Fair Labor Standards Act (FLSA): The Complete Employer’s Guide for Small Businesses
What the FLSA requires: minimum wage, overtime, exempt vs nonexempt, recordkeeping, and child labor. A practical compliance guide for small businesses.
Fair Labor Standards Act (FLSA)
Minimum wage, overtime, exempt vs nonexempt, recordkeeping, and child labor: what every employer must know
The Fair Labor Standards Act is the federal law that most directly affects how you pay your employees. It sets the floor for wages, determines who gets overtime, dictates what records you must keep, and restricts when minors can work. Every employer with employees is affected by it. And yet, the Department of Labor estimates that a significant percentage of employers are not in full compliance.
The reason is not that employers want to break the law. It is that the FLSA is deceptively complex. It covers five major areas, each with its own rules, exceptions, and state-level interactions. The exempt versus nonexempt classification alone has generated more employment litigation than almost any other area of HR law. And for small business owners without an HR department, navigating it without a guide is a recipe for expensive mistakes.
This guide covers what the FLSA requires of employers, how to determine whether your employees are exempt or nonexempt, what records you must keep and for how long, what the penalties are for violations, and how FLSA compliance connects to the onboarding workflow. I built FirstHR to manage the employee profiles, document storage, and onboarding paperwork that FLSA recordkeeping demands, but this guide is about understanding the rules so you can comply with confidence.
What Is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act is a federal law enacted in 1938 that establishes minimum wage, overtime pay, recordkeeping, and child labor standards for employees in the private sector and in federal, state, and local governments. It is administered and enforced by the Wage and Hour Division of the U.S. Department of Labor.
Three things the FLSA does not do that employers commonly assume it does: it does not define full-time or part-time employment (that is left to the employer), it does not require breaks or meal periods (some states do), and it does not limit the number of hours an adult employee can work in a week (it only requires overtime pay after 40 hours). The full-time hours guide covers the classification question in detail.
Who Is Covered by the FLSA
The FLSA covers employers through two types of coverage: enterprise coverage and individual coverage. If either applies, the employer must comply with the FLSA for covered employees.
| Coverage Type | Threshold | What It Means for Small Businesses |
|---|---|---|
| Enterprise coverage | Annual gross sales or business of $500,000 or more | Most businesses with more than a handful of employees meet this threshold. Gross sales includes all business done, not just profit. A restaurant, retail store, or service company doing $500K+ in annual revenue is covered. |
| Individual coverage | Employee individually engaged in interstate commerce or production of goods for commerce | Even if the enterprise threshold is not met, individual employees are covered if their work involves interstate commerce. Using the internet for business, making phone calls across state lines, processing credit card payments, ordering supplies from out of state, or serving customers from other states qualifies. |
| Government employers | All public agencies regardless of revenue | Federal, state, and local government employees are covered regardless of the agency's size or revenue. |
| Hospitals, schools, institutions | All covered regardless of revenue | Hospitals, residential care facilities, schools (public and private), and higher education institutions are covered regardless of enterprise revenue. |
The 5 Core Provisions of the FLSA
The FLSA governs five areas of employment. Each creates specific obligations for employers, and each carries penalties for noncompliance. Understanding all five is essential because violations in one area often trigger investigations across all five.
The five provisions interact. An employer who miscalculates overtime (provision 2) will also have incorrect records (provision 3), which means a DOL audit finds two violations instead of one. An employer who employs a 15-year-old for 25 hours during a school week (provision 4) has also failed to maintain proper records of the minor's hours (provision 3). The HR rules and regulations guide covers the broader federal compliance framework including FLSA alongside Title VII, ADA, FMLA, and OSHA.
Minimum Wage: Federal vs State vs Local
The federal FLSA minimum wage is $7.25 per hour, unchanged since July 24, 2009. However, more than 30 states and dozens of cities have set higher minimum wages. The rule is simple: the employer must pay whichever minimum wage is highest among federal, state, and local rates.
| Category | Rate | Applicable To |
|---|---|---|
| Federal minimum wage | $7.25/hour | All FLSA-covered employees in states without higher minimums |
| Tipped employees (federal) | $2.13/hour direct wage | Employees who customarily receive more than $30/month in tips. Employer must ensure total compensation (wages + tips) equals at least $7.25/hour. If tips are short, employer pays the difference. |
| Youth minimum wage | $4.25/hour for first 90 calendar days | Employees under 20 years old, for the first 90 consecutive calendar days of employment. After 90 days, full minimum wage applies. |
| State minimum wages (examples) | $16.50 (CA), $16.50 (WA), $15.50 (NY), $15.00 (CT, MA) | Employees working in those states. The higher state rate always applies. Check your state. |
| Local minimum wages (examples) | $18.29 (SeaTac, WA), $17.40 (Denver, CO), $16.20 (Flagstaff, AZ) | Employees working in those cities/counties. Local rate applies if higher than state and federal. |
For small businesses operating in a single state, the practical action is straightforward: look up your state minimum wage, compare it to $7.25, and pay the higher rate. For multi-state employers, each employee must be paid at least the minimum wage of the state (and city) where they work. The DOL state minimum wage page maintains the current rate for every state. The compliance hub provides state-by-state guides with current minimum wages for all 50 states plus DC.
Overtime Pay: The 40-Hour Rule
The FLSA requires employers to pay nonexempt employees at least 1.5 times their regular rate of pay for every hour worked beyond 40 in a single workweek. This is the provision that generates the most litigation and the most expensive mistakes.
| Rule | What It Means | Common Mistakes |
|---|---|---|
| Overtime after 40 hours per workweek | The 40-hour threshold is per workweek (a fixed 168-hour period), not per pay period. A biweekly pay period with 35 hours one week and 45 hours the next requires 5 hours of overtime for the second week. | Averaging hours across two weeks in a biweekly pay period. Each week stands alone. |
| Regular rate includes more than base pay | The regular rate includes base pay plus non-discretionary bonuses, shift differentials, commissions, and certain other compensation. Overtime is calculated on this total regular rate, not just the hourly wage. | Calculating overtime on base wage only, excluding bonuses or commissions that should be included. |
| No comp time for private employers | Private-sector employers cannot offer compensatory time off instead of overtime pay. Only public-sector employers can offer comp time under specific conditions. | Telling employees 'take Friday off instead of getting overtime for this week.' |
| No waiver possible | Employees cannot waive their right to overtime, even in writing. An agreement to work 50 hours per week at straight time is unenforceable. | Having employees sign agreements to work overtime without premium pay. |
| Workweek is employer-defined but fixed | The employer sets when the workweek begins (e.g., Monday 12:00 AM). Once set, it cannot be changed to avoid overtime obligations. | Shifting the workweek start day to avoid hitting 40 hours. |
The DOL Fact Sheet #17A provides the complete overtime rules including the regular rate calculation. The DOL overtime hub covers additional resources including exemption guidance and compliance assistance. A few states add additional overtime requirements: California requires overtime after 8 hours in a single day (not just 40 in a week), Alaska requires daily overtime after 8 hours for employers with 4+ employees, and Colorado requires overtime after 12 hours in a day. The part-time hours guide covers how part-time classification does not affect overtime eligibility (a part-time employee who works 45 hours earns 5 hours of overtime).
Exempt vs Nonexempt: The Classification That Matters Most
Every employee covered by the FLSA must be classified as either exempt or nonexempt. This classification determines whether the employee is entitled to overtime pay. Getting it wrong is the single most common and most expensive FLSA violation.
| Dimension | Exempt | Nonexempt |
|---|---|---|
| Overtime pay | Not entitled to overtime regardless of hours worked | Entitled to 1.5x regular rate for hours over 40/week |
| Pay method | Must be paid on a salary basis (fixed amount regardless of hours) | Can be paid hourly, salary, commission, or piece rate |
| Minimum compensation | $684/week ($35,568/year) | At least minimum wage for all hours worked |
| Typical roles (SMB) | General manager, office administrator with independent judgment, accountant, software developer | Receptionist, warehouse worker, retail associate, delivery driver, bookkeeper |
| Recordkeeping | Must track days worked and total pay | Must track all hours worked each day, total hours each week, and all compensation |
| Risk of misclassification | Treating a nonexempt employee as exempt → employer owes back overtime + liquidated damages | Treating an exempt employee as nonexempt → no legal risk (you are just paying overtime you did not have to) |
The 3-Part Exemption Test
To classify an employee as exempt from overtime, the employer must demonstrate that the employee meets all three parts of the exemption test. If any one part is not met, the employee is nonexempt and entitled to overtime.
The salary level threshold is the most frequently litigated element because it changes (or almost changes) periodically. The current threshold of $684/week has been in effect since January 1, 2020. The DOL's 2024 attempt to raise it to $1,128/week was vacated by the Eastern District of Texas in November 2024. Employers should monitor DOL rulemaking because future increases are likely. The HR audit guide covers how to review your exempt/nonexempt classifications as part of a broader compliance check.
The 5 White-Collar Exemption Categories
The duties test (part 3 of the exemption test) requires the employee's primary duty to fall into one of five white-collar categories. Each category has a specific duties test with distinct requirements.
| Exemption | Primary Duty | Additional Requirements | SMB Example |
|---|---|---|---|
| Executive | Managing the enterprise or a customarily recognized department or subdivision | Must customarily and regularly direct the work of at least 2 full-time employees (or equivalent). Must have authority to hire or fire, or recommendations on hiring/firing must be given particular weight. | General manager who runs the business, supervises 3+ employees, and has hiring/firing authority |
| Administrative | Office or non-manual work directly related to management or general business operations of the employer or the employer's customers | Must exercise discretion and independent judgment with respect to matters of significance. Routine clerical, bookkeeping, or secretarial work does not qualify. | Office administrator who manages vendor relationships, makes purchasing decisions, and handles employee benefits coordination with independent judgment |
| Professional (Learned) | Work requiring advanced knowledge in a field of science or learning, customarily acquired by a prolonged course of specialized intellectual instruction | The knowledge must be in a field that is traditionally taught in an academic setting (law, medicine, engineering, accounting, actuarial, teaching, architecture, sciences) | Staff accountant (CPA), registered nurse, licensed engineer, attorney |
| Professional (Creative) | Work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor | Must involve genuine creative ability, not routine mental, manual, or mechanical work | Graphic designer who creates original campaigns (not a production artist who resizes existing designs) |
| Computer Employee | Systems analysis, programming, software engineering, or similar computer-related work | Must earn at least $684/week on salary basis OR at least $27.63/hour. Primary duty must involve design, development, testing, or documentation of computer systems or programs. | Software developer, systems analyst, database administrator (not IT support, help desk, or hardware repair) |
| Outside Sales | Making sales or obtaining orders/contracts for services, customarily and regularly away from the employer's place of business | No salary basis or salary level requirement for outside sales. Must spend more than 50% of time outside the office making sales. | Field sales representative who visits client sites (not an inside sales rep who makes calls from the office) |
Misclassification: The Most Expensive FLSA Mistake
Misclassification occurs when an employer classifies a nonexempt employee as exempt, thereby failing to pay required overtime. This is the most common and most costly FLSA violation for small businesses.
| Misclassification Scenario | Why It Happens | The Cost |
|---|---|---|
| Salaried employee classified as exempt without meeting duties test | Owner assumes that paying a salary = exempt. It does not. The duties test must also be met. | Back overtime for up to 3 years (if willful) + equal amount in liquidated damages + attorney fees. For one employee earning $50K working 45 hrs/week: ~$15,000-$25,000 in back pay alone. |
| 'Manager' title given to non-managing employee | Owner gives the title for morale or business cards, but the employee does not supervise 2+ people or exercise management duties | Same damages as above. Title is irrelevant; duties are everything. |
| Administrative employee who does routine clerical work | Owner believes office work = administrative exemption. But routine data entry, filing, and scheduling without independent judgment is nonexempt. | Same damages formula. The 'administrative' exemption is the most litigated because the duties test is nuanced. |
| IT support classified as computer employee | Owner assumes all technology workers are exempt. But help desk, hardware installation, and network troubleshooting typically do not meet the computer employee duties test. | Same damages formula. The computer exemption requires systems analysis, programming, or software engineering duties. |
| Inside sales classified as outside sales | Owner believes all sales roles are exempt. But the outside sales exemption requires spending more than 50% of time physically outside the office. | Same damages formula. Phone sales, web sales, and email sales are not 'outside' sales. |
The financial exposure is significant because FLSA damages are doubled by default. If an employee is owed $10,000 in back overtime, the employer pays $10,000 in back wages plus $10,000 in liquidated damages (unless the employer can prove the violation was in good faith and based on reasonable grounds), plus the employee's attorney fees. For a small business with 3 misclassified employees over 2 years, the total exposure can easily reach $50,000 to $150,000.
FLSA Recordkeeping: What You Must Keep and for How Long
The FLSA requires employers to maintain specific records for every employee. These records must be accurate, complete, and available for inspection by the Wage and Hour Division. The DOL Fact Sheet #21 details every required data element.
| Record Category | Required Data Elements | Retention Period |
|---|---|---|
| Employee identification | Full name (as used for Social Security), address including zip code, date of birth (if under 19), sex, occupation | 3 years |
| Pay information | Basis of pay (hourly, salary, commission), regular hourly rate, total daily or weekly straight-time earnings, total overtime earnings, total additions to or deductions from wages, total wages paid each pay period, date of payment and pay period covered | 3 years |
| Hours worked (nonexempt) | Time and day of week when employee's workweek begins, hours worked each day, total hours worked each workweek | 3 years |
| Wage computation records | Time cards, piece work tickets, work and time schedules, records explaining basis for pay differentials between sexes in same establishment | 2 years |
| Exempt employee records | Basis of pay and total pay per pay period (hours tracking not required but recommended) | 3 years |
The recordkeeping obligation is non-negotiable and non-delegable. Even if a third-party payroll provider processes your payroll, the employer is responsible for ensuring the records exist and are accurate. During a DOL audit, the investigator will request these records. If they do not exist or are incomplete, the investigator assumes the violation occurred and calculates damages based on the employee's account of hours worked. The HR document management guide covers how to organize employee records within your broader file system.
At FirstHR, employee profiles store the identification data elements (name, address, DOB, occupation, classification) and document management retains signed acknowledgments and policy documents with timestamped audit trails. This does not replace payroll records (you need a payroll system for wage and hour data), but it covers the employment-record side of the FLSA requirement.
Child Labor Standards
The FLSA restricts the hours and types of work that employees under 18 can perform. These rules apply to all covered employers, including small businesses. The DOL child labor page provides the full list of prohibited occupations and hour restrictions.
| Age Group | Hours Restrictions | Prohibited Work |
|---|---|---|
| Under 14 | Generally cannot be employed (exceptions: family-owned non-mining/non-manufacturing businesses, newspaper delivery, acting/performing) | All non-exempt work |
| 14-15 years old | School days: 3 hours/day, 18 hours/week. Non-school days: 8 hours/day, 40 hours/week. Must work between 7 AM and 7 PM (9 PM June 1-Labor Day) | Manufacturing, mining, hazardous occupations, operating most powered equipment, baking, working from ladders/scaffolds |
| 16-17 years old | No federal hour limits | 17 hazardous occupations including mining, operating power-driven machinery, roofing, excavation, exposure to radioactive substances |
| 18+ years old | No restrictions under child labor rules | No restrictions under child labor rules (other FLSA provisions still apply) |
Child labor violations carry the highest per-violation penalties in the FLSA: up to $15,138 per violation, and up to $68,801 if the violation causes death or serious injury to a minor. For small businesses in retail, food service, and agriculture that commonly employ minors, strict compliance with hour restrictions and prohibited-occupation rules is essential. The onboarding checklist should include age verification and hour-restriction documentation for any employee under 18.
FLSA Compliance During Onboarding: The Overlooked Obligation
Most employers do not realize that onboarding activities are compensable work time under the FLSA. If the activity is mandatory, controlled by the employer, performed during the employer's normal working hours, and primarily for the employer's benefit, the employee must be paid for that time.
| Onboarding Activity | Compensable Under FLSA? | Why |
|---|---|---|
| Completing W-4, I-9, and direct deposit forms | Yes | Mandatory, controlled by employer, primarily for employer's benefit |
| Attending orientation session | Yes | Mandatory attendance = compensable work time |
| Reading and signing employee handbook | Yes (if mandatory) | If required by employer as condition of employment |
| Completing harassment prevention training | Yes | Mandatory training is always compensable, whether in-person or online |
| Setting up email, computer, and accounts | Yes | Work preparation directed by employer |
| Traveling to orientation location | Depends | Travel to a location other than normal worksite during normal work hours is generally compensable |
| Voluntary pre-employment social event | No | Not mandatory, not during work hours, not primarily for employer's benefit |
The practical implication: if your onboarding process takes 4 hours on Day 1 and you start paying the employee from hour 5, you owe 4 hours of back pay. If your onboarding includes a mandatory online training module that takes 2 hours to complete before the start date, those 2 hours are compensable. For nonexempt employees, this time also counts toward the 40-hour weekly overtime threshold. The onboarding documents guide covers the full list of required documents, all of which generate compensable time when the employee completes them.
State Wage and Hour Laws: Where They Override the FLSA
The FLSA sets the federal floor. Many states have wage and hour laws that exceed federal requirements. When state law is more generous to the employee than the FLSA, the state law applies. When the FLSA is more generous, the FLSA applies. The employer must comply with whichever standard benefits the employee more.
| Area | FLSA Standard | States with Higher Standards |
|---|---|---|
| Minimum wage | $7.25/hour | 30+ states plus DC. CA: $16.50, WA: $16.50, NY: $15.50, MA: $15.00, CO: $14.81, and many others. |
| Overtime threshold | After 40 hours/week | CA: also after 8 hours/day. AK: after 8 hours/day (4+ employees). CO: after 12 hours/day. NV: after 8 hours if paid less than 1.5x minimum wage. |
| Salary threshold for exemptions | $684/week ($35,568/year) | CA: $68,640/year. NY: $62,400/year (NYC). WA: $69,656/year. CO: $56,485/year. Several states exceed the federal threshold. |
| Tip credit | $2.13/hour direct wage | 7 states prohibit tip credit entirely (AK, CA, MN, MT, NV, OR, WA). Many others set higher direct wage floors. |
| Meal and rest breaks | No FLSA requirement | CA: 30-min meal break after 5 hours + 10-min rest every 4 hours. WA, CO, OR, CT, and others have break requirements. |
| Paid sick leave | No FLSA requirement | CA, NY, WA, OR, NJ, AZ, MD, MA, MI, CO, NM, MN, IL, CT, and others require paid sick leave. |
For multi-state employers, each employee must be paid under the rules of the state (and city) where they work. A company headquartered in Texas (no state overtime beyond FLSA, no paid sick leave, $7.25 minimum wage) with a remote employee in California must comply with California's daily overtime, $16.50 minimum wage, paid sick leave, and meal/rest break requirements for that California employee. The employment law guide maps every federal threshold by employee count including FLSA coverage.
Penalties for FLSA Violations
| Violation Type | Civil Penalty | Additional Damages | Statute of Limitations |
|---|---|---|---|
| Willful or repeated minimum wage or overtime violation | Up to $2,515 per violation | Back wages + liquidated damages (equal to back wages) + employee's attorney fees | 3 years (willful) or 2 years (non-willful) |
| Child labor violation | Up to $15,138 per violation | Additional penalties if violation is willful or causes injury | N/A (DOL enforcement) |
| Child labor violation causing death or serious injury | Up to $68,801 per violation | Criminal penalties possible | N/A |
| Willful violation (criminal) | Fine up to $10,000; second offense may include imprisonment | In addition to civil penalties and back wages | No limitation for criminal prosecution |
| Retaliation for filing FLSA complaint | Reinstatement + back wages + liquidated damages | Damages under both FLSA anti-retaliation and general anti-retaliation protections | 2-3 years |
The liquidated damages provision is what makes FLSA violations particularly expensive: the default is that the employer pays double the back wages owed. The employer can avoid liquidated damages only by proving that the violation was in good faith and that the employer had reasonable grounds for believing the act or omission was not a violation. This is a high bar. For most small businesses, the practical exposure is back wages x 2 plus attorney fees. The retaliation guide covers the anti-retaliation provisions that protect employees who file wage complaints.
FLSA Compliance Checklist for Small Businesses
FLSA vs FMLA: They Sound Similar but Are Completely Different
The FLSA and FMLA are the two most commonly confused federal employment laws, largely because their acronyms differ by only one letter. They govern entirely different aspects of employment.
| Aspect | FLSA (Fair Labor Standards Act) | FMLA (Family and Medical Leave Act) |
|---|---|---|
| What it governs | Wages and hours (minimum wage, overtime, recordkeeping, child labor) | Job-protected leave for family and medical reasons |
| Employer coverage | Most employers (enterprise or individual coverage) | Employers with 50+ employees within 75 miles |
| Employee eligibility | All covered employees from Day 1 | 12 months employed + 1,250 hours worked |
| Key obligation | Pay at least minimum wage and overtime for nonexempt employees | Provide up to 12 weeks unpaid, job-protected leave |
| Enacted | 1938 | 1993 |
| Enforced by | DOL Wage and Hour Division | DOL Wage and Hour Division |
| Applies to small businesses (under 50)? | Yes (most employers are covered) | No (FMLA requires 50+ employees) |
The two laws intersect in one important area: hours worked under the FLSA determine FMLA eligibility. An employee must have worked 1,250 hours in the preceding 12 months to be eligible for FMLA leave. The FLSA defines what counts as "hours worked." The FMLA guide covers the leave law in detail, including state laws that apply to employers under 50 employees.
Common FLSA Mistakes for Small Businesses
| Mistake | Why It Happens | The Fix |
|---|---|---|
| Assuming salaried employees are automatically exempt | Owner equates 'salary' with 'exempt.' But exempt requires meeting all 3 tests. | Apply the 3-part test to every salaried position. Document the analysis. |
| Not paying for pre-shift and post-shift work | Employee arrives 15 minutes early to set up, stays 10 minutes late to clean up. Owner does not count this time. | If the work is integral and indispensable to the principal activity, it is compensable. Track and pay for it. |
| Averaging hours across a biweekly pay period | Employee works 35 hours one week, 45 the next. Owner pays 80 hours straight time because it averages to 40/week. | Each workweek stands alone. The 45-hour week requires 5 hours of overtime regardless of what happened the week before. |
| Not including bonuses in overtime calculation | Owner pays a $500 quarterly production bonus but calculates overtime on base hourly rate only | Non-discretionary bonuses must be included in the regular rate for overtime calculation. Recalculate overtime in any week a bonus applies. |
| Misclassifying job titles instead of job duties | 'Office Manager' sounds exempt. But if the duties are primarily answering phones and data entry, the position is nonexempt. | Analyze actual duties, not titles. The duties test looks at what the employee actually does, not what the position is called. |
| Not tracking hours for remote employees | Owner assumes remote employees work their scheduled 40 hours. They might work 45. | Require remote nonexempt employees to log all hours worked. Implement a timekeeping system. |
| Offering comp time instead of overtime pay | Owner says 'take Friday off instead of overtime for the extra hours this week' | Comp time is prohibited for private-sector employers under the FLSA. Pay overtime in the pay period it was earned. |
| Not paying for mandatory training time | Owner requires employees to complete online training modules from home in the evening | Mandatory training is compensable work time. Pay for it and include it in the 40-hour overtime calculation. |
Frequently Asked Questions
What does FLSA stand for?
FLSA stands for the Fair Labor Standards Act, a federal law enacted in 1938 that establishes minimum wage, overtime pay, recordkeeping, and child labor standards for most employees in the United States. The law is administered and enforced by the Wage and Hour Division (WHD) of the U.S. Department of Labor. The FLSA applies to enterprises with annual gross sales of $500,000 or more and to employees individually engaged in interstate commerce.
Does the FLSA apply to small businesses?
Yes. The FLSA applies to any enterprise with annual gross sales or business of $500,000 or more and to employees who are individually engaged in interstate commerce or in the production of goods for commerce. In practice, most small businesses with 5 to 50 employees meet one of these thresholds. Using the internet to conduct business, accepting credit cards, ordering supplies from out of state, or serving customers from other states typically establishes individual coverage through interstate commerce. The DOL estimates that the FLSA covers the vast majority of American workers.
What is the FLSA minimum wage?
The federal FLSA minimum wage is $7.25 per hour, effective since July 24, 2009. However, 30 states plus DC have minimum wages higher than the federal rate. Employers must pay whichever minimum wage is higher: federal, state, or local. For tipped employees, the FLSA allows a direct cash wage of $2.13 per hour, provided that the employee's tips bring total compensation to at least $7.25 per hour. If tips are insufficient, the employer must make up the difference. Some states do not allow a tip credit and require the full state minimum wage before tips.
What is the FLSA salary threshold for exempt employees?
The current FLSA salary threshold for white-collar exemptions is $684 per week ($35,568 annually). An employee must earn at least this amount on a salary basis to potentially qualify as exempt from overtime. In 2024, the DOL issued a rule raising the threshold to $1,128 per week ($58,656 annually), but a federal court in Texas vacated that rule nationwide. The $684 threshold remains in effect. Highly compensated employees earning $107,432 or more annually qualify for a simplified duties test. The threshold may change in the future, so employers should monitor DOL rulemaking.
Who is exempt from FLSA overtime?
Employees who meet all three parts of the exemption test are exempt from FLSA overtime: they must be paid on a salary basis (not hourly), earn at least $684 per week, and perform duties that qualify under one of the white-collar exemption categories (executive, administrative, professional, computer employee, or outside sales). All three tests must be met. An employee who earns $100,000 per year but is paid hourly does not meet the salary basis test. An employee who meets the salary tests but performs primarily non-exempt duties (routine clerical work) does not meet the duties test.
Is FLSA only for hourly employees?
No. The FLSA applies to all covered employees regardless of how they are paid. Salaried employees who do not meet the exemption criteria (salary basis, salary level, and duties tests) are classified as nonexempt and must receive overtime pay for hours worked over 40 in a workweek. A common misconception is that putting an employee on salary automatically makes them exempt from overtime. It does not. The exemption depends on meeting all three tests, not just the method of payment.
What is the difference between FLSA and FMLA?
The FLSA (Fair Labor Standards Act) and FMLA (Family and Medical Leave Act) are two separate federal laws that address different aspects of employment. The FLSA governs wages and hours: minimum wage, overtime pay, recordkeeping, and child labor. It applies to most employers regardless of size. The FMLA governs job-protected leave: it provides eligible employees up to 12 weeks of unpaid leave for family and medical reasons. It applies only to employers with 50 or more employees. The two laws do not overlap in purpose, but they can interact (for example, onboarding time is compensable under FLSA, and FMLA leave eligibility depends on hours worked).
Is onboarding time compensable under the FLSA?
Yes. Under the FLSA, onboarding activities that are mandatory, controlled by the employer, performed during normal hours, and primarily for the employer's benefit are compensable work time. This includes completing new-hire paperwork (I-9, W-4, direct deposit forms), attending orientation sessions, reviewing and signing the employee handbook, completing required training (harassment prevention, safety), and setting up equipment or accounts. If these activities take place before the official start date, the time must still be paid if the four criteria above are met.
How long must employers keep FLSA records?
The FLSA requires employers to retain payroll records for at least 3 years. These include employee name, address, date of birth (if under 19), sex, occupation, workweek start day, hours worked each day, total weekly hours, basis of pay, regular hourly rate, daily or weekly earnings, deductions, total wages paid, and payment date. Wage computation records (time cards, work schedules, records explaining basis of pay differentials) must be retained for at least 2 years. Collective bargaining agreements must be kept for 3 years after their expiration.
What are the penalties for FLSA violations?
FLSA penalties include back wages (the unpaid minimum wage or overtime owed), liquidated damages (an additional amount equal to back wages, effectively doubling the liability), civil monetary penalties up to $2,515 per violation for willful or repeated minimum wage or overtime violations, up to $15,138 per violation for child labor violations, and up to $68,801 for child labor violations causing death or serious injury. Willful violations carry a 3-year statute of limitations instead of the standard 2 years. Criminal penalties (fines up to $10,000 and imprisonment) are possible for willful violators. The employer also pays the employee's attorney fees if the employee wins in court.