Fair Labor Standards Act (FLSA)

What the FLSA covers

The FLSA has four main parts:

• Minimum wage. The federal minimum wage has been $7.25 an hour since July 24, 2009. Most states and many cities set higher rates, and the employee gets whichever is highest. Tipped employees can be paid a cash wage as low as $2.13 an hour under federal law if tips bring them up to $7.25.
• Overtime. Non-exempt employees get at least one and a half times their regular rate of pay for hours worked over 40 in a workweek. See our full guide to overtime for how the regular rate works.
• Recordkeeping. Employers must keep accurate records of hours worked and wages paid for non-exempt employees.
• Child labor. Restrictions on hours and hazardous jobs for workers under 18, covered in more detail under child labor laws.

The Equal Pay Act of 1963 and the 2022 PUMP for Nursing Mothers Act, which requires break time and a private non-bathroom space for expressing breast milk, are also part of the FLSA.

What the FLSA does not require is just as useful to know. It does not require meal or rest breaks, paid vacation, holiday pay, sick leave, severance, premium pay for weekends, or a limit on hours for adults. Those come from state law, contracts or policy.

Who is covered

Coverage comes two ways. Enterprise coverage applies to businesses with at least $500,000 in annual gross sales or business, and to hospitals, schools and public agencies regardless of revenue. Individual coverage applies to an employee whose work involves interstate commerce, which today includes anyone who regularly makes out-of-state calls, handles mail or email across state lines, or processes card payments. In practice nearly every employer in contact centers, staffing, retail, logistics and healthcare is covered.

Coverage is not the same as eligibility for overtime. Covered employees are either non-exempt (protected by minimum wage and overtime) or exempt from one or both rules. The default is non-exempt. An employer that claims an exemption has to prove the employee meets every part of it, as explained in our guide to exempt vs non-exempt status.

Hours worked: where most FLSA claims start

The overtime math is simple. The fights are about what counts as work. Under the FLSA, hours worked include all time an employee is suffered or permitted to work, whether or not it was requested.

The usual sources of unpaid time:

• Pre-shift and post-shift work. Booting up computers, logging into phone systems and opening CRM tools before the paid shift starts. Contact centers have paid out many settlements over exactly this.
• Short breaks. Rest breaks of about 5 to 20 minutes must be paid. Only bona fide meal periods, normally 30 minutes or more with no duties, can be unpaid.
• Training and meetings. Required training is work time. Voluntary, outside-hours training unrelated to the current job can be unpaid if it meets all the DOL's tests.
• Travel during the workday, such as driving between client sites.
• Off-the-clock messages. Answering schedule texts or customer emails from home.
• Rounding. Rounding punches to the nearest 5, 6 or 15 minutes is allowed only if it is neutral over time, rounding both up and down.

A tight time and attendance setup that starts the clock when the agent first touches a system is the cheapest fix available.

Recordkeeping requirements

For non-exempt employees, employers must record identifying information, the workweek start, hours worked each day and week, the regular rate, straight-time and overtime earnings, deductions and the pay period. Payroll records must be kept for at least three years. Time cards, schedules and records used to compute wages must be kept for two years.

The FLSA does not prescribe a timekeeping method. Paper, biometric clocks and app-based punches are all fine if they are accurate. If an employer's records are missing or unreliable, courts let employees prove hours by reasonable estimate, and the employer then has to disprove it. Poor records almost always lose.

Penalties and how claims are brought

Employees can recover unpaid minimum wage and overtime going back two years, or three if the violation was willful, plus an equal amount as liquidated damages, which effectively doubles the bill. Attorney's fees are added. Repeated or willful violators can also face civil money penalties from the DOL.

FLSA lawsuits are usually brought as collective actions, where similarly situated employees opt in. In large hourly workforces, a single unpaid 10-minute login routine multiplies fast. At 600 agents, 10 minutes a day, 250 days a year and $18 an hour, the unpaid time is about $450,000 a year in straight time before overtime premiums and doubling. Retaliating against an employee who complains about wages, internally or to the DOL, is a separate violation.

This covers federal law only. States such as California, New York, Washington and Illinois add daily overtime, break rules, pay-frequency laws and stricter penalties, so check each state where you have employees.

FLSA compliance checklist for HR teams

• Classify every job as exempt or non-exempt based on its actual duties and salary, and document the reasoning.
• Define a fixed workweek (seven consecutive 24-hour periods) in writing.
• Pay for all time worked, including system login, required training and short breaks.
• Include non-discretionary bonuses and shift differentials in the regular rate.
• Audit rounding and auto-deducted meal breaks at least once a year.
• Keep payroll and time records for the required periods.
• Track the minimum wage in every state and city where people work, including remote workers.
• Give managers a clear rule: all overtime gets paid, and unauthorized overtime is a discipline issue, not a pay deduction.
• Display the required FLSA poster where employees can see it, including for remote staff electronically.