Skip to main content
Find a Lawyer
Please enter a legal issue and/or a location
Begin typing to search, use arrow keys to navigate, use enter to select

Federal Wage Law: The Fair Labor Standards Act

It's imperative that companies, especially small businesses, know and understand basic labor laws, including fair wage laws. Failure to comply with federal and state labor laws, like the Fair Labor Standards Act (FLSA) can lead to costly investigations and legal action. This can threaten the small business' financial health. Awareness of these laws can help small business owners with compliance.

This Findlaw article offers an overview of the Fair Labor Standards Act (FLSA) for small businesses.

The Fair Labor Standards Act

Congress passed the Fair Labor Standards Act (FLSA) in 1938 to offer minimum protections for American workers. The Act establishes minimum standards for part-time and full-time workers in the public and private sectors in the following areas:

  • Minimum wage
  • Overtime pay
  • Recordkeeping
  • Child labor standards

The U.S. Department of Labor (DOL) administers the FLSA, among other labor and employment laws, including, but not limited to, the following:

While these federal laws broadly aim to protect American workers, the FLSA focuses on wage, recordkeeping, and child labor.

Minimum Wage

The FLSA requires a federal minimum wage of $7.25 per hour for covered "non-exempt" workers. Non-exempt workers don't qualify for an exemption under the FLSA.

If a non-exempt worker puts in more than 40 hours in a workweek, the FLSA requires overtime pay. Overtime pay must be at least one and a half times the employee's regular rate. This is often called "time and a half."

Fair Labor Standards Act Coverage

As a small business owner, you should know if your business is "covered" by the FLSA, meaning your company must adhere to its rules. The DOL's Wage and Hour Division identifies two main ways the FLSA protects employees: enterprise coverage and individual coverage.

Enterprise Coverage

Companies with at least two employees and annual sales of at least $500,000 or one of the following:

  • Hospitals
  • Schools (including preschools)
  • State and local government agencies
  • Businesses providing medical or nursing care for inpatient residents

Individual Coverage

Individual employees whose work regularly involves them engaging in interstate commerce. For example, consider a telemarketer in San Jose, California, who calls consumers in Washington, D.C. The telemarketer regularly participates in interstate commerce.

Domestic Workers

The FLSA also covers certain domestic service workers. Domestic service workers provide services for an individual or family at their home, for example:

  • Housekeepers
  • Drivers
  • Personal chefs
  • Nannies
  • Gardeners

These workers are protected by the FLSA if they earn at least $1,000 from one employer in a calendar year or if they work more than eight hours a week for one or more employers.

Tipped Employees

Under the FLSA, "tipped employees" are people who regularly receive more than $30 monthly in tips. Federal law allows employers to consider tips part of these employees' wages. But they must pay at least $2.13 per hour in direct wages.

Employers who choose the tip credit must:

  • Inform employees in advance of the pay rate
  • Demonstrate that the employee's tips plus their direct wage are equal to at least the federal minimum wage ($7.25 per hour)

If the employee's combined wages don't equal the minimum hourly wage, the employer must make up the difference.

Keep in mind that many states and cities set their minimum wage above what is required by federal law.

FLSA Exemptions

Not all employees enjoy the FLSA's protections. The minimum wage and overtime pay protections of the FLSA don't apply to exempt employees. The FLSA narrowly defines exemptions to these provisions, which include, but are not limited to, the following:

  • Exemptions from minimum wage and overtime pay (this includes executive, administrative, and professional employees)
  • Exemptions from overtime pay only
  • Partial exemptions from overtime pay

Small business owners and employers should carefully consider the conditions for these exemptions.

Child Labor Laws

The FLSA contains specific child labor provisions designed to protect the overall well-being of minors. Through these laws, the FLSA ensures that minors don't work in unsafe spaces and that their work doesn't jeopardize their education. One way in which child labor laws protect minors is through regulating the number of hours minors can work in a workweek.

The FLSA considers the agricultural and non-agricultural positions that children may perform. It limits the age, hours, and times children can work in these positions. For example, 14 is the minimum age for most non-farm work. But children of any age may do the following:

  • Deliver newspapers
  • Perform in theater, radio, or television
  • Work for their parents in the parent's solely-owned non-farm business

Parents can employ their minor children of any age, at any time, on a farm owned or operated by their parents. Be sure to check your state's child labor laws for more information.


The FLSA also regulates the recordkeeping of specific employment information. Under the FLSA, employers must keep records of the following:

  • Wage information
  • Hours
  • Wage payment
  • Employee's full name and contact information
  • Employees birth date (if they're under 19 years of age)

Most employers keep this information as part of their regular business practices. If you're a small business owner, consider developing business practices that capture and record this information.


The Wage and Hour Division of the DOL enforces the FLSA. This Division will conduct investigations and other fact-finding techniques to determine if an employer complies with the Act.

The Division uses the following tools to enforce the Act:

  • DOL recovery of back wages through lawsuit
  • Employee recovery of back wages through a lawsuit
  • Monetary penalties
  • Criminal prosecution (for willful violations of the FLSA)

Employers can't fire or otherwise retaliate against an employee for filing a complaint or participating in an FLSA investigation.

Equal Pay Amendment

Congress has amended the FLSA many times since 1938. The Equal Pay Act of 1963 is one significant amendment. The FLSA's equal pay provisions prohibit gender-based wage discrimination for jobs requiring the following:

  • Equal effort
  • Equal skill
  • Equal or similar working conditions
  • Equal responsibility

The Equal Employment Opportunity Commission enforces wage and other types of employment discrimination.

Get Legal Help

Although federal employment and labor laws are vast and complex, small business owners aren't alone. A small business attorney can help. They can help educate you on state laws and ensure you don't violate employee rights. They're experts in many areas of small business law. Speak to an experienced small business attorney near you today.

Was this helpful?

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

Or contact an attorney near you:

Next Steps

Contact a qualified business attorney to help you prevent and address human resources problems.

Begin typing to search, use arrow keys to navigate, use enter to select

FindLaw will earn a commission if you purchase business formation products through these affiliate links.

Meet FindLaw's trusted partner LegalZoom, the #1 online business formation provider

Kickstart your LLC in minutes!

Join the millions who launched their businesses with LegalZoom.

LLC plans start at $0 + state fees.

Prefer to work with a lawyer?

Find one right now.

Copied to clipboard

Find a Lawyer

More Options