Congress enacted The Fair Labor Standards Act (FLSA) in 1938. The Act regulates minimum wage, child labor, overtime, and recordkeeping.
Essentially, the FLSA is a rulebook for how to properly and fairly treat your employees.
Parts of the FLSA
Below, each part of the FLSA is briefly explained. Resources with in-depth information are provided.
The FLSA requires you to pay employees at least a minimum wage. The national minimum wage presently stands at $7.25 per hour.
Some localities and states have their own minimum wage. You must pay employees the highest of the three wages—the federal, state, or local wage. For example, the minimum wage in California is $9 per hour. If you employ workers in California, you should pay them at least the state minimum wage because it is greater than the federal minimum wage.
The FLSA has provisions on child labor laws. These laws protect the rights of workers under 18 years old.
Some things that child labor laws regulate include:
- the types of jobs children of various ages can do,
- the times children can work,
- how many hours children can work each week,
- and how much you should pay children.
The U.S. Department of Labor (DOL) can help you understand the specific child labor guidelines for your business.
Many employees are entitled to extra wages if they work overtime hours. Under the FLSA, employees working more than 40 hours in a workweek are entitled to overtime pay. For overtime hours, you must pay employees at least 1.5 times their regular pay rate.
For example, an employee earns the minimum wage of $7.25. The employee worked 45 hours last workweek. You will pay the employee $290 for regular work hours ($7.25 x 40 = $290).
You will also pay the employee an additional $54.40 for overtime work hours ($7.25 x 1.5 = $10.88 overtime hourly wage, $10.88 x 5 overtime hours = $54.40 overtime wages).
The employee should receive $344.40 in total wages (before deductions) for the previous workweek.
Exempt employees do not receive overtime wages. Specific requirements determine if an employee is exempt or nonexempt. Remember, if an employee receives a salary, the salary does not automatically make the employee exempt from overtime wages.
States and cities can create their own overtime laws. You must follow the state or city overtime laws if they are more generous than the federal overtime laws. Some locations require overtime wages after an employee works 8 or 12 hours in a day. Some places also use double time to calculate the overtime pay rate. You should check with your state and city to find out if they have different overtime laws.
- the employee’s full name,
- Social Security number,
- complete address with zip code,
- birth date (if under 19),
- details on the employee’s workweek,
- and details on the employee’s wages.
The FLSA requires you to keep payroll records for at least three years. You must keep any documents that involve wage calculations (i.e., time cards, wage rate tables, wage deductions) for at least two years. The DOL can ask to inspect your records.
Why the FLSA matters to you
If you do not follow regulations set by the FLSA, you can receive steep penalties. You could potentially owe back wages to employees. The DOL enforces the FLSA. For more details about compliance with the FLSA, refer to the DOL website.
The FLSA does not apply to you if your business has a gross annual volume of business under $500,000. However, you should still check with federal, state, and local laws to make sure you comply with all applicable labor laws.
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This article was updated on 12/7/2015. The article was originally written by Shalleen Mayes and was published on 3/15/2012.