Conducting an FLSA Audit

The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage, overtime pay, recordkeeping, and youth employment standards. One crucial component of the FLSA pertains to overtime. It mandates that non-exempt employees be paid one and a half times their regular rate of pay for any hours worked over 40 in a workweek. Therefore, correctly classifying employees as either exempt or non-exempt is paramount.

In light of potential new overtime rulings, businesses should consider conducting an FLSA audit to ensure they are in compliance with the current statute – preparing for the potential overtime final rule sometime this year.

Here's a guide on how to carry out this audit, with examples and common pitfalls to watch for.

Steps to Conduct an FLSA Audit:

• Gather Necessary Documentation: Begin by collecting pertinent documentation. This includes job descriptions, payroll records, timekeeping methods, and any relevant employment agreements or policies.
• Review Job Descriptions: Examine job descriptions to determine the primary responsibilities and duties of each role. Does the role involve supervision, management, or decision-making? Does it require specialized knowledge? Compare this against the FLSA’s tests for exempt status.

Example: If a job description for an office manager includes tasks like “supervise administrative staff,” or “make decisions on office resource allocation,” they may potentially qualify as exempt under the administrative exemption.

• Evaluate Compensation Levels: Check the salary levels of each employee. The FLSA sets a salary threshold below which employees cannot be considered exempt, irrespective of their duties.

Example: As of my last update in 2021, to qualify for an exemption, employees generally must be paid at least $684 per week on a salary basis. If an employee is earning $600 weekly, they wouldn't qualify as exempt, regardless of their duties.

• Analyze Timekeeping Practices: Review how employees track their hours. This will help identify potential discrepancies or areas where non-exempt employees might be working overtime without proper compensation.

Example: If non-exempt employees are answering work emails or attending calls after office hours, they might be accruing untracked overtime.

• Consult Axis HR Solutions: Given the complexities and nuances of FLSA regulations, consider seeking advice from the experts at Axis HR Solutions. We can provide a detailed analysis and recommendations tailored to your organization.

Common Mistakes & How to Avoid Them:

• Misunderstanding Exemptions: Not all salaried employees are exempt. It's essential to understand that exemption status depends on both salary and the nature of the duties performed.

Avoidance Strategy: Regularly update job descriptions and ensure they accurately reflect the tasks and responsibilities of each role. Compare these descriptions with the FLSA's criteria for exemptions.

• Improper Time Tracking: Failing to track all the hours worked by non-exempt employees can lead to underpayment issues.

Avoidance Strategy: Train managers and employees on the importance of accurate timekeeping. Implement software or systems that help track work outside regular hours.

• Failure to Update with Changing Laws: The FLSA and its interpretations can change. A company might be compliant one year and out of compliance the next if they don’t adapt to new rules.

Avoidance Strategy: Stay informed about changes to federal and state labor laws. Subscribe to relevant newsletters, attend workshops, or consult with Axis HR Solutions regularly.

• Overlooking State Laws: Some states have labor laws that are more stringent than the FLSA.

Avoidance Strategy: Always cross-check your compliance with both federal and state regulations. Where there's a discrepancy, follow the law that's most favorable to the employee.

In conclusion, an FLSA audit is a proactive approach to ensure compliance with overtime rulings and other labor standards. Regular audits, combined with a keen awareness of the law and best practices, will help organizations avoid costly lawsuits and maintain a fair workplace environment.? Axis HR Solutions can conduct these audits for your organization now and in the future.? Learn more at:? www.axishrky.com