The Fair Labor Standards Act (“FLSA”) is a federal law that addresses such important concepts as overtime pay, minimum wage, equal pay, and child labor. Most employers, large and small, are aware of what’s referred to by the U.S. Department of Labor as “enterprise coverage.” Pursuant to enterprise coverage, an employer is subject to the FLSA if it:

  • has at least two employees
  • is engaged in interstate commerce; and
  • has an annual dollar volume of sales, or business done, from ordinary commercial activities of at least $500,000; or
  • is a hospital, business providing medical or nursing care for residents, school, preschool, or government agency

However, many employers do not know that their individual employees can be subject to the FLSA even if the enterprise is not.

Separate from enterprise liability, the U.S. Department of Labor recognizes something called “individual coverage.” Under this concept, the FLSA applies to individual employees who are engaged in interstate commerce, produce goods for interstate commerce, or work in activities closely related to such work.

For example, people who perform the following work are individually covered by the FLSA:

  • Assembling components in a factory that will be sent out of state;
  • Typing letters in an office that will be sent out of state;
  • Making telephone calls to people located out of state;
  • Processing credit card transactions originating out of state;
  • Traveling to other states for business; and
  • Doing janitorial work in buildings where goods are produced for shipment out of state

(Fact Sheet #14:  Coverage Under the Fair Labor Standards Act (FLSA), U.S. Department of Labor, Wage and Hour Division (July 2009)).

This is an important concept for people running small businesses and startups to understand.  Even if your incubator company is not yet experiencing $500,000 a year in sales you still may be required to abide by every aspect of the FLSA for certain of your employees. For example, if an employee travels to D.C. or Delaware or Pennsylvania for work, that person is covered; and if an employee send emails or letters out of state, that person is covered.

This means that in addition to understanding overtime law, minimum wage, and equal pay requirements, you must also have a firm grasp on the relevant tests applied by courts in this jurisdiction to determine whether the people performing work for you are independent contractors, trainees, interns, volunteers, or employees. These are not simple determinations. Do not get lulled into thinking that you don’t need to worry about these distinctions simply because your company is not making sales of at least $500,000 a year.

Moreover, even if the FLSA does not apply to each of your employees, don’t forget about relevant state and local laws.  For example, Maryland’s “Equal Pay Act for Equal Work” statute (Md. Labor & Employment § 3-301 et seq.) applies to all persons engaged in a business, industry, profession, trade, or other enterprise in the State that employ both men and women in a lawful enterprise.  And Maryland’s Wages and Hours statute (Md. Labor & Employment § 3-401 et seq.) applies to every individual in Maryland except those falling into the categories listed in Md. Labor & Employment § 3-403.

If you have questions regarding whether the FLSA or Maryland’s comparable laws apply to your employees, Astrachan Gunst Thomas, P.C. can help. Contact Elizabeth Harlan at 410-783-3528 (