How-to guide: How to understand and comply with wage and hour laws (USA)

Introduction

This guide will help in-house counsel, private practice lawyers and human resource departments to understand and comply with applicable wage and hour laws. While federal law provides underlying protection to employees, employers need to be aware that many states have enacted more stringent requirements.

This guide covers:

1. Overview of wage and hour laws
2. Fair Labor Standards Act coverage and enforcement
3. Impact of state laws

This guide can be read in conjunction with Checklist: Determining whether employees are exempt from wage and hour laws.

Section 1 – Overview of wage and hour laws

The Fair Labor Standards Act (FLSA), administered by the US Department of Labor (DOL), governs minimum wage, overtime pay, recordkeeping and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Under the FLSA an employer needs to comply with all relevant laws, including in relation to:

• minimum hourly wage;
• hours worked;
• travel time;
• time off;
• overtime;
• exempt and nonexempt employees;
• tipped wages;
• training time; and
• on-call time.

The FLSA was initially passed in 1938 and has been amended several times. In addition to the federal provisions under the FLSA, state and local wage and hour laws will also apply to employers (see section 3 below for further information).

1.1 Minimum wage requirement under the FLSA

The FLSA provides that all covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour, effective July 24, 2009, while the current federal minimum for tipped employees is $2.13 per hour. However, if the combination of tips and direct wages does not equal at least the standard minimum wage, the employer must make up the difference.

The $2.13 minimum for tipped employees is complex; employers can only take a ‘tip credit’ up to the difference between the tipped wage and the federal minimum ($5.12), ensuring the employee's total compensation reaches $7.25 per hour. However, some states, like California, have eliminated the tip credit entirely, requiring employers to pay tipped employees the full state minimum wage before tips, adding a layer of compliance complexity that organizations must navigate based on their geographic location.

Some employees are not covered by the FLSA but are subject instead to other regulations. Railroad workers, for example, are governed by the Railway Labor Act, and truck drivers fall under the purview of section 204 of the Motor Carriers Act.

1.2 Overtime pay requirement under the FLSA

There is no limit to the number of hours in a day, or the number of days in a week, that an employer may require an employee to work (provided the employee is at least 16 years old), nor is there a limit to the number of hours of overtime that may be scheduled.

The FLSA requires employers to pay covered employees not less than 1.5 times their regular rate of pay for all hours worked in excess of 40 in a workweek (classed as overtime), unless the employees are exempt. The FLSA does not require employers to pay additional pay for working on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on those days. For additional information regarding overtime pay requirements, see the Wage and Hour Division Fact Sheet #23: Overtime Pay Requirements of the FLSA.

1.3 Limits on consecutive working hours for youth workers

The FLSA does not limit the number of hours in a day or days in a week an employee may be required or scheduled to work, provided the employee is at least 16 years old. A youth worker aged 14-15 may work only outside of school hours. In addition, a youth worker may not work:

• more than three hours on a school day, including Friday;
• more than 18 hours per week when school is in session;
• more than eight hours per day when school is not in session;
• more than 40 hours per week when school is not in session; and
• before 7am or after 7pm on any day, except from June 1 through Labor Day, when nighttime work hours are extended to 9pm.

1.4 Break time

Generally, there is no requirement for break time in the FLSA. One notable exception relates to nursing mothers, which is addressed in Fact Sheet #73: FLSA Protections for Employees to Pump Breast Milk at Work.

Breaks lasting 15-20 minutes are typically included in hours worked, while meal-period breaks of 30 minutes or more are not.

See Fact Sheet #22: Hours Worked Under the FLSA issued by the DOL for additional information and examples, including on-call time, waiting time, travel time, and rest and meal periods.

1.5 Other FSLA considerations

1.5.1 Definition of a workweek

All provisions in the FLSA operate on a ‘workweek’ basis. A workweek is a fixed and regularly recurring period of 168 hours, made up of seven consecutive 24-hour periods. A workweek does not have to be a calendar week, but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees. Averaging of hours over multiple workweeks is not permitted, and overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

1.5.2 Waivers and collective bargaining agreements

Note that employees may not agree to waive either the minimum wage or overtime pay. For more information see Brooklyn Bank v O'Neil, 324 US 697 (1945).

One issue that may arise is where some or all employees are part of a collective bargaining agreement that may appear to conflict with the FLSA. As noted above, an employee, or a union on behalf of an employee, may not waive the rights granted to them under the FLSA.

1.5.3 Independent contractors

Independent contractors are not covered by the FLSA and therefore are not entitled to either the minimum wage or overtime pay. The DOL published a revised analysis for employers to determine who is an employee and who is an independent contractor. In their rule (29 CFR 780), the DOL describes independent contractors as people who as ‘an economic reality’ are not dependent on their employer and instead are in business for themselves.

For further information about the difference between employees and independent contractors, see Checklist for Determining the difference between an employee and an independent contractor.

1.5.4 Industry-specific laws and rules

In addition to the general principles outlined above, employers should be aware of any industry-specific rules that may apply to them. Car washes and detailers, health care and construction are just a few examples of industries that may be subject to special requirements when calculating wages and overtime pay. The DOL has provided fact sheets for these industry-specific rules. See, for example, Fact Sheet #19: The Motor Carrier Exemption under the FLSA.

Special rules may apply to minors in certain industries as well, such as agricultural jobs.

Section 2 – Fair Labor Standards Act coverage and enforcement

2.1 Coverage of the FLSA

The FLSA applies to both employees of ‘enterprises’ and also to ‘individual’ employees whose work involves them in interstate commerce.

A covered enterprise is one of the following:

• a business or organization that has an annual gross volume of sales or business done of not less than $500,000; or
• a hospital, business providing medical or nursing care for residents, school or preschool; or
• a government agency.

Individual coverage applies where an individual employee is not employed by a covered enterprise but is engaged in:

• interstate commerce or in the production of goods for interstate commerce; or
• any closely related process or occupation directly essential to such production.

Interstate commerce can be broadly defined.

In addition, domestic service workers such as housekeepers, chauffeurs, cooks, or full-time babysitters are covered if their cash wages from one employer in a calendar year amounted to a minimum amount determined by the Social Security Administration (this calendar year threshold is adjusted by the Social Security Administration each year; for 2025, the threshold is $2,800), or if they work a total of more than eight hours a week for one employer.

2.2 Exceptions to the FLSA

2.2.1 Youth workers

Generally, the FLSA requires employers of covered employees who are not otherwise exempt to pay their employees a minimum wage of not less than $7.25 per hour. Youths under the age of 20, however, may be paid a minimum wage of not less than $4.25 per hour, but only during the first 90 consecutive calendar days of employment with an employer. See Fact Sheet #32: Youth Minimum Wage under the FLSA.

Many states have specific regulations regarding the youth minimum wage, and in some jurisdictions, such as Florida, state law mandates that all employees, regardless of age, be paid the standard state minimum wage, which may be higher than the FLSA youth rate. Employers must ensure compliance with both the federal restrictions and relevant state labor laws.

2.2.2 Piece-rate work

Employers may pay employees on a piece-rate basis, provided the employees do not make less than the equivalent of the required minimum hourly wage rate and overtime for hours worked in excess of 40 hours in a workweek.

2.2.3 Tipped employees

The FLSA allows employers of tipped employees (ie, those who customarily and regularly receive more than $30 a month in tips) to consider such tips as part of their wages. Tipped employees must be paid a direct wage of at least $2.13 per hour if they claim a tip credit. They must also meet certain other requirements. See Fact Sheet #15: Tipped Employees Under the FLSA.

2.2.4 Other exceptions

Other exceptions to the minimum wage requirement include the following:

• student learners (vocational education students);
• full-time students in retail or service establishments, agriculture, or institutions of higher education; and
• individuals whose earning or productive capacities for the work to be performed are impaired by physical or mental disabilities, including those related to age or injury.

2.3 Exemptions to the FLSA

The FLSA exempts some employees from both the overtime pay and minimum wage provisions, and exempts other employees from the overtime pay provisions only. The exemptions are different to the exceptions listed at 2.2 above and are specific to narrow groups of employees. Employers should check the exact terms and conditions for any applicable exemption by contacting their local Wage and Hour Division office.

The following are examples of employees exempt from both the minimum wage and overtime pay requirements:

• executive, administrative, and professional employees, outside sales employees, and certain skilled computer professionals (as defined in the Department of Labor’s Code of Federal Regulations);
• employees of certain seasonal amusement or recreational establishments;
• seamen employed on foreign vessels;
• employees engaged in fishing operations;
• employees engaged in newspaper delivery;
• farm workers employed on farms that used less than 500 ‘man days’ of farm labor in any calendar quarter of the preceding calendar year;
• casual babysitters; and
• persons employed solely by the individual receiving services primarily providing fellowship and protection (companionship services) to seniors or individuals with injuries, illnesses, or disabilities.

With respect to executive, administrative, and professional employees the DOL had published a final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, to update and revise the regulations issued under section 13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional employees. However, the U.S. District Court for the Eastern District of Texas vacated the Department’s 2024 final rule (see State of Texas v. United States Department of Labor et al, 756 F.Supp.3d 361 (E.D. Tex. 2024)). As a result, the DOL has reverted back to the prior wage threshold amounts.

The following are examples of employees exempt from the overtime pay requirements only:

• certain commissioned employees of retail or service establishments;
• auto, truck, trailer, farm implement, boat, or aircraft salespersons employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
• auto, truck, or farm implement parts clerks and mechanics employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
• railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen on US vessels, and local delivery employees paid on approved trip-rate plans;
• announcers, news editors, and chief engineers of certain broadcasting stations;
• domestic service employees solely employed by the individual, family, or household receiving services who reside in the private home where they provide services;
• employees of motion picture theaters; and
• farmworkers.

There are also special provisions for US territories. For Puerto Rico, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, and the US Virgin Islands, the DOL sets the special salary level at $455 per week. For American Samoa, the special salary level is set at $380 per week. See Fact Sheet #17T: Special Salary Levels for U.S. Territories.

For further information see Checklist: Determining whether employees are exempt from wage and hour laws.

2.4 Recordkeeping requirements

Every employer covered by the FLSA must keep certain records for each of its covered employees, including details on wages, hours, and other information as set forth in the Department of Labor’s Code of Federal Regulations.

There is no specific form or format required for the records, but the records required include the employee’s full name and Social Security Number (SSN), address, date of birth (DOB), and data about the hours worked and the wages earned (including hours each day, regular hourly pay rate, total overtime and straight-time earnings, schedule of pay, and dates of periods of payment).

For a full listing of the basic records that an employer must maintain, see the Fact Sheet #21: Recordkeeping Requirements Under the FLSA.

2.5 Enforcement of the FLSA

Enforcement of the FLSA is the responsibility of the DOL Wage and Hour Division and is carried out by investigators that are stationed across the United States.

While the FLSA does not contain any specific reporting requirements, it does require that records be open for inspection by the DOL’s Wage and Hour Division.

Wage and Hour Division investigators gather data from employers in relation to wages, hours, and other employment conditions or practices (eg, youth workers’ rights, immigrant workers’ rights, unpaid leave rights, etc) in order to determine compliance with the law. A number of remedies are available to the DOL in the enforcement of the FLSA’s requirements. The Wage and Hour Division has issued FAQs that provide information on filing complaints and on the investigation process followed by the Division.

2.5.1 Recommendations and back payments

When DOL investigators encounter violations, they may:

• recommend changes in employment practices to bring the employer into compliance; and
• supervise the payment of any back wages due to employees.

2.5.2 Civil monetary penalties

Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil monetary penalties for each violation.

Employers may be subject to civil penalties for any violation that causes the death or serious injury of any minor employee – such penalty may be doubled when the violations are determined to be willful or repeated.

An employer that is required to pay a civil monetary penalty has the right to file an exception to the determination within 15 days of receipt of the notice of the violation and the imposed civil penalty. The matter is then referred to an administrative law judge for a hearing and determination as to whether the penalty is appropriate. If an exception is not filed, the penalty becomes final.

2.5.3 Other remedies

Other remedies available to the DOL are:

• lawsuits for back pay and an equal amount in liquidated damages;
• injunctions to restrain employers from violating the FLSA;
• criminal prosecution of willful violators, leading to fines of up to $10,000 and potential imprisonment for repeat violations; and
• prohibition of the shipment of goods in interstate commerce, if those goods were produced in violation of the minimum wage, overtime pay, child labor, or special minimum wage provisions.

Section 3 – Impact of state laws

It is important to remember that the overall policy goal of the FLSA is the protection of employees and their rights in the workplace. Many state laws and local ordinances have been enacted that are closely tied to the FLSA and share a similar policy goal. The state provisions may be more, less, or equally restrictive as the federal provisions. When federal and state standards are different, the rules that provide the most protection to workers will apply. Employers must comply with both federal law and applicable state laws.

3.1 Minimum wage

State minimum wage rates vary widely, ranging (as of 2025) from $5.15 to $17.95 per hour. Some states (eg, Tennessee, Louisiana, Alabama, South Carolina, and Mississippi) do not specify a minimum wage at all. The federal minimum rate serves as a floor rate and applies only if the state has not set a higher rate. In order to help employers with compliance, the DOL provides quick links to state labor offices, as well as a chart of state minimum wages.

Some states provide for annual adjustment of minimum wage rates, to account for inflation. For example, South Dakota law provides that the state minimum wage shall be adjusted by the increase, if any, in the cost of living. The increase in the cost of living is measured by the percentage increase of the Consumer Price Index (all urban consumers, U.S. city average for all items) as published by the U.S. Department of Labor. In no case shall the minimum wage be decreased. In addition, two states – New York and Oregon – set higher minimum wage rates for certain urban areas in those states. Some cities also have their own minimum wage ordinances. For example, the City of Tucson, Arizona has a “Living Wage” ordinance that requires contractors and subcontractors who do business with the City to pay a minimum wage of $17.15 per hour if health insurance benefits are offered and the employer pays no less than 50% of the employee’s health benefits premium; or $18.85 per hour if health insurance benefits are not offered or if the contractor pays less than 50% of the employee’s health benefits premium (note that the statewide minimum wage in Arizona is $14.70 per hour).

3.2 Overtime pay

As detailed above, the FLSA requires most employers to give nonexempt employees overtime pay when they work extra hours. Some states may have more stringent overtime requirements than the federal requirement. Complicating the matter further, some state laws may cover employees that are exempt under federal law. Employers must comply with the rules that are most beneficial to the employee.

The DOL provides a helpful resource for examining state overtime rules.

3.3 Break times

While most states do not have specific provisions relating to required break times, there are a few notable exceptions. In California, for example, an employer may not employ an employee for a work period of more than five hours per day without providing the employee with an unpaid, off-duty, meal period of not less than 30 minutes.

3.4 Final pay and pay frequency

The FLSA does not set out requirements for how frequently employees must be paid, or when final wages must be issued upon termination. This is a matter of state employment law. State laws often dictate how often employees must be paid (eg, weekly, bi-weekly, or semi-monthly). They will also set strict deadlines for providing the final paycheck to an employee who has resigned or been terminated. In some states, such as California, an employee’s final wages must be paid immediately upon the employee’s termination, while other states allow a short grace period for the final payment. Employers who make late payments are subject to penalties, and in some states, if an employee has to resort to litigation to collect their final payment, attorney’s fees and costs may be awarded.

3.5 Wage deductions

The FLSA generally restricts deductions from an employee's wages if they bring the employee's compensation below the minimum wage or if the deduction is not authorized by law. However, state laws often provide much more restrictive guidance on what employers can legally deduct from an employee's paycheck. Many states require written consent from the employee for certain deductions (such as for uniforms or tools) and some prohibit deductions for cash shortages, losses, or damages caused by employee negligence unless authorized by specific state statute. Employers must carefully review state wage deduction laws before implementing any deductions to ensure full compliance.

Additional resources

US Dept of Labor – Handy Reference Guide to the Fair Labor Standards Act
US Dept of Labor – Guía Práctica Referente a la Ley de Normas Justas de Trabajo
US Dept of Labor – State Minimum Wage Laws

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