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Extremely small businesses may not be bound by FLSA minimum wage, overtime rules

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in Compensation and Benefits

Almost everyone assumes that all employees are covered by the federal Fair Labor Standards Act (FLSA). But in some rare circumstances, employees in very small and distinctly local businesses may not be entitled to minimum wage or overtime.

If the business does not earn at least $500,000 in gross annual revenue—the minimum for an entire enterprise to be covered by the FLSA—then some employees may not be covered either.

The key is whether the individual employee is “engaged in interstate commerce.”

As the following case shows, some aren’t.

Recent case: Celestino Martinez worked off and on as a cook for Jade Palace, a small Chinese restaurant that employed a handful of workers and never made $500,000 in gross revenue while Martinez was employed.

Martinez sued, claiming that he had worked as many as seven days per week and up to 10 hours per day for a monthly check that did not cover minimum wage and included no overtime pay for hours worked in excess of 40 per week.

Jade Palace employer countered that Martinez was not eligible because he did not have any duties that engaged him in interstate commerce. For example, he did not have access to a telephone, e-mail or the Internet. Nor did he mail anything or order food. Essentially, he simply cooked food.

The 11th Circuit Court of Appeals said he was not covered by the FLSA. (Martinez v. Jade Palace, No. 10-13390, 11th Cir., 2011)

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