Running a business is hard enough without surprise wage‑and‑hour claims. The Fair Labor Standards Act (FLSA) sets the baseline rules for pay, overtime, and child labor nationwide. A quick grasp of those rules—and a solid payroll system—keeps you compliant and focused on growth.
Key Takeaways
- The FLSA sets the federal minimum wage ($7.25/hour) and overtime at 1.5× regular pay after 40 hours.
- Employees fall into non‑exempt (overtime‑eligible) or exempt (meet salary $684/wk + duties test).
- Keep wage & hour records for 3 years; timecards/wage calculations for 2 years.
- Penalties run up to $2,515 per violation (wage/overtime) and $145,752 for severe child‑labor breaches.
1. What the FLSA Covers
The Act boils down to four pillars that protect workers and shape your payroll.
Minimum Wage
Pay at least $7.25/hour unless your state or city requires more. Tipped workers get $2.13/hour only if tips make them whole.
Overtime
For non‑exempt staff, pay 1.5× their regular rate for every hour over 40 in a single workweek.
Child Labor
No hazardous jobs for anyone under 18. Kids 14–15 have strict hour limits during school weeks (3 hrs/day, 18 hrs/week).
Recordkeeping
Track each employee’s name, SSN, hours, pay rate, deductions, and totals. Store pay records three years; time records two years. Any consistent, accurate time‑tracking tool works.
2. Who’s Covered?
Exempt vs. Non‑Exempt Cheat‑Sheet
| Category | Salary Floor | Key Duties |
|---|---|---|
| Executive | $684/wk | Manages two+ employees, hires/fires |
| Administrative | $684/wk | Office/non‑manual work; independent judgment |
| Professional | $684/wk | Advanced knowledge – e.g., CPAs, engineers |
| Computer | $684/wk or $27.63/hr | Systems analysis, software design, similar |
| Outside Sales | None | Primary duty = making sales off‑site |
If an employee fails either the salary or duties test, classify them as non‑exempt and pay overtime. Non-exempt employees are those who are not exempt from FLSA protections, whereas exempt employees are not subject to FLSA rules.
3. Common Compliance Traps & Penalties
- Misclassifying salaried staff as exempt without passing the duties test.
- Unpaid “off‑the‑clock” time: pre‑shift prep, emails after hours, travel between worksites.
- Auto‑deducted meal breaks employees work through.
- Incomplete records or failure to post the official FLSA notice.
Fines start at $2,515 per repeated/willful wage violation; double damages apply if you don’t pay back wages promptly.
4. Three‑Step Compliance Checklist
- Audit classifications – Review each role annually; document your decision in the file.
- Track time accurately – Use a digital clock‑in/out system and require approvals weekly.
- Review payroll – Confirm overtime, minimum wage, and deductions before every run.
Need a “set‑it‑and‑forget‑it” payroll that nails FLSA compliance? Book a free 15‑minute strategy call with Valor Payroll Solutions and stop stressing about wage rules.
Frequently Asked Questions
What’s the statute of limitations for FLSA claims?
Two years for standard violations, three years if the breach is willful.
Are remote workers covered?
Yes. Hours worked from home count toward minimum wage and overtime just like on‑site hours—be sure your time‑tracking app covers them.
Do independent contractors fall under the FLSA?
No—but the Department of Labor’s “economic realities” test makes misclassification costly. When in doubt, get a legal review.
Can I offer comp time instead of overtime?
Private‑sector employers cannot. You must pay cash overtime; comp time is only allowed for public agencies.
Conclusion
The FLSA isn’t optional—and it isn’t going away. Classify employees correctly, track hours precisely, and pay what the law requires. Partnering with experts like Valor Payroll Solutions turns compliance from a burden into a non‑issue, so you can stay laser‑focused on growing your business.
