If you hire people in the U.S., the FLSA is the rulebook that sets the floor for pay and hours. It tells you the minimum you must pay, when overtime kicks in, what records to keep, and how young workers can be scheduled. States can add more protections, but the FLSA is the baseline.
Quick history & who enforces it
Congress passed the FLSA in 1938 during the New Deal to curb sweatshop conditions and unfair competition. Today, the U.S. Department of Labor’s Wage and Hour Division (WHD) enforces it—through audits, investigations, and litigation support. Employees can also bring private lawsuits, including collective actions under §216(b).
Who’s covered
Most employers are, either because:
- Enterprise coverage: Your business does at least $500,000 in annual gross sales and engages in interstate commerce (which, practically, is almost every modern company), or
- Individual coverage: A specific employee’s work ties to interstate commerce (using the phones, shipping, credit cards, the internet, etc.).
Public agencies are covered, and true independent contractors are not. Misclassification is a top enforcement target.
Core rules you can’t ignore
Minimum wage. The federal floor is $7.25/hour (many states and cities require more—follow the highest standard that applies).
Overtime. Non-exempt employees must get time-and-a-half for all hours over 40 in a workweek. The “regular rate” includes most nondiscretionary bonuses and incentives—get that math wrong and overtime is wrong.
Exemptions. Some roles (executive, administrative, professional, certain tech and outside sales) can be exempt from overtime if they meet both a salary basis/level and specific duties tests. Salary thresholds change over time—don’t rely on old numbers; verify current levels before classifying.
Tipped employees. You may take a tip credit (pay a lower cash wage if tips make up the difference to at least minimum wage), but only if you:
- Give proper advance notice,
- Keep managers/supervisors out of tip pools, and
- Follow the “80/20” rule limiting nontipped side work at the tipped rate.
Child labor. Strict limits apply to the hours and types of work minors can do, with extra care around hazardous tasks.
Recordkeeping. Keep accurate records of hours worked, pay rates, regular rate calculations, overtime, tips, and job classifications. You don’t need fancy software—just records that are complete, consistent, and retrievable.
Nursing employees. Provide reasonable break time and a private space (not a bathroom) for expressing milk, for up to one year after childbirth (many states go further).
What the FLSA doesn’t cover
It’s just as important to know what the FLSA doesn’t regulate. For example:
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Vacation, holiday, and sick pay – These are benefits left to employer policy or state law.
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Meal and rest breaks – The FLSA doesn’t require them (though some states do).
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Pay frequency – The law doesn’t set how often employees must be paid (weekly, biweekly, monthly), as long as they’re paid timely and fully.
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Termination rules – The FLSA doesn’t govern notice periods, severance, or discharge procedures.
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Workplace safety, harassment, or discrimination – Those are covered by other federal laws like OSHA, Title VII, or the ADA.
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Paid time off and benefits packages – Health insurance, retirement plans, and PTO are not part of the FLSA.
In short, the FLSA is about minimum wage, overtime, child labor, and recordkeeping. Everything else comes from state law, contracts, or other federal regulations.
How it’s enforced (and what it costs to get it wrong)
The DOL can audit without a complaint. Typical outcomes include back wages, liquidated damages (often doubling the back pay), and civil money penalties for willful or repeated violations—especially in child-labor cases. Employees can sue in court, individually or as a collective action, and employers who lose usually pay the employee’s attorneys’ fees. Retaliation (firing, demoting, cutting hours because someone complained) is illegal and often more expensive than the original issue.
Common employer pitfalls
- Calling someone “salary” and assuming that means they’re exempt (it doesn’t).
- Off-the-clock work: pre-shift prep, post-shift closing, answering messages after hours.
- Auto-deducted meal breaks when employees actually work through them.
- Miscalculating regular rate by leaving out nondiscretionary bonuses/shift diffs.
- Tip pooling that includes supervisors or too much side work at the tipped rate.
- Treating day-rate, piece-rate, or “1099” workers as non-employees when they function like employees.
Practical steps to stay compliant
- Map your workforce: list roles, duties, pay method, and exempt/non-exempt status; re-check salary thresholds and duties tests.
- Tighten timekeeping: every minute counts; train managers not to allow off-the-clock work.
- Audit pay calculations: verify regular-rate and overtime math, including bonuses.
- Review tipped policies: notice, tip pools, side-work limits, and tip records.
- Post and keep records: use the current DOL poster; keep clean, consistent payroll files.
- Train supervisors: most violations start with day-to-day scheduling and approvals.
- Watch state/local rules: when in doubt, apply the most protective standard.