HR Glossary | HR Cloud | 3 minute read

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) is the 1938 federal law that sets the baseline for minimum wage, overtime pay, recordkeeping, and youth employment standards in the United States.

It's the reason "exempt" and "non-exempt" exist as job classifications, and it's the law most wage-and-hour lawsuits ultimately come back to.

For a fuller breakdown of how it interacts with related terms, see HR Cloud's HR compliance glossary.

Who Does the FLSA Cover?

Coverage is broad. Most employers meet "enterprise coverage" if they have at least $500,000 in annual revenue and two or more employees engaged in interstate commerce, which in practice includes almost any business that ships goods, processes card payments, or uses the internet.

Even employers below that threshold can be covered individually if a specific employee's work regularly crosses state lines.

SHRM and other employer groups regularly flag this as the most misunderstood part of the law: most companies assume they're too small to qualify when they aren't.

What's the Difference Between Exempt and Non-Exempt?

Classification	What It Means	Overtime Owed?
Non-exempt	Paid hourly or salary but doesn't meet an exemption test	Yes, 1.5x pay past 40 hours/week
Exempt	Meets both a minimum salary threshold and a duties test (executive, administrative, professional, or similar)	No
Misclassified exempt	Labeled exempt but doesn't actually meet the tests	Yes, retroactively, plus penalties

How Is Overtime Actually Calculated?

Non-exempt employees earn 1.5 times their regular rate for every hour worked past 40 in a single workweek. The regular rate includes most bonuses and shift differentials, not just base pay.

Because the salary threshold for exemption changes periodically through DOL rulemaking, and has recently been contested in federal court, employers should confirm the current figure directly rather than relying on a number that may already be out of date.

A connected time and attendance system makes the actual hours-worked math far less error-prone than reconstructing it from timesheets after the fact.

What Records Does the FLSA Require Employers to Keep?

Records generally need to be kept for at least three years, and payroll data on which those wages were calculated for two years, so a reliable HRIS that retains this history matters more than it might seem day to day.

Hours worked each day and total hours each workweek for non-exempt employees
Regular hourly pay rate and total overtime earnings for the week
Basis on which wages are paid, and all deductions from or additions to wages
Total wages paid each pay period, and the date of payment

How Should HR Reduce FLSA Risk?

Pairing accurate onboarding records with ongoing employee self-service updates keeps job descriptions and classification decisions from quietly drifting apart over time, which is where most FLSA exposure actually accumulates.

Forbes has covered a steady rise in wage-and-hour enforcement activity in recent years, which makes proactive audits cheaper than waiting for a complaint.

Re-run the duties test whenever a role's actual responsibilities change, not just at hiring
Audit job titles against actual day-to-day work, since a title alone never establishes exemption
Track hours accurately for every non-exempt employee, including remote and hybrid staff
Review pay practices whenever the DOL updates the salary threshold

Discover how our HR solutions streamline onboarding, boost employee engagement, and simplify HR management

Book Your Free Demo

Frequently Asked Questions

Q: Does the FLSA set a national minimum wage?

A: Yes, but many states and cities set a higher minimum wage, and employers must pay whichever rate is higher for that location.

Q: Can a salaried employee still be owed overtime?

A: Yes. Being paid a salary doesn't automatically make someone exempt; they also have to meet a duties test and earn above the current minimum salary threshold.

Q: Does the FLSA require paid meal or rest breaks?

A: No, the FLSA itself doesn't require breaks, but if an employer offers short breaks, they're generally counted as paid work time. Many states have their own separate break laws.

Q: Who enforces the FLSA?

A: The Department of Labor's Wage and Hour Division investigates complaints and can pursue back pay, damages, and civil penalties; employees can also file private lawsuits.

Q: How far back can an FLSA claim go?

A: Generally two years, or three years if the violation was willful, which is one reason accurate recordkeeping matters even after an employee has left.