What is the Fair Labor Standards Act (FLSA)?

Running an organization today is a maze of responsibilities from keeping customers happy and balancing budgets to supporting employee and staying legally compliant. It’s a lot. And if you employ hourly workers, one regulation sits at the center of it all — the Fair Labor Standards Act (FLSA). 

Enforced by the United States Department of Labor (DOL), for over 80 years the FLSA has defined the rules for wage and hour laws in the U.S. But with changing labor markets, shifting state laws, and evolving technology, maintaining compliance isn’t always easy. If your workforce is scaling fast or your schedules are still managed manually, there’s a good chance something’s falling through the cracks. 

We’ll cover everything you need to know about the FLSA — from figuring out who qualifies for overtime, how employee classification works, and why things like breaks and scheduling matter more than you think.  

Origin of the FLSA

The FLSA was passed in 1938 to protect workers from unfair wages and exploitative conditions. With its introduction, the FLSA: 

• Introduced the 40-hour workweek 

• Established child labor protections 

• Mandated a federal minimum wage  

Today, it’s enforced by the U.S. Department of Labor’s Wage and Hour Division as one of the most influential labor laws in the country. 

Understanding the FLSA is crucial for avoiding wage violations, maintaining employee trust, and building a fair, scalable operation. The FLSA’s influence today is broader than its Depression-era origin — it’s about maintaining clear, lawful pay practices and protecting workers’ time in an increasingly complex labor market. 

Key employment practices regulated by the FLSA

At its core, the FLSA ensures that employees are treated fairly and paid correctly. It focuses on four primary areas:  

1. Minimum wage 
2. Overtime pay 
3. Recordkeeping 
4. Protections for younger workers  

These aren’t just legal checkboxes — they shape how you manage time, pay, and people daily.  

If your organization is covered by the FLSA (as most are), you’ll need to follow federal rules and, in many cases, state or local laws that go a step further.  

It can feel like a lot to keep track of, but once you understand how each piece of the FLSA fits into your daily operations, it becomes much more manageable. Here’s what you need to know. 

Minimum wage requirements

Minimum wage laws are designed to verify that workers are compensated fairly for their time. The FLSA sets the federal minimum wage, but many states and municipalities require higher rates.  

Falling short of federal, state or local laws, even by mistake, can lead to back pay, penalties, and a hit to your reputation. The risk grows if you manage teams across different regions with different rules. Here are some quick notes on minimum wage laws: 

• Federal rate – $7.25 per hour, unchanged since 2009  

• State or local rate – May exceed the federal minimum, and must be followed by the employer if more favorable to the employee 

• Tipped employees – Employers can take a tip credit, but must confirm employees earn at least the minimum when tips are included 

You can check the applicable wage laws in your area using the DOL’s state-by-state wage chart. 

Overtime pay obligations

Overtime tends to be one of the trickiest parts of the FLSA where employers slip up. Since not everyone is eligible for overtime, determining who qualifies depends on their FLSA status (which can be unclear).  

Misclassifying someone or inaccurately tracking hours leads to wage violations, frustrated employees, and unexpected costs. Knowing the rules, plus keeping a close eye on employee schedules and time records, goes a long way in avoiding overtime headaches. 

Federal overtime law requires eligible employees to be paid at least one and a half (1.5) times their regular rate for hours worked beyond 40 in a workweek. According to the FLSA, an employee’s workweek is a fixed and regularly recurring period of 168 hours or seven consecutive 24-hour periods. 

Common questions about FLSA

Now that you understand the key employment practices regulated by the FLSA, specific details can raise lingering questions. Topics like overtime pay, minimum wage, recordkeeping, and child labor often prompt a closer look. Let’s clear up some of the most common questions so you can stay ahead of FLSA compliance issues.  

What is FLSA exempt status?

Overtime exempt employees are paid a fixed salary regardless of hours worked and are excluded from receiving overtime because they make at least twice the minimum wage in their area. They are paid on a salary basis at not less than $1,128/week (as of Jan 1, 2025, per the Final Rule). 

However, salary-based pay alone does not determine exempt status. The FLSA outlines certain job duties which qualify employees for exemption, including managing at least two other employees and having the authority to hire or fire employees. Other categories include: 

• Executive 

• Administrative 

• Computer 

• Outside Sales 

• Highly-compensated 

What is FLSA nonexempt status?

Nonexempt employees are eligible to receive overtime pay from their employer. This FLSA status means a group of employees must earn at least minimum wage, and are paid by the hour based on the number of hours worked in each pay period. A few examples of nonexempt positions include: 

• Administrative assistants 

• Contractors 

• Retail associates 

• Hospitality roles 

• Construction workers 

What are the most frequent compliance mistakes?

Even with the best intentions, it’s easy to make mistakes when managing wage and hour rules — especially with outdated systems or if you’re relying on guesswork.  

Some of the most common FLSA errors come from incorrect classifications, missing pay details, or time tracking that doesn’t reflect the actual hours worked. Whether it’s a salaried employee who should’ve been receiving overtime, or a missed shift differential that throws off the pay rate, even minor oversights can lead to significant compliance risks. Catching these mistakes early — or building systems that prevent them altogether — is one of the smartest moves you can make: 

• Misclassification – Treating salaried employees as exempt without confirming their actual job duties meet exemption criteria 

• Off-the-clock work – Missing unpaid time spent closing, prepping, or responding to work-related messages outside scheduled hours 

• Inaccurate pay rates – Forgetting to include nondiscretionary bonuses, commissions, or shift differentials in the regular rate used to calculate overtime 

How do state-specific laws factor into FLSA?

While the FLSA provides a federal baseline, many states have passed labor laws that go above and beyond, particularly with overtime. Employers must always follow the rule that offers the most protection to the employee, whether federal, state, or local. 

FLSA is just the starting point for compliance, especially if you operate in multiple states. Here are a few examples where state law adds requirements beyond the FLSA: 

• California – Overtime starts after 8 hours in a workday, and double time kicks in after 12 hours. Weekly overtime still applies after 40 hours. 

• Colorado – Employees are entitled to overtime after 12 consecutive hours worked, even if those hours cross over two calendar days. 

• Alaska – Requires daily overtime after 8 hours for certain employers and adds protections for industries like healthcare, construction, and transportation. 

Every state has its own nuances, so double check your local and state ordinances even if you think you’re covered federally. You can find a full list of state overtime laws on the U.S. DOL State Laws portal. 

What types of recordkeeping does the FLSA require?

The FLSA sets specific recordkeeping requirements for employers and their employee’s data,  including: 

• Employee’s name and Social Security number 

• Address, birthdate, sex, and occupation 

• Workweek start time 

• Hours worked each day and each week 

• Wage rate and method of payment 

• Overtime earnings, deductions, and total wages paid 

These records must be kept for at least three years, while wage calculation documents like timecards and work schedules must be stored for two years. Employers can use any method to track employee hours, but the records must be accurate, consistent, and complete.  

Additionally, employers must display these records at the place of employment or central records office and be available for inspection by the DOL’s division representative. 

What should you know about hiring minors under the FLSA?

If your organization hires younger workers — especially in industries like retail, food service, or hospitality — you’ll want to be familiar with the FLSA’s rules around youth employment.  

These protections are designed to keep minors safe from risky environments, keep school as a priority, and prevent overworking. The younger the worker, the more restrictions. Most rules focus on when and how long they work, as well as what kinds of jobs they’re allowed to do: 

• Under 14 – Can only work in a handful of roles, like babysitting, newspaper delivery, or acting 

• Ages 14-15 – Can work outside school hours in non-hazardous jobs, but limited to 3 hours on school days and 18 hours per school week 

•  Ages 16-17 – Fewer hour restrictions, but still barred from hazardous jobs (like operating heavy machinery or working at heights) 

• Youth minimum wage – Employers can pay $4.25/hour for the first 90 calendar days of employment (workers under 20), but only under certain conditions  

Keep in mind that state laws may add more restrictions, like work permits or parental permission. If you regularly hire minors, it’s a good idea to double-check your state’s youth labor guidelines before opening roles to new hires. 

Why FLSA compliance matters

FLSA compliance isn’t just about checking a legal box. It’s about protecting your team, your reputation, and your bottom line. Whether you’re running a small operation or managing multiple locations, wage and hour laws shape how your organization runs every single day.  

Consequences of FLSA violations

The Department of Labor regularly investigates FLSA violations, and the penalties can be steep even if the issue was unintentional. Overlooking FLSA is the easiest way for minor issues to snowball into major consequences. No one wants a missed break, a few untracked overtime hours, or a classification mistake to turn into a lawsuit or audit.  

Beyond the legal risks, there’s a human cost with FLSA mishaps. Employees who aren’t paid correctly or feel like they’re working in a disorganized environment are more likely to leave or speak up publicly. 

Here’s what’s on the line if FLSA violations occur: 

• Civil penalties – Up to $2,374 per employee for repeat violations of minimum wage or overtime rules 

• Child labor fines – Up to $137,602 per incident if a minor is injured while working 

• Private lawsuits – Employees can sue for back pay, damages, and legal fees, often resulting in class action cases 

• Operational risk – Timekeeping errors and misclassified roles can delay payroll and trigger federal or state audits 

Employers must display labor law notices detailing employee rights under the FLSA. These posters, available in English and non-English versions, must be easily displayed and readable. Some state regulations may also require state-specific labor law notices from employers.  

FLSA compliance may feel like more bureaucratic legwork, but don’t underestimate the confidence it can build. When your team feels like you take their time seriously, it encourages the kind of operational consistency you need to grow your business. Compliance is a simple way to support a stronger, more stable place to work. 

What the FLSA does not require

It’s just as important to know what the FLSA doesn’t cover as it is to know what it does. While the law lays out key protections around wages, hours, and working conditions, many workplace policies fall outside its jurisdiction. These gray areas often trip up employers, especially with unclear expectations or the added complexity of state laws. 

Federal labor law is the minimum, but states and local governments can — and often do — add more.  

Here’s what the FLSA doesn’t mandate and what you’ll need to handle through state law or your own internal practices: 

• Meal and rest breaks – Not required under federal law, though many states require them (e.g., California, Oregon, New York) 

• Paid leave – The FLSA does not guarantee vacation time, holidays, or paid sick days 

• Premium pay – There’s no federal requirement for extra pay on weekends or holidays unless it qualifies as overtime 

• Severance pay – Not covered by federal law, severance is up to employer policy or contract terms 

• Termination rules – The FLSA doesn’t dictate when or how final paychecks must be issued, which varies by state 

• Pay stubs and W-2s – These are managed by IRS rules and state regulations, not the FLSA 

Aligning on what FLSA guidelines, your state/local regulations, and your internal policies cover is essential to eliminate confusion and maintain compliance. For the full list of what the law includes and excludes, you can visit the Department of Labor’s FLSA overview. 

How to be FLSA compliant without the headache

Managing a business is a hard enough — you don’t need to add in worrying about if someone clocks out late, misses a break, or picks up a shift that throws them into surprise overtime.  

Most wage and hour problems (i.e. the foundation of FLSA violations) start with two things — inconsistent time tracking and unstructured scheduling. When those pieces don’t communicate, compliance gets messy. And getting it wrong can cost you cash, trust, and time. 

FLSA checklist 2025

FLSA compliance doesn’t have to be a burden. When you build good habits in your timekeeping and scheduling process, you’re setting your organization up to be more organized, predictable, and less stressful. It’s all about using the right tools and workflows to stay ahead of issues, instead of cleaning up messes later. 

Start with the basics — track what matters, train your managers, and make sure your systems talk to each other. Here’s what that looks like in practice: 

• Use accurate time tracking – Confirm your employees clock in and out consistently using time tracking systems that log punches down to the minute (no handwritten sheets or guessing). 

• Apply the correct FLSA status – Double-check job duties and salary levels against DOL exemption tests. Set a cadence to do this regularly, not just during onboarding. 

• Train frontline managers – Reinforce your shift leads and supervisors to understand how breaks, overtime, and scheduling impact compliance. Give them the tools and guidance they need. 

• Build smart schedules – Use demand and availability data to avoid last-minute coverage issues that lead to unplanned overtime. Predictive scheduling laws in some cities also require posting schedules in advance. 

• Set alerts for potential violations – Systems should notify you when someone’s about to hit overtime, skip a break, or otherwise violate scheduling rules before it becomes a problem. 

• Track breaks reliably – Some states require specific rest and meal periods. You’re responsible for making sure they happen not just listing them on paper. 

• Keep digital records – Store timecards, wage calculations, schedules, and audit trails for at least two to three years in a secure, searchable format. 

• Review pay structure regularly – Don’t forget that bonuses and differentials may need to be factored into the regular rate when calculating overtime. Also, check for unlawful rounding practices. 

• Run internal audits – Periodically check your own time data, classifications, and pay records to fix any small issues before they escalate. 

When you combine accurate time tracking with thoughtful scheduling, everything just works better. You reduce the admin burden, improve team morale, and give yourself the peace of mind from knowing you’re on solid legal ground. 

FLSA compliance shouldn’t fill you with dread. With the proper setup, it becomes a natural part of how you run a smart, well-managed team. 

How understanding the FLSA helps your entire organization

When you know how the Fair Labor Standards Act works and what it expects, you can build a workplace that’s fair, organized, and built on trust.  We’ve looked at the key requirements of the FLSA, what it covers (and what it doesn’t), and how common compliance mistakes can impact everything from morale to growth.  

The most effective compliance strategies are built into everyday processes. When things like time tracking, employee scheduling, and recordkeeping align with the law, you reduce risk and make your organization easier to run.  

If you’re ready to take that even further, workforce tools supporting FLSA compliance can give you the clarity and consistency you need to move forward confidently, while offloading the manual work needed in the process. 

TCP Software’s employee scheduling, time, and attendance solutions are flexible and scalable to accommodate your organization and employees as you grow.  

From TimeClock Plus, which automates even the most complex payroll calculations and leave management requests, to Humanity for dynamic employee scheduling that saves you time and money, we have everything you need to meet your organization’s needs, no matter how unique.

Plus, with Aladtec, we offer 24/7 public safety scheduling solutions for your hometown heroes.  

Ready to learn how TCP Software takes the pain out of employee scheduling and time tracking? Speak with an expert today.