“Your scientists were so preoccupied with whether they could, they didn’t stop to think if they should.” 

– Jeff Goldblum, Jurassic Park

The Fair Labor Standards Act (“FLSA” or “Act “) is the most widely applicable federal wage and hour law. It covers more than 143 million workers in the United States,  who are engaged in interstate commerce or work for covered enterprises, and it is enforced by the U.S. Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”). The purpose of the Act is to set minimum wage, overtime, recordkeeping, and youth employment standards. Currently the FLSA enforces a minimum wage of $7.25 an hour. 

What really constitutes the payment of wages under the FLSA? This blog discusses what classifies as the payment of wages under the FLSA and discusses how an employee ought to be paid. 

Under the FLSA, wages are owed for all hours worked. Wages can be paid either in cash or through the furnishing of facilities. If paid in cash, DOL allows the employer to pay in cash or via a check. Also, if the employee consents, the employer may set up direct deposit to their bank account. 

Additionally, an employer can furnish “other facilities” which counts against the employee’s minimum wage obligation. This will include a significantly more complicated analysis of the facilities, their cost, and why they are being furnished.  The reasonable cost of board, lodging, or other facilities only counts towards the employee’s minimum wage obligation if it is the type of facilities that is customarily furnished by the employer. That means that the facilities are either furnished by the employer to many of its employees, or if it is customary in the business or trade for the employer to furnish these facilities to the employee. These facilities may take the form of childcare, transportation, tuition expenses, etc. as long as they are primarily for the benefit of the employee. 

DOL has a non-exclusive list for items that are customarily to be found to be for the primary benefit of the employee, such as childcare, meals, lodging, transportation, merchandise and tuition expenses. However, that doesn’t mean that all lodging or all transportation is for the benefit of the employee. If housing is furnished to the employee because the employer needs an employee at the facility, then it is likely that DOL will take the position that the lodging is furnished for the benefit of the employer and thus cannot reduce the employer’s minimum wage obligation. 

Likewise, DOL has a non-exclusive list of items that are customarily found to be for the primary benefit of the employer, such as electric power, telephones for business purposes, medical services which an employer is required to furnish under worker’s compensation laws, or rental of uniforms (where the rental is required by law, the employer, or nature of the work), business related travel expenses, and necessary tools. 

In the event that an employer can credit the cost of facilities that they furnish to employees towards the minimum wage obligation, the employer may only claim the reasonable cost of those facilities. The reasonable cost of facilities cannot exceed the cost to the employer. Additionally, the reasonable cost of the facilities cannot include profit. For example, in a retail establishment, the reasonable cost of a clothing item cannot include the profit that the establishment would charge a regular customer. Finally, the burden is on the employer to establish the cost of a facility and must be established via available records such as bills, purchase orders and cash register tapes. 

As you can see, satisfying the part of the FLSA minimum wage obligation through the furnishing of facilities is a complicated endeavor. However, if a business is already providing these facilities to their employees, they can take a credit for it against their minimum wage obligation instead of what is in effect paying an employee twice. In the current labor climate, this may not be the best decision to retain your workforce and keep up morale. But that is a business decision to be made with all the facts in mind.