FLSA (Fair Labor Standards Act): What It Is and Who It Covers
What FLSA covers
FLSA, passed in 1938 and enforced by the US Department of Labor (DOL) Wage and Hour Division, sets the floor for four major areas:
- Minimum wage: $7.25/hr federal (states can set higher)
- Overtime: 1.5× regular rate for hours over 40/week for non-exempt employees
- Recordkeeping: employers must keep accurate time + pay records for at least 3 years
- Child labor: restrictions on hours and types of work for workers under 18
Who is "exempt" vs "non-exempt"?
This is the most-misunderstood part of FLSA. Just being "salaried" doesn't make someone exempt from overtime. To be exempt (no overtime due), employees must meet all three tests:
- Salary basis: paid a regular, predetermined salary (not docked for partial-day absences)
- Salary level: at least $58,656/year ($1,128/week) as of 2026
- Duties test: meet specific executive, administrative, professional, computer, or outside sales duties
If any of these fails, the employee is non-exempt and owed overtime regardless of salary or job title.
What FLSA does NOT cover
FLSA is a floor, not a ceiling. It does not require:
- Paid vacation, sick leave, or holidays
- Severance pay
- Health insurance
- Premium pay for weekends or holidays (unless overtime kicks in)
- Meal or rest breaks (some states do require these)
- Pay raises or bonuses
FLSA enforcement and penalties
The DOL Wage and Hour Division investigates complaints. Common violations: misclassifying employees as exempt, off-the-clock work, miscalculated overtime, illegal deductions. Penalties can include:
- Back wages (2 years or 3 years if willful)
- Liquidated damages (an equal amount of back wages, doubling the bill)
- Civil penalties up to $1,000+ per violation
- Class action lawsuits with attorneys' fees
Related terms
1099 vs W-2 →I-9 →FICA →Exempt vs Non-exempt →
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Who must comply with FLSA?
Virtually all US employers. The "enterprise" test (revenue $500K+/year) covers most businesses, and even smaller employers may be covered under the "individual coverage" test if employees engage in interstate commerce (using phones, computers, US mail, etc. for work that crosses state lines).
What's the difference between FLSA and state wage laws?
FLSA is federal and sets the floor. State laws can be stricter (higher minimum wage, daily overtime, mandatory meal breaks). Employers must follow whichever is more protective for the employee.
Are independent contractors covered by FLSA?
No. FLSA only covers employees, not 1099 independent contractors. But misclassifying employees as contractors is a common FLSA violation. The DOL uses a multi-factor "economic realities" test to determine real status.
Can FLSA overtime be waived?
No. FLSA overtime cannot be waived by the employee or by agreement. Even if a non-exempt employee signs a contract saying "I won't claim overtime," the obligation remains. Employers cannot use comp time (extra time off) in lieu of overtime in the private sector.
How does MyCo handle FLSA compliance?
MyCo auto-classifies workers as exempt/non-exempt based on salary thresholds, applies 1.5× overtime to hours over 40/week, tracks state-specific daily overtime (CA, AK, NV), maintains 3+ years of records, and flags any pay run that triggers minimum wage issues. See it in action — book a demo.