SECTION IV: FLSA, OVERTIME, PAST DUE WAGES, AND
A THE FAIR LABOR STANDARDS ACT (FLSA): Establishes minimum wage, overtime
pay, record-keeping, and child labor standards
The FLSA affects more than 80 million full-time and part-time workers in the private
sector and in Federal, State, and local governments. The Wage and Hour Division (Wage-Hour)
administers and enforces FLSA with respect to private employment, State and local government
employment, and Federal employees of the Library of Congress, U.S. Postal Service, Postal Rate
Commission, and the Tennessee Valley Authority. The Office of Personnel Management is
responsible for enforcement with regard to all other Federal employees. Special rules apply to
State and local government employment involving fire protection and law enforcement activities,
volunteer services, and compensatory time off in lieu of cash overtime pay.
BASIC WAGE STANDARDS
Covered nonexempt workers are entitled to a minimum wage of not less than $5.15 an
hour. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is
required after 40 hours of work in a workweek.
Florida’s minimum wage guarantee is more generous in its provisions than the FLSA.
The current Florida minimum wage is $6.15. It is also governed by a general (4) four-year
statute of limitations with a (5) five-year limitation period, both of which exceed the FLSA’s
limitation periods. Additionally, Florida law provides that individuals experiencing violations of
this amendment may bring a class action pursuant to Fla.R.Civ.P. 1.220.
Wages required by FLSA are due on the regular payday for the pay period covered.
Deductions made from wages for such items as cash or merchandise shortages, employer-
required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of
employees below the minimum rate required by FLSA or reduce the amount of overtime pay due
The FLSA contains some exemptions from these basic standards. Some apply to specific
types of businesses; others apply to specific kinds of work. While FLSA does set basic
minimum wage and overtime pay standards and regulates the employment of minors, there are a
number of employment practices, which FLSA does not regulate.
For example, FLSA does not require:
(1) Vacation, holiday, severance, or sick pay;
(2) Meal or rest periods, holidays off, or vacations;
(3) Premium pay for weekend or holiday work;
(4) Pay raises or fringe benefits; and
(5) A discharge notice, reason for discharge, or immediate payment of final
wages to terminated employees.
The FLSA does not provide wage payment or collection procedures for an employee's
usual or promised wages or commissions in excess of those required by the FLSA. However,
some states do have laws under which such claims (sometimes including fringe benefits) may be
Also, FLSA does not limit the number of hours in a day or days in a week an employee
may be required or scheduled to work if the employee is at least 16 years old. These matters are
for agreement between the employer and the employees or their authorized representatives.
Who Is Covered?
All employees of certain enterprises having workers engaged in interstate commerce,
producing goods for interstate commerce, or handling, selling, or otherwise working on goods
or materials that have been moved in or produced for such commerce by any person are
covered by FLSA.
A covered enterprise is the related activities performed through unified operation or
common control by any person or persons for a common business purpose and --
(1) Whose annual gross volume of sales made or business done is not less than $500,000
(exclusive of excise taxes at the retail level that are separately stated); or
(2) Is engaged in the operation of a hospital, an institution primarily engaged in the care of those
who are physically or mentally ill or disabled or aged, and who reside on the premises, a school
for children who are mentally or physically disabled or gifted, a preschool, an elementary or
secondary school, or an institution of higher education (whether operated for profit or not for
(3) Is an activity of a public agency.
1. Construction and laundry/dry cleaning enterprises, which were previously
covered regardless of their annual dollar volume of business, are now subject
to the $500,000 test.
2. Any enterprise that was covered by FLSA on March 31, 1990, and that ceased
to be covered because of the increase in the enterprise coverage dollar volume
test must continue to pay its employees not less than $3.35 an hour, and
continues to be subject to the overtime pay, child labor and record-keeping
provisions of FLSA.
Employees of firms which are not covered enterprises under FLSA may still be subject to
its minimum wage, overtime pay, and child labor provisions if they are individually engaged in
interstate commerce or in the production of goods for interstate commerce. Such employees
include those who: work in communications or transportation; regularly use the mails,
telephones, or telegraph for interstate communication, or keep records of interstate transactions;
handle, ship, or receive goods moving in interstate commerce; regularly cross State lines in the
course of employment; or work for independent employers who contract to do clerical, custodial,
maintenance, or other work for firms engaged in interstate commerce or in the production of
goods for interstate commerce.
Domestic service workers such as day workers, housekeepers, chauffeurs, cooks, or full-
time babysitters are covered if they (1) receive at least $50 in cash wages in a calendar quarter
from their employers, or (2) work a total of more than 8 hours a week for one or more
Tipped employees are those who customarily and regularly receive more than $30 a
month in tips.
The employer may consider tips as part of wages, but such a wage credit must not exceed
50 percent of the minimum wage. The employer who elects to use the tip credit provision must
inform the employee in advance and must be able to show that the employee receives at least the
minimum wage when direct wages and the tip credit allowance are combined. Also, employees
must retain all of their tips, except to the extent that they participate in a valid tip pooling or
The reasonable cost or fair value of board, lodging, or other facilities customarily
furnished by the employer for the employee's benefit may be considered part of wages.
The performance of certain types of work in an employee's home is prohibited under the
law unless the employer has obtained prior certification from the Department of Labor.
Restrictions apply in the manufacture of knitted outerwear, gloves and mittens, buttons and
buckles, handkerchiefs, embroideries, and jewelry (where safety and health hazards are not
involved). The manufacture of women's apparel (and jewelry under hazardous conditions) is
generally prohibited. If you have questions on whether a certain type of work is restricted, or
who is eligible for a certificate, or how to obtain a certificate, you may contact the local Wage-
Subminimum Wage Provisions
The FLSA provides for the employment of certain individuals at wage rates below the
statutory minimum. Such individuals include student-learners (vocational education students), as
well as full-time students in retail or service establishments, agriculture, or institutions of higher
education. Also included are individuals whose earning or productive capacity is impaired by a
physical or mental disability, including those related to age or injury, for the work to be
performed. Employment at less than the minimum wage is provided for in order to prevent
curtailment of opportunities for employment. Such employment is permitted only under
certificates issued by Wage-Hour.
Training Wage Provisions
Under certain conditions, employers may pay a training wage of at least 85% of the
applicable minimum wage, or $3.35 an hour, whichever is greater, for up to 90 days, to
employees under age 20, except for migrant or seasonal agricultural workers and H-2A
nonimmigrant agricultural workers performing work of a temporary or seasonal nature.
An employee who has been paid at the training wage for 90 days may be employed at the
training wage for 90 additional days by a different employer, if that employer provides on-the-
job training in accordance with rules issued by the Department of Labor. Employers are
prohibited from displacing employees (or reducing their wages or benefits) in order to hire
employees at the training wage. In addition, employers are prohibited from hiring employees at
the training wage when other employees have been laid off in the previous six months from the
positions to be filled at the training wage, or from substantially equivalent positions. The
number of hours of work paid at the training wage cannot exceed 25% of all the hours worked by
employees of an establishment in any month.
Some employees are excluded from the overtime pay provisions or both the minimum
wage and overtime pay provisions by specific exemptions. Because exemptions are generally
narrowly defined under FLSA, an employer should carefully check the exact terms and
conditions for each. Following are examples which are illustrative but do not spell out the
conditions for each exemption.
Exemptions From Both Minimum Wage And Overtime Pay
(1) Executive, administrative, and professional employees (including teachers and academic
administrative personnel in elementary and secondary schools), outside sales persons, and
persons in certain computer-related occupations (as defined in Department of Labor regulations);
(2) Employees of certain seasonal amusement or recreational establishments, employees of
certain small newspapers, switchboard operators of small telephone companies, seamen
employed on foreign vessels, and employees engaged in fishing operations;
(3) Farm workers employed by anyone who used no more than 500 "man-days" of farm labor in
any calendar quarter of the preceding calendar year;
(4) Casual babysitters and persons employed as companions to the elderly or infirm.
Exemptions From Overtime Pay Provisions Only
(1) Certain highly-paid commissioned employees of retail or service establishments; auto, truck,
trailer, farm implement, boat, or aircraft salesworkers, or parts-clerks and mechanics servicing
autos, trucks, or farm implements, and who are employed by non-manufacturing establishments
primarily engaged in selling these items to ultimate purchasers;
(2) Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers,
seamen on American vessels, and local delivery employees paid on approved trip rate plans;
(3) Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting
(4) Domestic service workers residing in the employers' residences;
(5) Employees of motion picture theaters; and
Partial Exemptions From Overtime Pay
(1) Partial overtime pay exemptions apply to employees engaged in certain operations on
agricultural commodities and employees of certain bulk petroleum distributors.
(2) Hospitals and residential care establishments may adopt, by agreement with their employees,
a 14-day work period in lieu of the usual 7-day workweek, if the employees are paid at least time
and one-half their regular rates for hours worked over 8 in a day or 80 in a 14-day work period,
whichever is the greater number of overtime hours.
(3) Employees who lack a high school diploma, or who have not attained the educational level of
the 8th grade, can be required to spend up to 10 hours in a workweek engaged in remedial
reading or training in other basic skills without receiving time and one-half overtime pay for
these hours. However, the employees must receive their normal wages for hours spent in such
training and the training must not be job specific.
Child Labor Provisions
The FLSA child labor provisions are designed to protect the educational opportunities of
minors and prohibit their employment in jobs and under conditions detrimental to their health or
well-being. The provisions include restrictions on hours of work for minors under 16 and lists of
hazardous occupations orders for both farm and non-farm jobs declared by the Secretary of
Labor as being too dangerous for minors to perform.
Nonagricultural Jobs (Child Labor)
Regulations governing youth employment in non-farm jobs differ somewhat from those
pertaining to agricultural employment. In non-farm work, the permissible jobs and hours of
work, by age, are as follows:
(1) Youths 18 years or older may perform any job, whether hazardous or not, for unlimited
(2) Youths 16 and 17 years old may perform any non-hazardous job, for unlimited hours; and
(3) Youths 14 and 15 years old may work outside school hours in various non-manufacturing,
non-mining, non-hazardous jobs under the following conditions: no more than 3 hours on a
school day, 18 hours in a school week, 8 hours on a non-school day, or 40 hours in a non-school
week. Also, work may not begin before 7 a.m., nor end after 7 p.m., except from June1 through
Labor Day, when evening hours are extended to 9 p.m. Under a special provision, youths 14 and
15 years old enrolled in an approved Work Experience and Career Exploration Program
(WECEP) may be employed for up to 23 hours in school weeks and 3 hours on school days
(including during school hours.)
Fourteen is the minimum age for most non-farm work. However, at any age, youths may
deliver newspapers; perform in radio, television, movie, or theatrical productions; work for
parents in their solely owned non-farm business (except in manufacturing or on hazardous jobs);
evergreens and make evergreen wreaths.
Farm Jobs (Child Labor)
In farm work, permissible jobs and hours of work, by age, are as follows:
(1) Youths 16 years and older may perform any job, whether hazardous or not, for unlimited
(2) Youths 14 and 15 years old may perform any non-hazardous farm job outside of school
(3) Youths 12 and 13 years old may work outside of school hours in non-hazardous jobs, either
with parent's written consent or on the same farm as the parents;
(4) Youths under 12 years old may perform jobs on farms owned or operated by parents or, with
parents' written consent, outside of school hours in non-hazardous jobs on farms not covered by
minimum wage requirements.
Minors of any age may be employed by their parents at any time in any occupation on a farm
owned or operated by their parents.
The FLSA requires employers to keep records on wages, hours, and other items, as
specified in Department of Labor recordkeeping regulations. Most of the information is of
the kind generally maintained by employers in ordinary business practice and in compliance with
other laws and regulations. The records do not have to be kept in any particular form and time
clocks need not be used.
With respect to an employee subject to both minimum wage and overtime pay provisions;
the following records must be kept:
(1) personal information, including employee's name, home address, occupation, sex, and
birth date (if under 19 years of age);
(2) hour and day when workweek begins;
(3) total hours worked each workday and each workweek;
(4) total daily or weekly straight-time earnings;
(5) regular hourly pay rate for any week when overtime is worked;
(6) total overtime pay for the workweek;
(7) deductions from or additions to wages;
(8) total wages paid each pay period; and
(9) date of payment and pay period covered.
Records required for exempt employees differ from those for nonexempt workers, and
special information is required for homeworkers, for employees working under uncommon pay
arrangements, for employees to whom lodging or other facilities are furnished, or for employees
receiving remedial education.
Terms Used in FLSA
Workweek -- A workweek is a period of 168 hours during 7 consecutive 24-hour
periods. It may begin on any day of the week and any hour of the day established by the
employer. Generally, for purposes of minimum wage and overtime payment each workweek
stands alone; there can be no averaging of 2 or more workweeks. Employee coverage,
compliance with wage payment requirements, and the application of most exemptions are
determined on a workweek basis.
Hours Worked -- Covered employees must be paid for all hours worked in a workweek.
In general, "hours worked" includes all time an employee must be on duty, or on the employer's
premises or at any other prescribed place of work. Also included is any additional time the
employee is suffered or permitted to work.
COMPUTING OVERTIME PAY
Overtime must be paid at a rate of at least one and one-half times the employee's regular
rate of pay for each hour worked in a workweek in excess of the maximum allowable in a given
type of employment. Generally, the regular rate includes all payments made by the employer to
or on behalf of the employee (excluding certain statutory exceptions). The following examples
are based on a maximum 40-hour workweek.
(1) Hourly rate -- (regular pay rate for an employee paid by the hour). If more than 40 hours are
worked, at least one and one-half times the regular rate for each hour over 40 is due.
Example: An employee paid $5.15 an hour works 44 hours in a workweek. The employee is
entitled to at least one and one-half times $5.15, or $7.73, for each hour over 40. Pay for the
week would be $206.00 for the first 40 hours, plus $30.92 for the four hours of overtime--a total
(2) Piece rate -- The regular rate of pay for an employee paid on a piecework basis is obtained
by dividing the total weekly earnings by the total number of hours worked in the same week.
The employee is entitled to an additional one-half times this regular rate for each hour over 40,
plus the full piecework earnings.
Example: An employee paid on a piecework basis works 45 hours in a week and earns $207. The
regular rate of pay for that week is $207 divided by 45, or $4.60 an hour. In addition to the
straight-time pay, the employee is entitled to $2.30 (half the regular rate) for each hour over 40.
Another way to compensate pieceworkers for overtime, if agreed to before the work is
performed, is to pay one and one-half times the piece rate for each piece produced during the
overtime hours. The piece rate must be the one actually paid during non-overtime hours and
must be enough to yield at least the minimum wage per hour.
(3) Salary -- the regular rate for an employee paid a salary for a regular or specified number of
hours a week is obtained by dividing the salary by the number of hours for which the salary is
intended to compensate.
If, under the employment agreement, a salary sufficient to meet the minimum wage
requirement in every workweek is paid as straight time for whatever numbers of hours are
worked in a workweek, the regular rate is obtained by dividing the salary by the number of hours
worked each week. To illustrate, suppose an employee's hours of work vary each week and the
agreement with the employer is that the employee will be paid $300 a week for whatever number
of hours of work are required. Under this agreement, the regular rate will vary in overtime
weeks. If the employee works 50 hours, the regular rate is $6 ($300 divided by 50 hours). In
addition to the salary, half the regular rate, or $3 is due for each of the 10 overtime hours, for a
total of $330 for the week. If the employee works 60 hours, the regular rate will be $5 ($300
divided by 60). In that case, an additional $2.50 is due for each of the 20 overtime hours,
for a total of $350 for the week.
In no case may the regular rate be less than the minimum wage required by FLSA.
If a salary is paid on other than a weekly basis, the weekly pay must be determined in
order to compute the regular rate and overtime. If the salary is for a half month, it must be
multiplied by 24 and the product divided by 52 weeks to get the weekly equivalent. A monthly
salary should be multiplied by 12 and the product divided by 52.
Wage-Hour's enforcement of FLSA is carried out by investigators stationed across the
U.S. As Wage-Hour's authorized representatives, they have the authority to conduct
investigations and gather data on wages, hours, and other employment conditions or practices, in
order to determine compliance with FLSA. Where violations are found, they also may
recommend changes in employment practices, in order to bring an employer into compliance
It is a violation of FLSA to fire or in any other manner discriminate against an employee
for filing a complaint or for participating in a legal proceeding under FLSA.
Willful violations may be prosecuted criminally and the violator fined up to $10,000.
A second conviction may result in imprisonment.
Violators of the child labor provisions are subject to a civil money penalty of up to $10,000 for
each employee who was the subject of a violation.
Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements
are subject to civil money penalties of up to $1,000 per violation.
The FLSA prohibits the shipment of goods in interstate commerce, which were produced in
violation of the minimum wage, overtime pay, child labor, or special minimum wage provisions.
RECOVERY OF BACK WAGES
Listed below are methods that FLSA provides for recovering unpaid minimum and/or overtime
(1) Wage-Hour may supervise payment of back wages.
(2) The Secretary of Labor may bring suit for back wages and an equal amount as liquidated
(3) An employee may file a private suit for back pay and an equal amount as liquidated damages,
plus attorney's fees and court costs.
(4) The Secretary of Labor may obtain an injunction to restrain any person from violating FLSA,
including the unlawful withholding of proper minimum wage and overtime pay.
PRACTICE TIP: An employee may not bring suit if he or she has been paid back wages under
the supervision of Wage-Hour or if the Secretary of Labor has already filed suit to recover the
A 2-year statute of limitations applies to the recovery of back pay, except in the case of willful
violation, in which case a 3-year statute applies.
Equal Pay Provisions
The equal pay provisions of FLSA prohibit wage differentials based on sex, between men
and women employed in the same establishment, on jobs that require equal skill, effort, and
responsibility and which are performed under similar working conditions. These provisions, as
well as other statutes prohibiting discrimination in employment, are enforced by the Equal
Employment Opportunity Commission.
OVERTIME LAWSUITS: FAIR LABOR STANDARDS ACT (FLSA)
White Collar Exemptions: those applicable to executive, administrative, professional, outside
sales, and computer professional employees. Excluded from overtime eligibility.
1. SALARY LEVEL TEST: $455 per week. Anyone earning less is not exempt.
1. Lawyers, physicians, teachers, and any outside sales reps regardless of
minimum salary; and
2. Highly compensated employees: anyone earning $100,000 per year is
deemed exempt, if he or she earns $455 per week on a salary or fee basis,
and customarily and regularly performs any one or more exempt duties,
and performs office or non-manual work.
2. SALARY BASIS TEST: cannot reduce salary based on quantity or quality of work (no
Exception: Disciplinary suspension of less than one week. Can discipline of one
day or more if imposed in good faith for infractions of workplace conduct rules
such as sexual harassment, workplace violence, or drug or alcohol infractions:
provided suspensions are imposed pursuant to a written policy applicable to ALL
EMPLOYEES. Notice of unpaid disciplinary suspension must be clear in the
Workplace conduct rules do NOT include rules related to performance or ATTENDANCE
issues. You can determine employee’s salary or compute on an hourly, daily or shift basis.
There is no requirement to pay an exempt employee during week in which he or she performs no
work for the employer.
The employer won’t lose exemptions only if the employer has an actual practice of making
1. The number of deductions;
2. The time period of the deductions;
3. The number and geographic location of employees whose salaries were
4. The number and geographic location of managers responsible for such
5. Whether the employer had a clearly communicated policy prohibiting
An employer will not lose exemption for any employees if the employer:
1. Has a clearly communicated policy prohibiting improper deductions and
the policy includes a complaint mechanism;
2. Reimburse employees for any improper deductions; and
3. Makes a good faith commitment to comply in the future – unless the
employer willfully violates the policy: usually when the employer is still
violating the policy even after the employee complains.
Executives: primary duty is management of the enterprise or a recognized department or
subdivision. Customarily and regularly directs the work of two or more other employees. 3) Has
authority to hire or fire other employees (or recommendations as to hiring, firing, advancement,
promotion or other change of status are given particular weight).
Administrative: Primary duty of performing office or non-manual work directly related to
management policies or general business operations of the employer or the employer’s
customers. Primary duty includes the exercise of discretion and independent judgment with
respect to matters of significance.”
Learned professional: Primary duty of performing work requiring advanced knowledge in a
field of science or learning customarily acquired by prolonged course of specialized intellectual
Creative Professional: Primary duty is the performance of work requiring invention,
imagination, originality or talent in a recognized field of artistic or creative endeavor.
Teachers: Primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting
knowledge and who is employed and engage in this activity in an educational establishment by
which the employee is employed.
Computer Professional: Primary duty is 1) the application of systems analysis techniques and
procedures, including consulting with users, to determine hardware, software, or system
functional specifications; 2) the design, development, documentation, analysis, creation, testing
or modification of computer system s or programs, including prototypes, based on and related to
user or system design specifications; 3) the design, documentation testing, creation or
modification of computer programs related to machine operating systems; or 4) a combination of
the aforementioned duties, the performance of which requires the same level of skills.
Outside Sales Professional: (no salary minimums): employed for the purpose of and
customarily and regularly engaged away from the employer’s place or places of business in
making shares or obtaining orders or contracts for services or for the use of facilities. Hours
spent on non-sales work do not exceed 20% of the hours worked in a workweek by nonexempt
employees of the employer.
DEFENSES FOR EMPLOYERS TO CLAIMS FOR OVERTIME
The rights provided under the FLSA, including the right to overtime compensation,
cannot be contractually abridged or otherwise waived by an employee because a waiver would
“nullify the purposes” of the statute and the legislative policies it was designed to effectuate. See,
e.g., Lee v. Flightsafety Servs. Corp ., 20 F.3d 428, 432 (11th Cir.1994); Lynn's Food Stores,
Inc. v. U.S. Dept. of Labor, 679 F.2d 1350, 1352 (11th Cir.198 3).
The FLSA's general aim of counteracting the unequal bargaining power of employers
over their employees forbids the waiver of minimum and overtime wages. Brooklyn Savings
O'Neill, 324 U.S. 697, 706, 65 S.Ct. 895, 89 L.Ed. 1296 (1945). Accordingly, waiver is usually
not a recognized affirmative defense under the FLSA, nor is a release of FLSA rights valid. See
Casertav. Home Lines Agency, Inc.,273 F.2d 943, 946 (2d Cir.1959).
EXCEPTIONS TO WAIVERS: There are only two exceptions where waiver is a recognized
(1) an employee accepts full payment of unpaid wages, as supervised by the Secretary of
(2) an employee accepts payment under a court-approved settlement. See 29 U.S.C. §§
216(b), 216(c); Lynn’s Food Stores,679 F.2d at 1352.
ESTOPPEL: like waiver and release, the doctrine of estoppel is not recognized under the
FLSA. See Caserta, 273 F.2d at 946. Federal courts have repeatedly rejected equitable estoppel
as an affirmative defense to an FLSA action, even where an employee is required, but fails to,
record overtime hours worked. See, e.g., Burryv. Nat'l Trailer Convoy, Inc., 338 F.2d 422, 426-
27 (6th Cir.1964); Handler v. Thrasher,191 F.2d 120, 123 (10th Cir.1951).
THE GOOD FAITH DEFENSE: The only type of equitable estoppel defense recognized by
courts is the “Good Faith Defense” of the Portal to Portal Act of 1947, 29 U.S.C. § 259, which
protects an employer from FLSA liability if it relied on an opinion in writing from the
Administrator of the Wage and Hour Division.
STATUTE OF LIMITATIONS: The FLSA requires claims for unpaid overtime compensation
under the FLSA to be brought within two years of the violation, except that in cases involving
willful violations of the FLSA, the limitations period is extended to three years. 29 U.S.C. §
255(a). Because the FLSA establishes a statute of limitations, Defendant's laches defense must
ACCORD AND SATISFACTION: like the doctrine of waiver and release, accord and
satisfaction is not a valid defense in a private action brought under the FLSA. See O'Connorv.
U.S., 60 Fed.Cl. 164, 167 (2004) (“O'Connor I ”), O’Connor. U.S., 308 F.3d 1233, 1242
(Fed.Cir.2002) (“O'Connor II”). Accord and satisfaction is only a cognizable affirmative defense
in FLSA actions brought by federal employees who are represented by a labor union pursuant to
the Civil Service Reform Act, 5 U.S.C.§ 7121(a)(2)(c)(iii). See O'Connor I, 60 Fed.Cl. at 167.
Defendants are unable to assert a legally cognizable defense of accord and satisfaction defense in
this case, so this defense must be stricken.
SETOFF: Brennan v. Heard, 491 F.2d 1, 4 (5th Cir.1974). The Brennan case only stands for
the principle that setoffs may not result in sub-minimum wage payments to an employee;
moreover, the Fifth Circuit has since clarified that its holding in Brennan does not prohibit a dis-
trict court from applying a setoff where the setoff will not cause a plaintiff's wages to fall below
the statutory minimum. Singer v. City of Waco, Tex.,324 F.3d 813, 828 n. 9 (5th Cir.2003). Thus,
the rule in Brennan does not bar an employer from asserting a setoff defense in all circum-
The FLSA explicitly provides that certain payments made by an employer shall be
“creditable toward overtime compensation,” namely: (1) extra compensation provided by a
premium rate for certain hours worked by the employee in any day or workweek because such
hours are hours worked
There are several types of payments that cannot be applied to offset unpaid wages,
including: (1) fringe benefits such as meals, health insurance, bonuses, and paid vacations, see
Dunlop v. Gray-Goto, Inc., 528 F.2d 792, 794 (10th Cir.1976) and Futrell v. Columbia Club,
Inc., 338 F.Supp. 566, 573 (D.C.Ind.1971); (2) wages for “down time” on the job, see Hiner v.
Penn-Harris-Madison Sch. Group,256 F.Supp.2d 854, 860(N.D.Ind.2003); (3) wages for meal
breaks, see Ballarisv. Wacker Siltronic Corp.,370 F.3d 901, 913-14 (9th Cir.2004); and (4)
amounts loaned by an employer to an employee, see Donovanv. Pointon,717 F.2d 1320, 1323
B UNPAID WAGES CLAIMS (excluding overtime):
448.108: LITIGATION OVER UNPAID WAGES:
1 Prevailing party may get reasonable attorney’s fee: discretionary: But covers
employment contract litigation. Only discretionary. Whereas you can contract
for award in K.
2 If the employer breaches the contract, the employee is relieved from obligations.
If employee breaches, employer is relieved.
3 CLAIMS FOR WAGES UNDER EMPLOYMENT CONTRACTS: DOCTRINE
OF UNCLEAN HANDS: General rule: if you breach the contract, the other side is free of their
contract obligations. If the other side breaches, you are relieved of obligations. Litigation then
ensues over who breached first.
a Arbitration clauses in employment contracts are valid and enforceable,
even in a 440.205 action
4 Unpaid stock options and royalty are unpaid wages, and can give rise to fees.
5 Contingency fee risk multiplier is applicable for back wages and unpaid wage
claims. Portland Cement co v Goudie, 718 So.2d 274.
6 DISCLAIMERS IN EMPLOYEE HANDBOOKS OR MANUALS: “this
employee manual or handbook disclaimer is not intended for form a contract of employment
C Statute of limitations F.S. 95.11
1 Claims for unpaid wages: statute begins to run from date unpaid wages
became due and payable. For overtime or damages for wages. 2 years from
2 Salary imports a specific contract for a specific sum for a specified period of
time, while wages are compensation for services by the day or week.
Broward Builders Exchange v. Goehring, 231 So.2d 513.
3 2 years to recover unpaid commissions on contract.
4 4 year statue of limitations for unpaid commission for salaried employee in
oral contract: Statute of frauds does not bar recovery since devoid of evidence
that parties intended the contract to last beyond a year and contract was
terminable at will with an indefinite duration...
New Important Overtime Cases
Posely v. Eckerd Corp., F.Supp.2nd, 2006 WL 1366737, S.D.Fla., 2006.
Store managers, for themselves and as representatives of purported class, sued retail pharmacy
chain, claiming to have been undercompensated and asserting various state and federal causes of
action including claims under Fair Labor Standards Act (FLSA). Chain moved for summary
The District Court, held that:
(1) in absence of "work parties," store managers' primary duty under applicable former FLSA
"short test" was management;
(2) their attendance at work parties did not alter store managers' status as bona fide executive
employees exempt from FLSA overtime requirements;
(3) FLSA's minimum wage provisions were not violated;
(4) Florida statute declaring ten hours of labor a "legal day's work" and requiring "extra
pay" for all work performed in excess of 10 hours daily was unconstitutionally vague;
(5) store managers were not entitled to payment for those hours based on quantum meruit theory;
(6) chain's alleged discovery violations did not require denial of summary judgment
STATE AND FEDERAL UNEMPLOYMENT LAW
The Social Security Act of 1935 (Public Law 74-271) created the Federal-State
Unemployment Compensation (UC) Program. The program has two main objectives: (1) to
provide temporary and partial wage replacement to involuntarily unemployed workers who were
recently employed; and (2) to help stabilize the economy during recessions. The U.S.
Department of Labor oversees the system, but each State administers its own program. Because
Federal law defines the District of Columbia, Puerto Rico, and the Virgin Islands as States for
the purposes of UC, there are 53 State programs.
The Federal Unemployment Tax Act of 1939 (Public Law 76- 379) and titles III, IX, and
XII of the Social Security Act form the framework of the system. The Federal Unemployment
Tax Act (FUTA) imposes a 6.2 percent gross tax rate on the first $7,000 paid annually by
covered employers to each employee. Employers in States with programs approved by the
Federal Government and with no delinquent Federal loans may credit 5.4 percentage points
against the 6.2 percent tax rate, making the minimum net Federal unemployment tax rate 0.8
percent. Since all States have approved programs, 0.8 percent is the effective Federal tax rate.
This Federal revenue finances administration of the system, half of the Federal-State Extended
Benefits (EB) Program, and a Federal account for State loans. The individual States finance their
own programs, as well as their half of the Federal-State Extended Benefits Program.
FUTA generally determines covered employment. FUTA also imposes certain requirements on
the State programs, but the States generally determine individual qualification requirements,
disqualification provisions, eligibility, weekly benefit amounts, potential weeks of benefits, and
the State tax structure used to finance all of the regular State benefits and half of the extended
The Social Security Act provides for the administrative framework: title III authorizes
Federal grants to the States for administration of the State UC laws; title IX authorizes the
various components of the Federal Unemployment Trust Fund; title XII authorizes advances or
loans to insolvent State UC Programs.
COVERAGE: In order to qualify for benefits, an unemployed person usually must have
worked recently for a covered employer for a specified period of time and earned a certain
amount of wages.
FUTA covers certain employers that State laws also must cover for employers in the States to
qualify for the 5.4 percent Federal credit. Since employers in the States would lose this credit and
their employees would not be covered if the States did not have this coverage, all States cover
the required groups:
(1) Except for nonprofit organizations, State-local governments, certain agricultural labor,
and certain domestic service, FUTA covers employers who paid wages of at least $1,500
during any calendar quarter or who employed at least one worker in at least 1 day of each
of 20 weeks in the current or prior year;
(2) FUTA covers agricultural labor for employers w ho paid cash wages of at least $20,000
for agricultural labor in any calendar quarter or who employed 10 or more workers in at
least 1 day in each of 20 different weeks in the current or prior year; and
(3) FUTA covers domestic service employers who paid cash wages of $1,000 or more for
domestic service during any calendar quarter in the current or prior year.
FUTA requires coverage of nonprofit organization employers of at least four workers for 1
day in each of 20 different weeks in the current or prior year and State-local governments
without regard to the number of employees. Nonprofit and State-local government organizations
are not required to pay Federal unemployment taxes; they may choose instead to reimburse the
system for benefits paid to their laid-off employees.
States may cover certain employment not covered by FUTA, but most States have chosen not to
expand FUTA coverage significantly. The following employment is therefore generally not
(2) certain agricultural labor and domestic service;
(3) service for relatives;
(4) service of patients in hospitals;
(5) certain student interns;
(6) certain alien farmworkers;
(7) certain seasonal camp workers; and (8) railroad workers (who have their own
States have developed diverse and complex methods for determining UC eligibility. In
general there are three major factors used by States:
(1) the amount of recent employment and earnings;
(2) demonstrated ability and willingness to seek and accept suitable employment; and
(3) certain disqualifications related to a claimant's most recent job separation or job offer
refusal. Monetary qualifications
The State monetary qualification requirements in the base year for the minimum and
maximum weekly benefit amounts, and for the maximum total potential benefits. The base year
is a recent 1-year period that most States (48) define as the first 4 of the last 5 completed
calendar quarters before the unemployed person claims benefits. On average, workers must have
worked in two quarters and earned $1,734 to qualify for a minimum monthly benefit. Q.
In February 1996, a Federal court in Pennington v. Doherty overturned the base year
definition in use by most States. The court agreed with the plaintiff's contention that Illinois
could have used an alternative base period (the last four completed quarters) and that this
alternative would better carry out Federal law, which requires States to use administrative
methods that ensure full payment of UC ``when due.'' This alternative method would impose
greater costs on the States affected. The Balanced Budget Act of 1997 (Public Law 105-33)
revised the Federal law that was central to the court's decision so that States have full authority to
set base periods for determining eligibility.
All State laws provide that a claimant must be both able to work and available for work. A
claimant must meet these conditions continually to receive benefits.
Only minor variations exist in State laws setting forth the requirements concerning “ability to
work.'' A few States specify that a claimant must be mentally and physically able to work.
“Available for work'' is translated to mean being ready, willing, and able to work. In addition
to registration for work at a local employment office, most State laws require that a claimant
seek work actively or make a reasonable effort to obtain work. Generally, a person may not
refuse an offer of, or referral to, ``suitable work'' without good cause.
Most State laws list certain criteria by which the “suitability'' of a work offer is to be tested.
The usual criteria include the degree of risk to a claimant's health, safety, and morals; the
physical fitness and prior training, experience, and earnings of the person; the length of
unemployment and prospects for securing local work in a customary occupation; and the
distance of the available work from the claimant's residence. Generally, as the length of
unemployment increases, the claimant is required to accept a wider range of jobs.
In addition, Federal law requires States to deny benefits provided under the Extended
Benefits Program (see below) to any individual who fails to accept work that is offered in writing
or is listed with the State Employment Service, or who fails to apply for any work to which he is
referred by the State agency, if the work:
(1) is within the person's capabilities;
(2) pays wages equal to the highest of the Federal or any State or local minimum wage;
(3) pays a gross weekly wage that exceeds the person's average weekly unemployment
compensation benefits plus any supplemental unemployment compensation (usually
private) payable to the individual; and
(4) is consistent with the State definition of ``suitable'' work in other respects. Public Law
102-318 suspended these provisions from March 7, 1993, until January 1, 1995.
States must refer extended benefits claimants to any job meeting these requirements. If the
State, based on information provided by the individual, determines that the individual's prospects
for obtaining work in her customary occupation within a reasonably short period are good, the
determination of whether any work is ``suitable work'' is made in accordance with State law
rather than the criteria outlined above.
There are certain circumstances under which Federal law provides that State and extended
benefits may not be denied. A State may not deny benefits to an otherwise eligible individual for
refusing to accept new work under any of the following conditions:
(1) if the position offered is vacant directly due to a strike, lockout, or other labor dispute;
(2) if the wages, hours, or other conditions of the work offered are substantially less
favorable to the individual than those prevailing for similar work in the locality; or
(3) if, as a condition of being employed, the individual would be required to join a union or
to resign from or refrain from joining any bona fide labor organization. Benefits may not
be denied solely on the grounds of pregnancy. The State is prohibited from canceling
wage credits or totally denying benefits except in cases of misconduct, fraud, or receipt of
There are also certain conditions under which Federal law requires that benefits be denied.
For example, benefits must be denied to professional and administrative employees of
educational institutions during summer (and other vacation periods) if they have a reasonable
assurance of reemployment; to professional athletes between sport seasons; and to aliens not
permitted to work in the United States.
The major causes for disqualification from benefits are not being able to work or
available for work, voluntary separation from work without good cause, discharge for
misconduct connected with the work, refusal of suitable work without good cause, and
unemployment resulting from a labor dispute. Disqualification for one of these reasons may
result in a postponement of benefits for some prescribed period, a cancellation of benefit rights,
or a reduction of benefits otherwise payable.
Federal law requires that benefits provided under the Extended Benefits Program be
denied to an individual for the entire spell of his unemployment if he was disqualified from
receiving State benefits because of voluntarily leaving employment, discharge for misconduct, or
refusal of suitable work. These benefits will be denied even if the disqualification were
subsequently lifted with respect to the State benefits prior to reemployment. The person could
receive extended benefits, however, if the disqualification were lifted because he became
reemployed and met the work or wage requirement of State law. Public Law 102-318 suspended
the restrictions on extended benefits under Federal law, however, from March 7, 1993, until
January 1, 1995. The Advisory Council on Unemployment Compensation was required to study
these provisions, and it recommended that the Federal rules be eliminated. However, Congress
has taken no action on this recommendation.
The Emergency Unemployment Compensation Act of 1991 (Public Law 102-164)
provided that ex-members of the military be treated the same as other unemployed workers with
respect to the waiting period for benefits and benefit duration. Before this 1991 action, Congress
had placed restrictions on benefits for ex-service members, so that the maximum number of
weeks of benefits an ex-service member could receive based on employment in the military was
13 (as compared with 26 weeks under the regular UC Program for civilian workers). In addition
to a number of restrictive eligibility requirements, ex-service members had to wait 4 weeks from
the date of their separation from the service before they could receive benefits.
The Unemployment Compensation Amendments of 1976 (Public Law 94-566) required
all States to reduce an individual's UC by the amount of any government or private pension or
retirement pay received by the individual.
Public Law 96-364, enacted in 1980, modified this offset requirement. Under the
modified provision, States are required to make the offset only in those cases in which the work-
related pension was maintained or contributed to by a ``base period'' or ``chargeable'' employer.
Entitlement to and the amount and duration of unemployment benefits are based on work
performed during this State-specified base period. A ``chargeable'' employer is one whose
account will be charged for UC received by the individual. However, the offset must be applied
for Social Security benefits without regard to whether base period employment contributed to the
Social Security entitlement.
States are allowed to reduce the amount of these offsets by amounts consistent with any
contributions the employee made toward the pension. This policy allows States to limit the offset
to one-half of the amount of a Social Security benefit received by an individual who qualifies for
Amount and Duration of Weekly Benefits
In general, the States set weekly benefit amounts as a fraction of the individual's average
weekly wage up to some State-determined maximum. The total maximum duration available
nationwide under permanent law is 39 weeks. The regular State programs usually provide up to
26 weeks. The permanent Federal-State Extended Benefits Program provides up to 13 additional
weeks in States where unemployment rates are relatively high. An additional 7 weeks is
available under a new optional trigger enacted in 1992, but only 7 States have adopted this
trigger as of July 31, 1997. The temporary Emergency Unemployment Compensation (EUC)
Program, which operated from November 1991 through April 1994, provided either 7 or 13
additional weeks of benefits during its final months of operation. A State offering this temporary
program could not have offered the extended benefits simultaneously, however.
The State-determined weekly benefit amounts generally replace between 50 and 70
percent of the individual's average weekly pretax wage up to some State-determined maximum.
The average weekly wage is often calculated only from the calendar quarter in the base year in
which the claimant's wages were highest. Individual wage replacement rates tend to vary
inversely with the claimant's average weekly pretax wage, with high wage earners receiving
lower wage replacement rates.
Most States vary the duration of benefits with the amount of earnings the claimant has in
the base year. Twelve States provide the same duration for all claimants. The minimum durations
range from 4 weeks in Oregon to 26 weeks in 12 States. The maximum duration is 26 weeks in
51 States (including the District of Columbia, Puerto Rico, and the Virgin Islands). Two States
have longer maximum durations. Massachusetts and Washington both provide up to 30 weeks.
From 1999 to 2000, 16 States increased and 3 decreased their minimum weekly benefit
amounts. Thirty-six States raised their maximum weekly benefit amounts, while no State
decreased them. Five States lowered their minimum potential durations, and 13 States raised
their minimum duration.
The Federal-State Extended Benefits Program is available in every State and provides one-
half of a claimant's total State benefits up to 13 weeks in States with an activated program, for a
combined maximum of 39 weeks of regular and extended benefits. Weekly benefit amounts are
identical to the regular State UC benefits for each claimant, and Federal funds pay half the cost.
The program activates in a State under one of two conditions:
(1) if the State's 13-week average insured unemployment rate (IUR) in the most recent 13
weeks is at least 5.0 percent and at least 120 percent of the average of its 13-week IURs
in the last 2 years for the same 13-week calendar period; or
(2) at State option, if its current 13-week average IUR is at least 6.0 percent. All but 12 State
programs have adopted the second, optional condition. The 13-week average IUR is
calculated from the ratio of the average number of insured unemployed persons under the
regular State programs in the last 13 weeks to the average covered employment in the
first four of the last five completed calendar quarters.
In addition to the two automatic triggers, States have the option of electing an alternative
trigger authorized by the Unemployment Compensation Amendments of 1992 (Public Law 102-
318). This trigger is based on a 3-month average total unemployment rate (TUR) using
seasonally adjusted data. If this TUR average exceeds 6.5 percent and is at least 110 percent of
the same measure in either of the prior 2 years, a State can offer 13 weeks of EB. If the average
TUR exceeds 8 percent and meets the same 110-percent test, 20 weeks of EB can be offered.
Analysis of historical data shows that this TUR trigger would have made EB more widely
available in the past than did the IUR trigger. As of July 31, 1997, the TUR trigger had been
authorized by seven States (Alaska, Connecticut, Kansas, Oregon, Rhode Island, Vermont, and
Washington). As of May 2000, EB is not active in any State.
The Extended Benefits (EB) Program was enacted to provide unemployment
compensation benefits to workers who had exhausted their regular benefits during periods of
high unemployment. Before enactment of a permanent EB Program, Congress authorized two
temporary programs, during 1958 and 1959 and again in 1961 and 1962. The Federal-State
Extended Unemployment Compensation Act of 1970 authorized a permanent mechanism for
providing extended benefits. Extended benefits rules were amended by the Omnibus Budget
Reconciliation Act of 1981 (Public Law 97-35) and the Unemployment Compensation
Amendments of 1992 (Public Law 102-318).
During the 1970s and 1980s, temporary programs provided supplemental benefits to UC
recipients who had exhausted both their regular and extended benefits during three periods of
high unemployment: (1) the Emergency Unemployment Compensation Act of 1971, which
provided benefits until March 31, 1973; (2) the Federal Supplemental Benefits Program, first
authorized by the Emergency Unemployment Compensation Act of 1974, and subsequently
extended in 1975 (twice) and in 1977; and (3) the Federal Supplemental Compensation Program,
created by the Tax Equity and Fiscal Responsibility Act of 1982, which was subsequently
extended and modified six times and finally expired on June 30, 1985.
More recently, Congress passed the Emergency Unemployment Compensation Act of
1991 (Public Law 102-164) authorizing a temporary Emergency Unemployment Compensation
(EUC) Program. The EUC Program, which was extended four times, effectively superseded the
EB Program and entitled individuals whose regular unemployment compensation benefits had
run out to additional weeks of assistance. At its peak in 1992, the EUC Program provided
benefits for 26 or 33 weeks, depending on the level of unemployment in the respective States.
The EUC Program ended on April 30, 1994.
Benefits under the EUC Program were originally financed from spending authority in the
Extended Unemployment Compensation Account (EUCA) of the Unemployment Trust Fund.
However, depletion of EUCA led Congress to fund EUC from general revenues from July 1992
to October 1993. States that qualified for extended benefits while EUC was in effect could elect
to trigger off extended benefits. This reduced the State funding burden because 50 percent of
extended benefit costs are financed from State UC accounts while EUC was entirely federally
THE FEDERAL UNEMPLOYMENT TAX
FUTA imposes a minimum, net Federal payroll tax on employers of 0.8 percent on the
first $7,000 paid annually to each employee. The current gross FUTA tax rate is 6.2 percent, but
employers in States meeting certain Federal requirements and having no delinquent Federal loans
are eligible for a 5.4 percent credit, making the current minimum, net Federal tax rate 0.8
percent. Since most employees earn more than the $7,000 taxable wage ceiling, the FUTA tax
typically is $56 per worker or 3 cents per hour for a full-time worker. The 1997 budget bill
extended the 0.2 percent surtax through 2007.
The wage base for the Federal tax was held constant at $3,000 until 1971, and then was
increased on three occasions, most recently in 1983.
The effective Federal unemployment tax rate equals FUTA revenue as a percent of total
covered wages. Although the statutory tax rate doubled from 0.4 percent in the late 1960s to 0.8
percent in the late 1980s, the effective tax rate has fluctuated between 0.2 and 0.3 percent in most
of those years.
STATE UNEMPLOYMENT TAXES
The States finance their programs and half of the permanent Extended Benefits Program
with employer payroll taxes imposed on at least the first $7,000 paid annually to each employee.
States have adopted taxable wage bases at least as high as the Federal level because they
otherwise would lose the 5.4 percent credit to employers on the difference between the Federal
and State taxable wage bases.
Although the standard State tax rate is 5.4 percent, State tax rates based on
unemployment experience can range from zero on some employers in 16 States up to a
maximum as high as 10 percent in 2 States