Fair Labor Standards Act: Minimum Wage, Overtime, and Coverage

The Fair Labor Standards Act is the 1938 federal law that sets a minimum hourly wage, requires overtime pay after 40 hours in a workweek, restricts what jobs and hours minors can work, and requires employers to keep detailed pay records.¹ It is enforced by the Department of Labor’s Wage and Hour Division and applies to most private-sector employers and to federal, state, and local government agencies.²

The Federal Minimum Wage

Under 29 U.S.C. § 206, every covered, nonexempt worker must be paid at least $7.25 per hour.³ That rate has not changed since 2009. Most states now set a higher floor, with rates running roughly from $11 to $17 per hour. When state or local law sets a higher wage than the federal rate, the employer pays the higher amount.

Tipped Workers

Employers can pay tipped employees a direct cash wage as low as $2.13 per hour if the worker’s tips bring total hourly pay to at least $7.25. The $5.12 difference is called a tip credit.⁴ If tips fall short in any week, the employer has to make up the gap. Employers who keep tips or redistribute them improperly owe the full tip credit taken plus an equal amount in liquidated damages.⁵

Workers Under 20

Employees under 20 years old can be paid $4.25 per hour during their first 90 consecutive calendar days on the job. After 90 days pass, or once the worker turns 20, the full $7.25 applies. The clock runs on calendar days, not days worked, so the subminimum window closes quickly for part-timers.⁶

Overtime After 40 Hours

Section 207 requires employers to pay nonexempt employees at least one and a half times their regular rate for every hour worked past 40 in a single workweek.⁷ Each workweek stands on its own. An employer cannot average 35 hours one week and 45 the next to duck the premium. The FLSA does not require daily overtime; a few states impose that on their own, but the federal rule looks only at the weekly total.

Who Is Exempt From Overtime

Section 213(a)(1) exempts employees in executive, administrative, professional, computer, and outside sales roles.⁸ These are the white-collar exemptions. Qualifying for one requires passing both a salary test and a duties test. A job title alone never makes someone exempt.

The enforceable salary threshold is $684 per week ($35,568 per year), the level set by the 2019 rule. The Department of Labor tried to raise that figure in 2024, first to $844 and later to $1,128 per week, but a federal court in Texas vacated the rule.⁹ Anyone paid a salary below $684 per week is automatically nonexempt and owed overtime, whatever their duties look like. Several states set higher thresholds of their own.

The duties tests differ by category:

Executive: primary duty is managing the business or a recognized department, the employee regularly directs at least two full-time employees, and has real authority over hiring and firing.
Administrative: office or non-manual work directly tied to management or general business operations, requiring independent judgment on significant matters.
Professional: work demanding advanced knowledge in a field of science or learning, typically acquired through extended specialized education.
Computer: systems analysts, programmers, software engineers, and similar roles. Hourly computer employees must earn at least $27.63 per hour to qualify.
Outside sales: primary duty is making sales or obtaining contracts, customarily performed away from the employer’s place of business.

A separate “highly compensated employee” exemption applies to workers earning at least $107,432 per year in total compensation. They face a lighter duties test but must still perform at least one executive, administrative, or professional duty regularly.¹⁰ Misclassifying a nonexempt employee as exempt is one of the most common FLSA violations; when it happens, the employer owes all unpaid overtime plus an equal amount in liquidated damages.¹¹

Which Employers and Workers Are Covered

The FLSA reaches workers through two paths: enterprise coverage and individual coverage. An employer outside both can argue the law does not govern its workplace at all.

Enterprise Coverage

A business qualifies when it has at least two employees and annual gross sales or business volume of $500,000 or more.¹² Hospitals, residential care facilities, schools from preschool through college, and government agencies are covered regardless of revenue.¹³ A family-owned business whose only workers are immediate family members of the owner is excluded from enterprise coverage.

Individual Coverage

Even when a business does not meet the $500,000 threshold, individual employees are still protected if their work regularly involves interstate commerce. Courts read that phrase broadly. Processing credit card transactions, sending emails to contacts in other states, handling goods that crossed state lines, or ordering supplies from out-of-state vendors can each be enough.¹⁴ This is why employees at small businesses often have FLSA protection even when the employer’s revenue is below the enterprise cutoff.

Employees vs. Independent Contractors

The FLSA only protects employees. Whether someone is an employee or an independent contractor turns on the economic reality of the relationship, not the label in a contract. The Department of Labor weighs six factors: how much control the hiring party exerts, whether the worker’s own decisions affect profit or loss, the worker’s investment in equipment and helpers, the skill and initiative involved, how permanent the relationship is, and whether the work is integral to the business.¹⁵ No single factor decides the question. The more the factors point toward economic dependence on the employer, the more likely the worker is an employee owed FLSA protections.

Child Labor Rules

Workers under 18 are banned from jobs the Secretary of Labor has declared hazardous, including operating power-driven machinery, driving motor vehicles, and working with radioactive materials.¹⁶

For 14- and 15-year-olds, the rules are tighter. They can only work outside school hours. Shifts are capped at 3 hours on a school day and 8 hours on a non-school day. Weekly hours cannot exceed 18 when school is in session or 40 when it isn’t. Work must fall between 7 a.m. and 7 p.m., extended to 9 p.m. from June 1 through Labor Day.¹⁷

Penalties are steep. The civil money penalty can reach $16,035 per employee for each child labor violation. When a violation causes serious injury or death, that figure rises to $72,876, and willful or repeated violations causing death can reach $145,752.¹⁸

Recordkeeping

Covered employers must record each employee’s hourly rate, daily and weekly hours, straight-time earnings, overtime pay, and deductions. For workers under 19, the employer also has to record the date of birth. Records must be preserved for at least three years.¹⁹ When an employer can’t produce accurate records during a Wage and Hour Division investigation, courts tend to accept the employee’s account of hours worked.

What the FLSA Does Not Require

The law’s scope is narrower than many people assume. The FLSA does not require:

Vacation, holiday, severance, or sick pay
Premium pay for working weekends or holidays
Pay raises or cost-of-living adjustments
Fringe benefits like health insurance or retirement plans
A discharge notice, a reason for termination, or immediate delivery of a final paycheck
Rest breaks or meal periods, though short breaks of 5 to 20 minutes, if offered, count as paid work time²⁰

These items come from employment contracts, company policy, or other federal and state laws.²¹ One narrow break rule the FLSA does impose: the PUMP for Nursing Mothers Act, at 29 U.S.C. § 218d, requires reasonable break time and a private non-bathroom space for nursing employees to express breast milk for up to one year after a child’s birth.²²

Filing a Complaint and Recovering Back Pay

An employee who believes an employer is violating the FLSA can file a complaint with the Wage and Hour Division by calling 1-866-487-9243 or contacting the agency online. Complaints are confidential; the Division does not disclose the complainant’s name or the substance of the complaint to the employer.²³ An employee can also skip the agency and file a private lawsuit.

The statute of limitations for recovering unpaid wages or overtime is two years, extended to three years if the violation was willful.²⁴ The clock runs backward from the date the complaint is filed, so delay costs money.

Liquidated Damages

When an employer violates the minimum wage or overtime provisions, the statute makes it liable for the unpaid wages plus an equal amount in liquidated damages.⁵ Doubling is the default, not a punishment reserved for the worst offenders. An employer avoids liquidated damages only by convincing a court it acted in good faith and had reasonable grounds for believing its pay practices complied with the law.²⁵ Not knowing the rule isn’t enough; employers typically need to show affirmative steps, such as seeking legal advice, before a court will exercise that discretion.

Retaliation

Firing, demoting, cutting hours, or otherwise punishing a worker for filing an FLSA complaint is itself a separate violation. Section 15(a)(3) protects employees who complain about wage violations, whether to the government, in court, or internally to the employer, and it protects workers even if they turn out not to be covered by the FLSA.²⁶ Remedies for retaliation include reinstatement, lost wages, and liquidated damages equal to those lost wages.

1
U.S. Department of Labor. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage
2
U.S. Department of Labor. Wages and the Fair Labor Standards Act
3
Office of the Law Revision Counsel. 29 USC 206 – Minimum Wage
4
U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act
5
Office of the Law Revision Counsel. 29 USC 216 – Penalties
6
U.S. Department of Labor. Fact Sheet 32 – Youth Minimum Wage – Fair Labor Standards Act
7
Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
8
Office of the Law Revision Counsel. 29 USC 213 – Exemptions
9
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption
10
U.S. Department of Labor. Fact Sheet 17H – Highly-Compensated Employees and the Part 541 Exemptions
11
U.S. Department of Labor. Fact Sheet 17A – Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees
12
Office of the Law Revision Counsel. 29 USC 203 – Definitions
13
U.S. Department of Labor. Fact Sheet 14 – Coverage Under the Fair Labor Standards Act
14
U.S. Department of Labor. Fact Sheet 27 – New Businesses Under the Fair Labor Standards Act
15
U.S. Department of Labor. Fact Sheet 13 – Employment Relationship Under the Fair Labor Standards Act
16
U.S. Department of Labor. FLSA Child Labor Rules – Hazardous Occupations
17
U.S. Department of Labor. Fact Sheet 43 – Child Labor Provisions of the Fair Labor Standards Act
18
U.S. Department of Labor. Civil Money Penalty Inflation Adjustments
19
eCFR. 29 CFR Part 516 – Records to Be Kept by Employers
20
U.S. Department of Labor. Breaks and Meal Periods
21
U.S. Department of Labor. Handy Reference Guide to the Fair Labor Standards Act
22
Office of the Law Revision Counsel. 29 USC 218d – Breastfeeding Accommodations in the Workplace
23
U.S. Department of Labor. How to File a Complaint
24
U.S. Department of Labor. Back Pay
25
Office of the Law Revision Counsel. 29 USC 260 – Liquidated Damages
26
U.S. Department of Labor. Fact Sheet 77A – Prohibiting Retaliation Under the Fair Labor Standards Act