The Fair Labor Standards Act of 1938

The Fair Labor Standards Act of 1938

Introduction

The Fair Labor Standards Act of 1938 (FLSA) was introduced by President Roosevelt to deal with issues such as child labor and the establishment of minimum wage. Most employees continue being subjected to low payments that cannot meet their basic needs. Countries that do not have strong Acts on fair labor also experience high rates child labor and this can only be fixed if appropriate Labor Acts are introduced. The is paper will focus on the history of FLSA, the various ways of how it’s implemented, the impact it has to business and society, policy analysis, and some recommendations for future policy makers.

History of the Act

The campaign to improve the working conditions and pay in the United States started in the early 1830s. This was motivated by the fact that people used to works for around 10 to 15 hours in a day. As a result, there were numerous cases of work-related injuries and illnesses that inspired some authors to write books such as The Jungle written in 1906, and The Iron Steel in 1907. By then, companies hired men, women, and children who all worked together. In an effort to curb exploitation by employers, some early labor laws were enacted to reduce the working hours per week and establish a minimum wage (Whittaker, 2003). Nonetheless, most of these laws such as the federal child labor law and a District of Columbia law, that sought to establish a minimum wage for women, were declared unconstitutional by the Supreme Court.

In the early 1900s, there was increasing demands for jobs in the cities as people abandoned jobs in the farms in search of factory jobs. Similarly, during the same period there were many immigrants from other countries who were endeavoring to work in the United States. Factory workers used to work for long hours where they were also paid low hourly wage. After the World War I, the economic conditions had worsened with the unemployment rate in the United States reported to be around 4% from 1922-1929. Despite the high unemployment rated, the working hours per day were long and workers were not paid overtime. Due to the Great Depression the unemployment rate had reached 25% in 1934 (Nordlund, 1997).

President Roosevelt sent the Fair Labor Standards bill to the Congress on May 1937 with a message that America should be able to provide its citizens with a fair pay for a fair day’s work. According to Roosevelt, there was no justification for a democratic country like the United States to still be having child labor and allowing employers to overwork their employees. Although different states had a right to formulate their standards, Roosevelt emphasized that goods produced under conditions that were not decent should be treated as contraband and should not be allowed to trade in America.

At the initial stages, the bill recommended 40 cents as a minimum wage per hour with maximum workload per week being set at 40 hours. As pertains to age, 16 years was the minimum age for workers in manufacturing and mining industries. Additionally, the bill also proposed a labor standards board that was assigned the task of reviewing the wages and the number of hours in some cases (US Congress, 2010). Those who supported the bill argued that it would end oppression that was often experienced in industries that produced goods for interstate commerce. In particular, the bill was to deal with child labor and the unnecessarily long hours that workers were being subjected to without receiving any form of compensation. They argued that shortening the working hours would create new jobs as employers would opt to do so instead of paying their employees for overtime. This was also prompted by a survey conducted by the Labor Department’s Children’s Bureau targeting a sample of 450 children. The study revealed that more than quarter of the children worked for at least 60 hours a week and only a third of them worked for 40 hours or less. According to an explanation offered by a Commissioner of Labor Statistics the success of a business was determined by the ability of the employers to overwork their employees but not on their efficiency. Most of the congressmen supported a bill that excluded work done after a collective bargaining and hence made the Senate to pass a weakened bill on July 31, 1937.

President Roosevelt was not amused by the passing of the weakened bill and arranged for a special meeting of the Congress in October, 1937. In this meeting, he emphasized that the exploitation of child labor and exposing workers to long hours of work while paying them poorly was seriously affecting buying power. When the bill was submitted to the House for voting it was defected 218 to 198. Present Roosevelt was of the idea that the bill was being defeated because it was too lengthy (Robinson, Franklin, & Wayland, 2009). Therefore, he wanted the bill to be drafted in two pages, but Solicitor Labor Gerard only managed to reduce the bill from 40 to 10 pages. Most of the employers were opposed to the bill mentioning that the 40 cents per hour was too high for them. This led the bill to be adjusted to 25cents per hour. Finally, the bill passed the House by a vote of 291 to 89 on June 13, 1938. Upon passing, the Congress sent the bill to President Roosevelt who signed the Fair Labor Standards Act that became effective on October 24, 1938.

Essentially, the Fair Labor Standards Act creates a minimum wage, overtime pay, record keeping, and youth employment standards that affect full-time and part-time workers in the private sector and in federal or local governments. All employees who engage in interstate commerce or in the production of goods for commerce are covered by FLSA. As at July, 2007 the FLSA recommended a minimum wage of $5.85 per hour. This was then adjusted to $6.55 and $7.25 in 2008 and 2009 respectively (US Congress, 2010). However, there are some special provisions for workers in American Samoa and the Commonwealth of the Northern Mariana Islands.  According to FLSA, all the nonexempt workers should be paid overtime at a rate that is not less than one and a half times of their regular rates once they work for more than 40 hours in a week. It was necessary to establish the FLSA due to the public policy prescription market failure to regulate child labor and wages. For this reason, President Roosevelt decided to salvage the situation on behalf of the United States by pushing for the Act to be enacted.

Implementation of the Fair Labor Standards Act

According to the Act, facilities such as lodging that are provided by employers for the benefit of their employees may be taken as part of wages. In some cases, performance of certain types of work in an employee’s home is not allowed until the employers acquire certification from the Department of Labor. Theses restrictions apply in the manufacture of items where safety and health hazards are involved.

In the implementation of FLSA, some individuals can be employed at wage rates that are below the statutory minimum. Some of such people include students in agricultural establishments and other institutions of learning. Moreover, people whose productivity is impaired by mental disability or injuries are not covered by FLSA (Whittaker, 2003).  The Act also provides a minimum wage that is not less than $4.35 an hour for employees who are below 20 years of age for the first 90 days of employment. However, the Act does not allow employers to displace other employees with an intention of hiring workers at the youth minimum wage. It is also critical for employers to check the terms and conditions of the employees who are exempted from overtime pay provisions and minimum wage. In essence, the success of the implementation of FLSA depends on how well both the employers and employees understand all the provisions of the Act.

Impact on Business and Society

As the Act seeks to address the issue affecting workers in the United States, it has had some impacts to the society. The main impact that the FLSA has had on the society is by improving the working conditions for the employees. For instance, workers are no longer exploited by companies that used to pay them poorly and subjected them to long hours of work. Before, the enactments of this Act, companies were exposing their employees to long hours of work without compensating them in any way (Gates & Leschner, 2007). However, this changed when the Act was introduced since it seeks to regulate and harmonize the rates at which workers are paid by their employees while at the same time discouraging child labor and exploitation.

The FLSA has played a big role in motivating workers to dedicate their time in working for their employers. According to the Maslow’s Hierarchy of Needs Theory, people are motivated when their basic needs are satisfied. Ideally, when the wages for workers are increased, it enables the workers to afford paying for some of the basic needs such as food, shelter, and clothing. In some cases, when the workers are not paid enough wages, they tend to only pay for the things they can afford. This means that with low wages, it might be impossible for workers to afford luxury goods such as cars or building their own apartments. Furthermore, Maslow theory also indicates that the level of satisfaction can also be measured through self esteem. However, this is mainly achieved after the basic needs are met. Since the FLSA was mainly targeting the factory workers, it is not possible to quantify the level of satisfaction the workers achieved after their wages were increased. However, it was quite clear that with the increased wages they could afford some comfortable lifestyle.

At the initial stages of the Act, employers were opposed to it because they thought the recommended hourly wages were too expensive to maintain. Employers further added that the Act would push them out of business due to the high cost of maintaining employees. Upon harmonization, FLSA has impacted positively to the business community because wages are standardized and the exploitation of workers is eliminated (Ellen, 2000).  Likewise, the Act has introduced some standards that employers have to adhere to while paying their employees. As a result, businesses are also ready to employ more workers instead of subjecting themselves to the prohibitive costs of overtime pay.

Policy Analysis

The FLSA that was enacted in 1938 largely covered industrial workers who took part in interstate commerce. In this regard, retail, service and agricultural workers were not covered by this Act. Similarly, the Act also did not cover people employed by state or local governments. Over the years, the Act has undergone various amendments that mainly focus on overtime pay, child labor, and the wage floor. Due to the innumerable amendments, the FLSA has been subjected to a wider coverage (Gates & Leschner, 2007). Most of the amendments are driven by political and economic circumstances. The expansion of the Act through amendments has been opposed by many employers who strongly feel that the Act does not consider the state of their businesses and whether they can be sustainable with the high wage rate. In order to figure out the context of the FLSA, scholars and policy analysts have been involved in the analysis of the minimum wage. Some of the concerns are about the impact of the Act to the market and the pricing of commodities.

After the instruction of the minimum wage policy as advocated in the FSLA, workers are paid a decent pay that makes them enjoy some reasonable comfort in their working places. In addition, with fair pay, workers are put in a better economic situation where they can afford to pay for the other basic services.

Strengths

As noted by US Congress (2010), the Fair Labor Standards Act of 1938 tries to address a wide range of workers and ensures that such workers are not exploited by their employers by advocating for a specific payment that should be paid on an hourly basis. In particular, FLSA clearly stipulates the amount of overtime that should be paid to workers based on their hourly rate. For instance, the Act is very clear that overtime payment should be around one and half times of the normal rate paid to a worker. This has been set to eliminate any confusion that may arise if a constant figure was set. Moreover, many employers are bale to pay their workers using different rates that are based on their ordinary rates of payments. As such, workers that have a high rate of income have a higher rate of overtime payment per hour than the workers at a lower rate of payment.

Although FLSA does not cover all enterprises, it provides a provision where enterprises are subjected to a minimum wage provision so long as they are participating in any form of commerce or in the production of goods or services for trade. For instance, employees who work in communications or transportation sector regularly use the mails and telephones for interstate communication. They also keep records for their interstate transactions and receive or send goods in interstate commerce. Moreover, enterprises that are not covered by FLSA because they do not meet the minimum annual income still continue to be subjected to the child labor, record keeping, and overtime pay provisions.

Domestics service workers, housekeepers, cooks, drivers, and full-time baby sitters are also covered by FLSA if they work for more than eight hours per week. Ideally, this minimum wage provision is applicable whether they work for one employer or more. In addition, FLSA has also addressed tipped employees who receive more than $30 monthly tips. In this case, the Act provides that an employer may consider the tips to be part of the wages but the employer has to pay them at least $2 per hour as direct wages (Calsavina, Calsavina, & Calsavina, 2010). To ensure that this provision is not abused, FLSA requires employers to inform their employees in advance if such an arrangement is to be made. If the tips combined with the direct wages do not add up to the minimum hourly wage, the employer is required to pay the difference. It is also a requirement for employees to keep their tips unless their employers have arrangements to pool their tips.

Weaknesses

FLSA does not address vacation, severance of sick pay for employees. For this reason, employees are left to negotiate with their employers on the terms of sick leave and annual vacations. This has left many workers to be manipulated by their employers to either work with the provided terms or seek for other employers. Moreover, without a clear guideline on how workers should be compensated when they are sick, FLSA assumes that employers will always be in a position to compensate their employees according to the agreed terms. However, this is not always the case since some companies compensate their employees poorly due to the lack of standardization.

Another area that FLSA has shown some weakness is in the increase of salaries or wages of employees. This has left employers to be the main determinants on when or how to increase the pay of their employees. With this lapse, workers fail to ask for pay increases due to the fear of being victimized or losing their jobs (Calsavina, Calsavina, & Calsavina, 2010).  In essence, employers control their staffs by reminding them that they are adhering to FLSA in paying them for overtime and the hourly charges. With this, employees do not have any ground to ask for a pay increase since it’s not supported by any Act.

According to Calsavina, Calsavina, & Calsavina (2010), this Act does not have any reliable method of determining the hourly pay that workers should receive. In essence, the Act fails in providing appropriate guidelines on how it arrives at some figures as the recommended hourly charges. For instance, setting an hourly charge at $5 does not consider the economic situation of the different areas in the United States. This is contrary to what many economic analysts indicate that different regions experience varying cost of living. Considering this economic principle, then it implies that wages in the areas that have high cost of living should be slightly higher to cushion workers against such conditions.

When considering the payments for workers there are various factors that are considered. For instance, employers will have to find out the input of the employees, their level of skills, their commitment, and the duration they have worked with them. In relation to this, FLSA recommends some basic wages and overtime payments for workers without any consideration on the amount of work they have done within the given time. As a result, many employers end up paying their workers not for the amount of work they have done but for the number of hours they have been in their work premises. Eventually, the cost of hiring workers becomes very high and unsustainable to the companies.

Recommendations

In order to be more helpful, FLSA should be revealed by policy makers to address the issue of sick pay for employees. There should be a standard action on how employers should pay their employees when they are sick. This is likely to eliminate the disagreements that may arise when employees try to negotiate the sick pay rates with their employers.

When it comes to pay increase, FLSA should be modified to include standardized procedure on how wages should be increased. This can be done by identifying some general accomplishments that employees need to attain in order to qualify for a pay increase. Moreover, the pay increase can be based on individual appraisal of employees and the skills they possess. It is also essential for the Act to have a better method of determining the minimum hourly rates. The best way to do this would be to appoint a team of experts that will analyze economic factors and recommend new payment rates on an annual basis. Therefore, future policy makers should pay greater attention to the details before enacting Acts to ensure that they address as many issues as possible and to avoid any loophole.

 

 

 

References

Calsavina, G., Calsavina, R. & Calsavina, E. (2010). Complying with the Fair Labor Standards     Act (FLSA): A Continuing Legal Challenge for Employers. Journal of Legal, Ethical and   Regulatory Issues, 13 (1), p. 39.

Ellen, M. (2000). The Fair Labor Standards Act of 1938 and Competing Visions of the Living      Wage. Review of Radical political Economics, 32 (3), pp. 408-4016.

Gates, S. & Leschner, K. (2007). In the Name of Entreprenuership?: The Logic and Effects of        Special Regulatory Treatment for Small Business. New Jersey: RAND Corporation.

Nordlund, W. (1997). The Quest for a Living Wage: The History of the Federal Minimum Wage    Program. Michigan: Greenwood Publishing Group.

Robinson, R., Franklin, G., & Wayland, R. (2009). Employment Regulation in the Workplace:       Basic Compliance for Managers. Boston: M.E. Sharpe.

US Congress. (2010). Congressional Record, V. 153, PT. 2, January 18, 2007 to February 1,        2007. New York: Government Printing Office.

Whittaker, W. (2003). The Fair Labor Standards Act. New York: Nova.

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