Business Owners FAILED This FLSA Test

How would you have scored?

We asked business owners to take a little test about FLSA regulations. See what they got wrong.

While it’s true that the FLSA regulations are some of the most notoriously complicated laws in American jurisprudence, the pitfalls that generate lawsuits can be deceptively simple.

How simple? And where do business owners have the biggest blind spots when it comes to FLSA compliance?

We worked with Mark Tabakman of Fox Rothschild to identify the most common misconceptions employers have about the FLSA.

We worked with Mark Tabakman of Fox Rothschild to identify the most common misconceptions employers have about the FLSA. Then, we challenged business owners across the nation to test their knowledge of the FLSA.

The results of over 1,000 business owners, unfortunately, weren’t good. The average score was 56%—meaning most people just beat a coin toss.

These are the questions with the highest fail rates—and the most business-critical misconceptions that could put you at high risk for a lawsuit.

Misconception #1: Interplay of Federal, State, & Local Labor Laws

Who holds the trump card when it comes to federal versus state labor laws?

Question: True or false: The FLSA typically overrides state laws.

Correct Answer:

FLSA test - incorrect answer

Only 42% of survey takers knew that federal law doesn’t always trump state law. In fact, state labor laws—and even local labor laws—quite often supersede the FLSA. E.g., if state minimum wage requirements are higher than the federal minimum, employers are required to pay at the state-stipulated level. The rule is, employers are required to follow whichever law is more stringent.

Why This Misconception Puts You at Risk for a Lawsuit

It can be easy to assume that the Fed will have you covered—and will have the most strict policies—when it comes to labor laws. However, many business owners find themselves facing lawsuits for failing to deal with the complicated dance that comes from the interplay of federal, state, and local laws. If state or local law dictates a higher standard, that’s the one to follow.

Misconception #2: Relevance of Job Titles

We asked business owners to consider the importance of employee job titles:

Question: Jenny is a nonexempt employee whose job title is “Social Media Lead.” Amber is a an exempt employee at the same company whose job title is likewise “Social Media Lead.” Is the company at risk for a lawsuit for misclassification?

Correct Answer:

FLSA test - incorrect answer

While 68% answered correctly—one of the biggest wins of the survey—it’s still considered a D+ by normal grading standards. Which tells us that the 32% of respondents who think that job titles carry weight are at risk for a lawsuit. The Department of Labor (DOL) has stated that job titles play very little role in determining classification. Salary and job duties are the critical factors.

Why This Misconception Puts You at Risk for a Lawsuit

The misconception that job title holds much water when it comes to the FLSA has lead to many a business owner putting a label with “Manager” or “Director” on an employee and setting his or her salary right at the exemption threshold—without corresponding job duties that meet the requirements to classify that employee as exempt. Job duties carry far more weight than job title and can put you at high risk for a lawsuit.

Misconception #3: Required Hours for Exempt Employees

It’s beneficial to know whether or not it’s kosher to require exempt employees to work a certain number of hours each week.

Question: Dave is an exempt, salaried employee who is expected to work 40 hours per week for a marketing agency. To finish a big project, Dave has to work 50 hours during one week. The following week, Dave only logs 37 hours when he takes off early on Friday to go fishing. Can Dave’s manager require him to make up the remaining 3 hours of his expected 40?

Correct Answer:

FLSA test - correct answer

A mere 41% of respondents knew the correct answer here. It’s a persistent myth that exempt employees can decide how many hours they’ll work each week.

Why This Misconception Puts You at Risk for a Lawsuit

Employers are well within their rights to require exempt employees to work a certain number of hours each week—even if they worked more than 40 hours during a previous week. Assuming that exempt employees can set their own hours can get you in hot water with the FLSA if other employees believe you’re applying the company’s policies about employee hours willy nilly and insist that discrimination is the root cause—not your misunderstanding of the FLSA.

Misconception #4: Salaried Vs. Exempt

Let’s hone in on the difference between salaried and exempt employees—particularly in certain fields that the DOL has identified.

Question: Mary is a salaried, nonexempt computer programmer making $55,000 annually. How many hours of overtime would she be owed for working 43 hours per week?

Correct Answer:

FLSA test - 3 hours

More than 40% of respondents chose the answer that Mary would be owed zero hours of overtime. However, Mary would be owed three hours, since employees may be salaried but still classified as nonexempt (particularly in many computer-related jobs) and therefore eligible for overtime.

Why This Misconception Puts You at Risk for a Lawsuit

Many business owners use the terms “salaried” and “exempt” interchangeably—but it’s critical to realize that these terms mean very different things. An employee may be paid a salary—but still be eligible for overtime, even if their salary is above the overtime threshold the FLSA has set (for example, many tech employees). Not knowing the difference—or acting on it—can mean shortchanging employees who are due overtime, and setting the stage for a lawsuit.

Misconception #5: FLSA Recordkeeping Requirements

We tested business owners’ knowledge of the FLSA’s requirements for keeping records of employee hours.

Question: Jean is a salaried, nonexempt employee who works 40 hours each week for a call center. Larry is a nonexempt, hourly employee who works 40 hours each week. Marcia is a salaried, exempt employee who works 40 hours each week. The call center must keep records of hours for which employees?

Correct Answer:

FLSA test - Jean and Larry

Only 43% got this question right. The FLSA requires that a record of logged hours must be kept for all nonexempt employees—including salaried ones.

Why This Misconception Puts You at Risk for a Lawsuit

Failing to track employee hours effectively or correctly for all nonexempt employees puts many business owners in a bind and can make things go from bad to worse in the event of an FLSA lawsuit. Employers must keep records for ALL nonexempt employees—salaried or hourly—for two years. Not to mention that easily accessible, accurate records can be a lifesaver as evidence in court. Being able to find and produce these records is key to ensuring that the FLSA’s statute of limitations doesn’t get thrown out the window, and can help a business owner settle a brewing lawsuit quickly without racking up major legal fees.

What Now?

While the results of this survey should come as a warning to business owners, there’s plenty of simple steps and information to mitigate the risk of lawsuits.

Explore the resources below to keep your business safe!

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