Are Businesses That Make Less Than $500,000 a Year Subject to Labor Laws?
Hiring employees can be essential for small businesses to meet growing demand, but taking on workers can raise a host of legal issues. The federal government enforces a variety labor laws that can affect workers at companies of all sizes. Whether a particular labor law covers a business can depend on a variety of factors such how much revenue it makes and the number of workers it employs.
The Fair Labor Standards Act establishes a federal minimum wage and overtime rules that require covered businesses to pay workers at a rate of one and a half times their normal pay for hours worked beyond 40 in one week. According to the U.S. Department of Labor, the act applies to businesses with $500,000 in annual dollar volume of business or more. A company with less than half a million dollars in annual business is generally not covered. Certain types of businesses, however, such as hospitals, schools, institutions of higher education and government agencies are covered regardless of annual business volume.
Even if a business has less than $500,000 in annual revenue, the Fair Labor Standards Act may still cover individual employees that work for the company. The Department of Labor states that employees are generally covered in any workweek when they are individually engaged in interstate commerce. In addition, domestic service workers like housekeepers, chauffeurs, cooks and full time babysitters are covered if they meet certain minimum income or work hour requirements.
The FLSA does not cover certain workers even if they work for companies who make more than $500,000. Employees not subject to FLSA laws include executives, professionals, administrators, outside sales staff and skilled computer employees. Railroad and air carrier employees, taxi drivers, farm workers and movie theater employees are exempt from the overtime pay requirements of the FLSA.
The Equal Pay Act of 1964 requires business to pay men and women the same amount for substantially equal work in the same establishment. According to the U.S. Equal Employment Opportunity Commission, the Equal Pay Act applies to all businesses covered by the FLSA.
While the Fair Labor Standards Act uses business volume as a metric for determining coverage, most labor laws do not depend on how much money a business makes. For instance, essentially all employers in the private sector are subject to unemployment insurance laws. Similarly, the Occupational Safety and Health Act, which prescribes guidelines for workplace safety, applies to all workers except self-employed people, workers on farms that employ only immediate members of the farmer's family and certain federal, state and local government employees. Companies with less than 15 employees are not subject to Title VII of the Civil Rights Act of 1964, which makes it illegal to discriminate in the workplace based on race, religion, gender and nationality.