FLSA (Fair Labor Standards Act)

The FLSA establishes four primary protections for American workers:

Minimum Wage: The federal minimum wage is $7.25 per hour as of 2024. Many states and cities have enacted higher minimum wages — employers must pay whichever rate is higher. Tipped employees may be paid a direct cash wage of $2.13 per hour, provided their tips bring total compensation to at least the minimum wage.

Overtime Pay: Non-exempt employees must receive overtime pay at a rate of at least 1.5 times their regular rate for all hours worked beyond 40 in a single workweek. The workweek is a fixed, recurring 168-hour period (seven consecutive 24-hour periods) defined by the employer. Overtime is calculated weekly — employers cannot average hours across multiple weeks (unless a valid alternative work schedule agreement exists in some states).

Recordkeeping: Employers must maintain accurate records of hours worked and wages paid for each non-exempt employee. Required records include personal information, hours worked each day and week, regular rate of pay, overtime earnings, and total wages paid per pay period.

Child Labor: The FLSA restricts the types of work minors can perform and limits the hours they can work. Children under 14 are generally prohibited from most non-agricultural employment. Fourteen and fifteen-year-olds face restrictions on hours and types of work. Sixteen and seventeen-year-olds can work unlimited hours but cannot perform hazardous jobs.

The FLSA applies through two types of coverage:

Enterprise Coverage: Businesses are covered if they have annual gross sales or business volume of at least $500,000, or if they are hospitals, care facilities, schools, or government agencies regardless of revenue. Virtually all employers of any meaningful size meet this threshold.

Individual Coverage: Even if the business doesn't meet enterprise coverage, individual employees are covered if their work regularly involves interstate commerce. This includes making phone calls to other states, handling records of interstate transactions, shipping goods across state lines, or traveling to other states for work. Courts interpret this broadly — using email, the internet, or a credit card machine that processes out-of-state transactions typically establishes individual coverage.

Certain employees are exempt from specific FLSA provisions. The most common exemptions apply to executive, administrative, professional, computer, and outside sales employees who meet specific salary and duties tests. Other exemptions exist for certain agricultural workers, seasonal amusement park employees, and others.

The regular rate of pay is central to overtime calculations, and it includes more than just the hourly wage. The regular rate must include:

• Base hourly pay or salary converted to hourly equivalent
• Non-discretionary bonuses and incentive payments
• Shift differentials
• Commissions
• Piecework earnings

The regular rate does not include discretionary bonuses, gifts, holiday premiums, paid time off payments, employer contributions to benefit plans, or reimbursements for business expenses.

Example calculation: An employee earns $20/hour and works 45 hours in a week. Regular pay: 40 hours x $20 = $800. Overtime pay: 5 hours x $30 ($20 x 1.5) = $150. Total weekly pay: $950.

If the same employee also received a $100 non-discretionary production bonus, the regular rate would need recalculation: ($800 + $100) / 40 hours = $22.50/hour. Overtime: 5 hours x $11.25 (half-time premium) = $56.25. Total: $800 + $100 + $56.25 = $956.25.

FLSA violations carry significant financial penalties:

Off-the-clock work: Requiring or permitting employees to work before clocking in, after clocking out, or during unpaid breaks is the most common violation. This includes answering work emails from home, mandatory pre-shift meetings, and post-shift cleanup.

Misclassification: Incorrectly classifying non-exempt employees as exempt to avoid paying overtime. The Department of Labor scrutinizes job duties, not titles, to determine proper classification.

Tip violations: Failing to pay tipped employees the full minimum wage when tips fall short, requiring tip pooling with ineligible employees, or employers retaining employee tips.

Penalties include:

• Back wages for up to two years (three years for willful violations)
• Liquidated damages equal to the back wages owed (effectively doubling the liability)
• Civil penalties up to $2,451 per violation for repeat or willful violations
• Criminal prosecution for willful violators (fines up to $10,000 and possible imprisonment)
• Attorney fees awarded to prevailing employees

The Wage and Hour Division of the Department of Labor enforces the FLSA through investigations and audits.