract staffing firms are, in fact, jointly employed by each firm. Therefore, the DOL will hold each organization liable for violations committed under the FLSA. Courts, however, will utilize an economic realities approach to determine who is the employer. In either case, it is clear in most situations, that clients can and will be held liable for FLSA violations.

NOTICE: Top Echelon has provided the content of this page for general informational purposes only. You should not substitute this information for personal consultation with a qualified professional in the field, nor should you rely upon this information in taking any action. No attorney-client relationship will be created through your use of this Web site, nor from any response from or conversation with Top Echelon's Legal Department.