Staying compliant with the Fair Labor Standards Act (FLSA) is critical—but navigating its complexities can be overwhelming. A simple mistake in employee classification, overtime pay, or recordkeeping could lead to hefty fines, lawsuits, and damage to your company’s reputation.
At Lift HCM, we specialize in helping businesses stay compliant with FLSA regulations. From wage laws to accurate employee classification, we guide employers through the legal maze to avoid costly mistakes. This article breaks down the essential rules of FLSA compliance—so you can protect your business and employees.
Table of Contents
- What is the Fair Labor Standards Act (FLSA)?
- Who Must Comply with the FLSA?
- Key FLSA Provisions for Employers
- Common FLSA Compliance Mistakes (and Fixes)
- Tips For A Successful FLSA Audit
- Consequences of FLSA Violations
- Ensuring Compliance with Lift HCM
1. What is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act (FLSA) was enacted in 1938 to establish fair wage and labor standards for workers in the United States. It governs:
✔ Minimum wage requirements
✔ Overtime pay rules
✔ Recordkeeping standards
✔ Child labor protections
✔ Employee Classification (exempt vs. non-exempt)
For employers, FLSA compliance is crucial—accidental or intentional violations can result in severe penalties, lawsuits, and financial losses.
2. Who Must Comply with FLSA?
Employer Coverage
Most businesses must follow FLSA regulations if they meet one of these criteria:
📌 Annual revenue of $500,000 or more
📌 Engagement in interstate commerce (e.g., shipping goods across state lines, making out-of-state phone calls, or handling credit card transactions)
Even if a company doesn’t meet these thresholds, individual employees may still be covered if their work involves interstate commerce.
Employee Classification: Exempt vs. Non-Exempt
✔ Non-Exempt Employees → Eligible for overtime pay (hourly workers)
✔ Exempt Employees → Not entitled to overtime (salary-based roles that meet exemption criteria)
Misclassifying employees is one of the most common FLSA violations and can lead to wage disputes and legal penalties.
3. Key FLSA Provisions for Employers
Minimum Wage Laws
The FLSA mandates a federal minimum wage, currently set at $7.25 per hour. However, many states have their own minimum wage laws that may be higher than the federal standard. As an employer, you must adhere to the higher rate, whether it's the state or federal law.
💡 Tip: Check the DOL’s Minimum Wage Map to ensure your business is paying the correct wages.
Overtime Pay Regulations
- Non-exempt employees must be paid 1.5x their regular rate for hours worked beyond 40 per week.
- Overtime must be calculated on actual hours worked, not scheduled hours.
- Salaried employees may still be entitled to overtime if they don’t meet exemption criteria.
Example:
If an employee earning $15/hour works 45 hours, their overtime pay should be:
- 40 hours @ $15/hour = $600
- 5 overtime hours @ ($15 × 1.5) = $112.50
- Total Pay = $712.50
Recordkeeping Requirements
Employers are required to maintain accurate records of employees' work hours and wages. These records should be kept for at least three years and should detail everything from hours worked to overtime calculations.
Employers must record:
Personal information: employee's name, home address, occupation, gender, and birth date if under 19 years of age
Hour and day when the workweek begins
Total hours worked each workday and each workweek
Total daily or weekly straight-time earnings
Regular hourly pay rate for any week when overtime is worked
Total overtime pay for the workweek
Deductions from or additions to wages
Total wages paid each pay period
Date of payment and pay period covered
Child Labor Laws
The FLSA child labor provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being. The provisions include restrictions on hours of work for minors under 16 and lists of hazardous occupations orders for both farm and non-farm jobs declared by the Secretary of Labor to be too dangerous for minors to perform.
Nonagricultural Jobs:
- Workers age 18 or older: Not subject to the FLSA’s child labor regulations.
- Minors 16 and 17 years old: May perform any nonhazardous job for unlimited hours.
- Minors 14 and 15 years old: May work outside school hours in nonmanufacturing, nonmining, nonhazardous jobs under the following conditions:
- No more than 3 hours on a school day.
- 18 hours in a school week.
- 8 hours on a non-school day.
- 40 hours in a non-school week.
- Only between 7 AM and 7 PM, except from June 1 through Labor Day, when evening hours are extended to 9 PM.
- Special provisions apply for youths enrolled in approved Work Experience and Career Exploration Programs (WECEP) and Work-Study Programs (WSP).
Farm Jobs:
- Minors 16 years and older: May perform any job, whether hazardous or not, for unlimited hours.
- Minors 14 and 15 years old: May perform any nonhazardous farm job outside of school hours.
- Minors 12 and 13 years old: May work outside of school hours in nonhazardous jobs with a parent’s written consent or on the same farm as the parent(s).
- Minors under 12 years old: May perform jobs on farms owned or operated by parent(s), or with a parent’s written consent, outside of school hours in nonhazardous jobs on farms not covered by minimum wage requirements.
Minors of any age may be employed in any occupation on a farm owned or operated by their parents.
4. Common FLSA Compliance Mistakes and How to Avoid Them
🚨 1. Misclassifying Employees as Exempt
❌ Mistake: Assuming a salaried worker is exempt without meeting the legal criteria.
✅ Fix: Apply the DOL’s Exemption Tests to classify employees correctly.
🚨 2. Failing to Pay Overtime
❌ Mistake: Paying straight-time for overtime hours.
✅ Fix: Use automated time-tracking to capture all hours worked.
🚨 3. Poor Recordkeeping
❌ Mistake: Incomplete payroll records.
✅ Fix: Implement cloud-based payroll software to track wages, hours, and deductions.
🚨 4. Ignoring State Wage Laws
❌ Mistake: Only following federal wage rules when state laws require higher pay.
✅ Fix: Regularly review state labor laws to ensure compliance.
5. Tips For A Successful FLSA Audit
- Maintain Meticulous Records: Keep employee records accurate, organized, easily accessible, and up-to-date.
- Utilize Effective Time Tracking: Employ time-tracking software (that includes overtime tracking) or a detailed Excel spreadsheet to ensure precise record-keeping.
- Implement a Verification Process: Require both the employee and a supervisor/manager to sign off on weekly hours worked, demonstrating mutual agreement on the recorded data.
- Keep Job Descriptions Current: Regularly update job descriptions, including compensation details and justifications. This documentation supports equitable and lawful pay practices.
- Review Your Handbook Frequently: Review your employee handbook every two years, paying particular attention to timekeeping and recording policies, to ensure alignment with FLSA guidelines.
💡 Pro Tip: Schedule quarterly compliance reviews to proactively identify FLSA risks before they become legal problems.
6. Consequences of FLSA Violations
Failing to comply with FLSA can result in:
- Back Pay Penalties: Employers may be required to pay years’ worth of unpaid wages.
- Civil Monetary Fines: The DOL can impose up to $2,074 per violation.
- Employee Lawsuits: Workers can sue for unpaid wages and damages.
- Department of Labor Investigations: DOL audits can uncover hidden compliance violations.
Ensuring FLSA Compliance: Protecting Your Business and Employees
Maintaining compliance with the Fair Labor Standards Act is not just a legal obligation but a crucial component of responsible business management. By understanding the intricacies of the FLSA, from employee classification to overtime pay and recordkeeping, employers can safeguard their operations against costly penalties and legal challenges.
At Lift HCM, we are committed to guiding businesses through these complexities, ensuring that they not only meet regulatory requirements but also foster a fair and equitable workplace. By implementing the strategies and best practices outlined in this article, you can confidently navigate the FLSA landscape, protecting both your business and your employees.
Need help navigating FLSA compliance? Contact Lift HCM today for expert guidance and payroll solutions tailored to your business’s needs!
