Fair Labor Standards Act (FLSA)

What Is the Fair Labor Standards Act?

The Fair Labor Standards Act (FLSA) is a US federal law that protects employees from unfair pay practices and work standards. Signed by President Franklin D. Roosevelt in 1938, the law's original purpose was to protect workers from abuses during the Great Depression. The Wage and Hour Division was also established at this time and is still responsible for enforcing these and other labor standards today.

To reflect the needs of the modern workforce, the government has amended the FLSA many times over the years. Today, it remains one of the most important workplace laws for public and private employers to know.

What Employment Practices Are Regulated by the FLSA?

The FLSA governs a variety of workplace practices, but mainly those related to employee wages, health, and safety. The primary provisions under the FLSA include the following:

Minimum Wage

The federal minimum wage is the lowest amount an employer may pay an hourly employee. Several states also have minimum wage laws. If the state minimum wage is higher than the federal, the employee is entitled to the state pay rate.

Overtime Pay

Employers are required to pay non-exempt employees overtime when they work more than 40 hours per week. According to FLSA rules, overtime is calculated as 1.5 times an employee's regular pay, or "time-and-a-half." If federal and state overtime laws differ, the employer must default to the higher of the two.

Employer Recordkeeping

Employers must keep diligent records about their employees. This includes timekeeping information, wage rate, overtime earnings, and other key data points. Payroll records, sales and purchase records, and collective bargaining agreements should be kept for at least three years, and records related to wage calculations should be retained for two years. Additionally, employers must display an official FLSA poster where employees can easily see it in the workplace.

Child Labor

FLSA protects minors from work that may be detrimental to their wellbeing. Youth employment laws regulate how long they can work, what they can do, and other practices to help ensure their jobs are safe and don't infringe upon the educational opportunities open to school-age children.

FLSA Exempt Status

Every US employee is classified as either exempt or non-exempt—two groups that have different legal rights. The FLSA excludes exempt employees from receiving the same overtime and minimum wage protections as non-exempt workers. To be FLSA exempt, employees typically must be:

• Paid at least $35,568 annually (or $684 per week)
• Paid at least $107,432 annually (if they are “highly compensated employees”)
• Employed in administrative, professional, executive, computer, or outside sales roles

The Department of Labor (DOL) regularly reviews this criteria to ensure the law is relevant to the current workforce. Most recently, the DOL announced a proposed FLSA rule in 2023 that grants overtime protection to a greater number of workers.

FLSA Overtime Exemptions

Exempt employees are not entitled to extra pay for working more than 40 hours a week. However, an employer may still choose to compensate these workers for the extra time spent on the job. This compensation may be traditional time-and-a-half or another form of payment, such as:

• Sales commission
• Percentage of profit
• Flat sum
• Bonus pay

Nonprofit Organizations

Nonprofit organizations may be required to follow FLSA rules on an enterprise basis or individually. The law applies to any organization with sales or revenue of at least $500,000 annually (enterprise coverage) and individuals who are involved in interstate commerce. Employees of hospitals, schools, preschools, and government agencies may also be covered.

The enterprise requirement doesn't apply to charitable activities like collecting donations, but it does apply to the revenue a nonprofit collects in other ways. For example, if an organization sells T-shirts or operates a gift shop, this is the revenue that would be considered for the FLSA requirement.

Religious Organizations

Generally, clergy and other religious workers are exempt under FLSA. However, there may be some exceptions, such as when a church or religious group operates a school or nursing home.

FLSA Non-Exempt Status

Hourly employees are classified as non-exempt if they meet FLSA requirements, including the duties test and salary basis test. Unlike exempt employees, these workers are entitled to overtime pay and other protections under the law. While hourly employees typically fall under this category, this coverage also applies to salaried non-exempt workers.

What Is Not Guaranteed By the FLSA?

Employee misclassification and other FLSA-related mistakes can result in costly penalties for business owners, so it's important to know how it applies to your workforce and policies. FLSA governs many benefits for qualified employees, but not every common business practice is lawfully guaranteed. For example, the law does not regulate the following:

• Vacation, holiday, or sick pay
• Higher pay for weekend work
• Breaks and meal times
• Wage raises
• Fringe benefits
• Employment discharge notices and severance pay
• Pay stubs and W-2 forms

These benefits are usually offered by individual businesses as outlined in their employee handbook, while others may be regulated by state law.