How to Comply With Wage and Hour Laws

Start With the Federal Minimum Wage

The Fair Labor Standards Act (FLSA) sets the federal minimum wage at $7.25 an hour, a rate that's been in place since July 24, 2009. Many states and some cities set a higher minimum wage, and when that's the case, an employee is entitled to the higher of the two rates, not the federal minimum. Check your specific state's and city's current minimum wage before assuming the federal rate applies to your business.

Pay Overtime Correctly

Covered nonexempt employees must receive overtime pay at a rate of "not less than one and one-half times the regular rate of pay" for every hour worked beyond 40 in a single workweek, per the FLSA. A few things commonly trip up employers here:

• Overtime is based on hours worked in a single workweek, not a pay period, and not an average across two weeks.
• There's no federal requirement to pay extra just for working a weekend, holiday, or night shift, unless those hours push the employee's total past 40 for the week.
• The "regular rate" used to calculate overtime generally includes most forms of compensation, not just an employee's base hourly wage, which can make the calculation more involved than it first appears for employees who receive bonuses or other pay on top of their hourly rate.

Confirm Who's Actually an Employee

FLSA wage and hour protections apply to employees, not independent contractors, so classification matters before you can even apply the minimum wage and overtime rules. The Department of Labor published a final rule revising its guidance on employee versus independent contractor classification, effective March 11, 2024. Misclassifying an employee as a contractor to avoid minimum wage or overtime obligations is one of the more common and costly wage-and-hour mistakes a growing business makes.

Keep Required Time and Pay Records

Employers covered by the FLSA must keep accurate records of employees' hours worked and wages paid. These records support your own compliance and are what the Wage and Hour Division will ask to review if a complaint or audit comes up, so treat them as a standing requirement rather than something to reconstruct after the fact.

Post the Required Notice

Employers must display the official FLSA poster explaining employees' rights under the law in a location where employees can readily see it. This is a low-cost, easy-to-miss requirement, especially for a business that recently moved locations or opened a new one.

Follow Child Labor Rules If You Employ Minors

If your business employs workers under 18, the FLSA's child labor provisions restrict the types of jobs and conditions minors can work in, intended, per the Department of Labor, to "protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being." Restaurants, retail and seasonal employers are among the businesses most likely to employ minors and should review these restrictions specifically.

Watch for State Rules That Go Beyond the FLSA

Some states require paid or unpaid meal and rest breaks, set a different overtime threshold, such as daily overtime after 8 hours instead of only weekly overtime after 40, or set stricter pay frequency or final paycheck rules than federal law requires. The FLSA is a floor, not a ceiling: state law can require more, and when it does, you follow the state rule.

Exempt vs. Nonexempt Status Isn't Just About Job Title

Whether an employee is exempt from overtime depends on their actual job duties and how they're paid, not simply the title you give them. Calling a position "manager" doesn't make someone exempt if their actual responsibilities and pay structure don't meet the FLSA's specific tests for an exemption.

Wage Claims Can Go Back Further Than You Expect

If an employee files a wage complaint or lawsuit, back pay can potentially be owed for violations going back two years, or three years if the violation is found to be willful, which is one reason accurate time and pay records matter well beyond the current pay period.

Multi-State Employers Have to Track Each State Separately

If you have employees working in more than one state, or remote employees in a different state than your business, each state's wage and hour rules apply to the employees working there, regardless of where your business itself is based.

This Is Not Legal Advice

Wage and hour law involves fact-specific questions, particularly around exempt status, independent contractor classification, and multi-state compliance. Talk to an employment attorney if you're unsure whether a specific role is exempt, whether a worker is properly classified, or how to handle a wage complaint.