16 Sep The Essential Guide to the FLSA’s Wage and Hour Requirements
When it comes to the Fair Labor Standards Act (FLSA), there are many potential missteps that small businesses can make. Unlike some laws, the FLSA doesn’t generally have exemptions for small businesses. If your company earns at least $500,000 a year or has employees who do any form of interstate commerce, the FLSA applies to you.
What Is the FLSA?
The FLSA is a law governing minimum wage, recordkeeping, and overtime. It also involves many child labor laws. Passed in 1938, this law applies to more than 143 million workers in the United States. To make sure your organization is FLSA compliant, remember the following guidelines.
FLSA Basics: Exempt Versus Non-Exempt Workers
In a recent Mission to Grow podcast on “HR Compliance,” Mary Simmons, the vice president of HR compliance, learning, and development at Asure Software, discussed some of the major problems that employers have with FLSA rules.
“The biggest area where I find confusion is that you do not have a choice [ . . . ] All of your employees are exempt or non-exempt. There’s no in-between,” Simmons says. “It’s a duties test, and that’s what drives the exemption.”
By law, all your employees must be classified as exempt or non-exempt workers. Thanks to recent updates to rules about exempt workers, you’ll likely need to classify the majority of your employees as non-exempt. Only executive, administrative, or professional employees are exempt from overtime requirements.
Starting on January 1, 2025, these groups must be paid at least $58,656 per year to remain exempt. Highly compensated employees must be paid $151,164. Once an employee is classified as exempt, you don’t have to pay them overtime.
This FLSA determination is made through your job postings. There are very clear rules about how much workers have to be paid, and there are only three specific job types that qualify. To avoid violating the FLSA, you should perform regular audits and document your exempt determinations.
Minimum Wage and Overtime Pay
Currently, the minimum wage is set at $7.25 per hour. Employees can work up to 40 hours a week. After the 40-hour mark, workers must be paid time and one-half their regular rate. The only exception to this rule is for non-exempt employees, but there are very few workers who fit the non-exempt classification.
While minimum wage applies to the majority of workers, there are a few specific instances where different wage requirements apply.
- Full-time students
- Executive, administrative, and professional employees
- Tipped employees
- Seasonal workers
- Employees at recreational establishments, like amusement parks
- People with disabilities
Child Labor Protections (Agricultural)
There are specific provisions in the FLSA for child workers. There are also safety standards that govern what children are allowed to do. For example, they are banned from manufacturing explosives, working in coal mines, or operating balers.
For the first 90 days the minor worker is employed, they can be paid $4.25 per hour. After 90 days, they must be paid the federal minimum wage. Additionally, minors automatically switch to the federal minimum wage when they turn 20 years old.
While younger children can work on a farm where a parent is also employed, most children can begin working in agricultural settings outside of school hours once they reach the age of 14. At age 16, they can work in any non-hazardous position during or outside of school hours.
Child Labor Protections (Non-Agricultural)
Outside of delivering newspapers or casual babysitting, children can’t perform non-agricultural jobs until they’re 14. At ages 14 and 15, they can begin doing non-hazardous jobs, but there are many limitations on the hours and working conditions they can do.
Once minors turn 16, their hours and employment options open up significantly. All of the youth employment provisions disappear completely once the minor turns 18.
Overtime Expectations
As a small business, you must pay overtime. During her Mission to Grow interview, Simmons discussed a notable experience she had with a manufacturing company. Because of the new exempt salary changes in place for 2025, the manufacturing company was concerned about how they would pay their currently salaried workers.
In response, Simmons asked them about how much overtime they would need to pay if the positions became non-exempt. To her surprise, the company said that they didn’t pay overtime. After drilling into the company’s answers, Simmons discovered that everyone was working overtime and getting comp time instead of overtime pay.
While no one at the manufacturing company was aware of the law, ignorance isn’t considered a legal justification in FLSA audits. Employees must be paid overtime if they work overtime. Comp time isn’t an alternative, even if some employees may like getting it.
Frequently Asked Questions About Wage and Hour Laws
To better understand wage and hour laws, review some of the most common frequently asked questions.
What Are the Penalties for Not Complying With the FLSA?
FLSA penalties can quickly add up. For willful or repeated violations, you’ll be charged $1,000 per violation. If a child labor violation is involved, you’ll be charged $10,000. In severe cases, violations can even lead to criminal charges or imprisonment.
Can I Give Workers Comp Time Instead of Overtime Pay?
It is not possible to give workers comp time in place of overtime pay. If you are audited or reported, this can lead to significant penalties.
Does the FLSA Require You to Pay Extra for Weekends or Nights?
The FLSA does not dictate how much you pay your workers on weekends or nights. Under the FLSA, minimum wage rules and overtime pay are specifically set, but it doesn’t go into weekend, holiday, or night pay.
However, this doesn’t mean that you can’t give your workers extra pay for working nights, weekends, or holidays. Additionally, you should keep in mind that each state may have different laws. Whenever the state and federal law conflict about employment matters, you must follow the law that benefits workers the most. For instance, you would need to give your workers holiday pay on specific holidays if you’re an employer in Rhode Island.
How Many Hours or Days Can Employees Work Each Week?
The FLSA doesn’t regulate how many hours or days employees can work. It simply says that employees must be paid time and one-half pay if they work over 40 hours. However, it’s important to remember that minor employees do have rules governing how long they can work.
Are You Certain You Are Compliant with Wage and Hour Requirements According to the FLSA?
During Asure’s 2024 HR Benchmark Report, we asked 1,065 small businesses if they were in compliance with wage and hour requirements. We found that many companies are incredibly confident about their compliance. From our experience working with small businesses, it’s likely that some of these organizations are overconfident.
When we asked about FLSA compliance, we received the following results.
84% of zero-growth firms said they were certain they were compliant with wage and hour requirements.
92% of fast-growth firms said they were certain that they were compliant with wage and hour requirements.
While there’s a difference between zero-growth and fast-growth companies, it isn’t huge. Most likely, both of these results are over-inflated. It’s impossible to know what you don’t know, so these numbers are probably higher than they ought to be.
Become a Fast-Growth Company
Fast-growth companies are far more likely to be in compliance with laws and regulations. In fact, we found that 82% of fast-growth companies said yes to all five of our questions about HR compliance. Only 57% of zero-growth businesses said yes to every HR compliance question.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.