Fair Labor Standards Act (FLSA) Regulations

The Fair Labor Standards Act is a US federal law introduced to prevent unequal employment practices and preserve the rights of all employees in the US.

In order to be FLSA compliant and avoid unexpected wage and hour lawsuits, all US businesses are required to track time for all non-exempt employees and keep those records for two years.

Here are the most important things you need to know about DOL's FLSA timekeeping compliance.

How Clockify helps with compliance →

What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) are rules set by the US Department of Labor regarding:

More specifically, the FLSA is in charge of:

They apply to all businesses in the US, regardless of their operating sector.

Even though businesses need to track their time, the FLSA doesn't insist on a specific timekeeping method, so companies may choose whichever method they prefer as long as it gives accurate records.

Here are some common examples of timekeeping methods:

Who has to comply with FLSA rules and regulations?

In terms of employees, the FLSA rules and regulations apply to everyone who is:

In terms of companies and enterprises, the FLSA rules and regulations apply to all who:

What is the Fair Labor Standards Act's minimum wage?

According to the current FLSA regulations, the minimum wage per hour is:

Take into account that the minimum wage rate mustn't be lower than these figures.

Furthermore, there are exceptions regarding the minimum compensation that apply to workers in certain employment categories under specific circumstances. This means that certain employees can legally receive less than the minimum federal wage requirement (which is also called a subminimum wage).

Workers who earn subminimum wages include the following groups:

Employment at less than the minimum wage is only allowed and regulated with a certificate by the Secretary of Labor.

How is the Fair Labor Standards Act's overtime pay calculated?

Non-exempt employees are allowed to work overtime, and thus they're compensated for their overtime work. As the term suggests, they are not exempt from the FLSA rules regarding overtime pay.

Exempt employees, on the other hand, are free from the FLSA minimum wage and overtime pay.

Overtime calculator

Calculating overtime pay for non-exempt employees

The compensation that non-exempt employees receive for overtime work shouldn't be less than 1.5 times their regular pay rates within a 40-hours workweek, with some exceptions.

According to the Fair Labor Standards Act, 1.5 times of employee's regular rate is always mandatory for all nonexempt employees who work over 40 hours in a workweek, except for:

Some states also have special exceptions to their overtime pay rules for certain employees (e.g. Washington and California). In such cases, the employee is eligible to receive overtime pay based on the standard that allows higher compensation.

Calculating overtime pay for non-exempt employees is fairly simple. For example, if an employee earns $9 per hour and works for 46 hours within a workweek, this is how the employer needs to calculate their payment:

The regular pay for 40 hours per week (when the hourly rate is $9) is $360, which suggests that $360 of regular pay, plus $81 of overtime pay, equals $441 in total for the entire workweek.

Calculating overtime pay for employees paid per commissioned job

In order to be exempt from overtime payments, commissioned employees must meet the following conditions:

If the employee doesn't meet all of these conditions, they must be paid for all overtime hours 1.5 times the regular rate of pay.

If the employee is paid per commissioned job, calculating overtime pay will also start from taking an hourly rate into account.

To find the hourly rate, the employer needs to divide the amount earned for a week with the number of employee hours worked, including overtime. Just like in the previous example, overtime equals 1.5 of the regular rate.

For example, if an employee is paid $352 per commissioned job (the amount earned for a week) and they have worked 44 hours within a week (number of hours worked), the breakdown goes as follows:

So, the employee is entitled to $12 for each overtime hour. In this case, this amounts to $48 for 4 additional hours. This in turn means $400 in total ($352+$48).

Calculating the regular rate and overtime pay for salaried employees

To calculate the regular rate for salaried employees (those that receive the same compensation every week regardless of the hours worked), you have to divide the salary by the actual hours the employee has worked within a week.

For example, if an employee's actual hours worked differ from week to week, but they receive a flat compensation of $450, the breakdown for a 45-hour week goes as follows:

The employee receives half of the $10 as compensation for each overtime hour. In this case, for 5 overtime hours, the employee earns $25 ($10/2=$5; $5 x 5 hours=$25).

The hourly rate and the final amount for salaried employees will vary depending on the total hours worked. The higher the total hours, the lower the hourly rate will be, which in turn, will impact the overtime payments.

Working off the clock: why it's illegal and how to prevent it

Exempt and non-exempt employees

When it comes to applying the FLSA guidelines, there is a difference between exempt and non-exempt employees.

To be precise, whether someone will be classified as exempt or non-exempt may depend on:

To sum up, you can determine whether an employee has an exempt or non-exempt status by their salary level, salary basis, and job duties.

Professions that are exempt from overtime payments and minimum wage

Some professions are exempt from the overtime pay provisions, while some are exempt from both the minimum wage and overtime pay provisions

Here's a list of some professions exempt from overtime pay and minimum wage:

For more detailed information on the professions exempt from overtime payments and minimum wages, check out the US Department of Labor.

Employees who are exempt from overtime payments

The following list of employees are classified as exempt from overtime protections, even if they work for more than 8 hours per day (or 40 hours per week):

Even though the rules vary by state, workers in any of the above classifications are usually considered exempt from receiving overtime pay.

Furthermore, the Fair Labor Standards Act excludes from receiving overtime compensation any person who is technically not considered to be an ‘employee.' Such individuals are those who:

Should I work overtime without pay?

Recordkeeping rules for exempt employees

By definition, exempt employees are not paid by the hour but earn fixed salaries. This includes jobs where it's required to:

But even though these employees may be exempt from the FLSA regulations, employers still need to keep records on their:

Although salaried employees earn fixed payments that are not determined by the hours they've worked, a certain daily routine is expected.

To make it official, the FLSA requires information on the time and day of the week when the workweek begins. For example, some companies work on Saturdays but not on Mondays, so they start their workweek on Tuesdays. Additionally, some workers start at 9 a.m.

It's also important to document the following information:

The importance of tracking employee hours for exempt employees

For exempt employees, it's also beneficial to keep track of employee hours in order to:

  1. Add additional accountability for employees. Salaried employees can also benefit from tracking their own work hours since it gives them a better control of their tasks, which in turn promotes accountability within an organization.
  2. Have accurate information on who worked overtime, and how long the overtime was. This will help you:
    • Identify whether you should hire additional employees in order to minimize the overtime hours,
    • Find out whether you should introduce an app to automate some processes that are contributing to overtime hours, and
    • Calculate overtime pay, in accordance with the FLSA requirements.
  3. Get insight into the number of hours it takes to finish a certain type of project. Also, find out which type of work or client takes the most out of your employee's working hours.

Recordkeeping rules for non-exempt employees

According to the FLSA, all employees that earn less than $11.38 per working hour (or $23,600 per year) are not exempt (not salaried), so they must be classified as hourly employees.

The same rules apply to certain types of jobs. For example, in tech jobs, if an employee is making less than $27.63 per working hour (or $57,470 per year), they must also be classified as hourly employees.

This type of employees require recordkeeping on information such as:

There are also non-exempt salaried workers who receive annual compensation, but they are still not eligible to be released from the FLSA regulations regarding overtime, and minimum wages.

Employers also have to provide:

How long are companies required to keep wage records?

According to FLSA requirements, companies are required to keep wage records for a minimum of 2 years. The information they need to keep record of includes:

Apart from this information, it's also vital to keep the following records for a minimum of 3 years:

Do you need to track time for exempt and non-exempt employees?

Regardless of whether your employees are categorized as exempt or non-exempt, time tracking may still be necessary because it provides numerous benefits for both categories. However, if your employees are non-exempt, this requirement is especially important.

On the other hand, exempt workers are not required to keep track of their working hours. However, even if an employee is not subject to the FLSA timekeeping requirements, it is still beneficial to track their work hours. Time tracking gives them detailed insights into the business — it helps them:

As far as employers are concerned, they may want to maintain records on time spent working for exempt employees in case an employee doesn't show up at work. Time tracking will help them prove that the individual failed to comply with their hourly threshold. So, even though tracking salaried employees' hours is not mandatory by law, it is considered legal.

All in all, some companies want to invest in an employee time tracking system because they simply want to monitor attendance, while others want to keep time records in case a certain employee doesn't meet the exemption requirements.

FLSA timekeeping requirements

In order to be compliant with the FLSA timekeeping requirements, it's important to keep track of employees' hours worked.

When it comes to the timekeeping itself, there are no actual limitations to the timekeeping method used. As we mentioned above, the only requirement is that you must provide precise, correct, and detailed data.

Each company can choose the tool most suited for their workers:

Companies must keep precise records of the hours worked by non-exempt employees. These records must be kept daily and include:

Does FLSA allow time clock rounding?

The FLSA allows time clock rounding, usually for a period of 15 minutes (a full quarter hour):

It's important that the employees average out this time rounding. They should avoid always rounding only up or down but rather combine the two practices for more accurate time results.

Also, bear in mind that the FLSA doesn't strictly require time tracking for exempt employees.

How to minimize mistakes in timesheets

General working rules and employee rights

Adjacent to the Fair Labor Standard Act , the Equal Pay Act of 1963 (EPA) preserves equal rights and employment opportunities for both men and women.

In addition, the FLSA youth employment regulations specify the working hours and conditions for minors.

In other words, these regulations imply that:

For more information on occupations forbidden for all minors under 18 years of age, please check the Fair Labor Standard Act regarding child labor regulations.

What happens if you disregard the FLSA requirements?

To be compliant with FLSA, you must always pay at least minimum wages, compensate for all overtime hours, and classify employees properly with exempt or non-exempt status.

If an employer in any way violates the FLSA's overtime or wage regulations, they might risk a lawsuit. That's why it's important to understand the provisions of the Fair Labor Standards Act and keep in mind everything that employers need to do to maintain FLSA compliance.

What are FLSA violations?

Here are the most common violations of the Fair Standard Labor Act:

In case an employer violates the FLSA minimum wage and overtime regulations, an employee may be able to receive back pay or an equal amount of the wages in liquidated damages.

Additionally, a 2-year statute of limitations (the period in which employees can claim unpaid overtime or minimum compensation) applies for unpaid minimum wages or overtime compensation. However, if the employer willfully violated the provisions of the Act, a 3-year statute of limitations will apply. A federal court jury determines willfulness for this purpose, but the employee must provide strong evidence in order to prove that the employer purposefully violated the act.

What's not required and covered by the FLSA?

Most businesses are subject to the FLSA, and they are obliged to make sure their employees are aware of the FLSA rules as well. The rules must be posted in the workplace for everyone to see.

In some cases, certain employers are not exempt from the FLSA requirements, while their employees are exempt. Such an example are airline employees who are not owed any compensation for working off-clock hours. However, these employees get fair monthly compensation in spite of their extra responsibilities.

Additionally, independent contractors and freelancers are not technically considered employees, therefore, they are exempt from FLSA wage and overtime regulations.

The matters not required or covered by the FLSA are the times spent on:

Although it's a usual practice for employers, the FLSA also does not require them to offer:

The FLSA also states that employers are free from making immediate payments to dismissed employees. Rather, they can wait till the next payroll period to issue the final paycheck to the departing employee (regardless of their exempt or non-exempt status). However, some states require companies to pay employees' salaries on the last day of employment or within the next 72 hours (such as California). Additionally, whether employees should receive compensation for unused holiday time or sick leave days upon termination is a matter of state laws.

State Labor Laws Guides

Are there any other matters not prescribed by the FLSA?

Employees 16 years of age and older may choose to work any number of hours per day or days in a certain week because there are no specific restrictions. However, any work that exceeds over 40 hours per week will be regarded as overtime and should be compensated as such.

There are certain state laws that regulate child labor. For example, according to California child labor laws, minors must undertake an Employment certification (work permit) in order to be eligible to work.

Additionally, the FLSA does not have specific requirements about extra payment if an employee goes to work on:

For further reading, the United State's Department of Labor provides additional information on FLSA requirements.

FLSA-compliant timekeeping software

Clockify is a free time tracking and timesheet software completely compliant with the FLSA requirements. It is an easy and accurate way to keep track of what and when your employees are working.

Timekeeping features in Clockify

Tracker feature in Clockify (screenshot)

Clockify's key timekeeping features include:

By choosing FLSA-compliant software, you ensure that you have obtained the record of all the hours worked and followed through with the timekeeping requirements.

Conclusion: The FLSA is an important federal law that establishes basic employment rights

The goal of the Fair Labor Standards Act is to control regulations and restrictions regarding minimum wage, overtime pay, child labor as well as recordkeeping for all employees in the US.

The act advocates for equal rights for all employees, regardless of their age, gender, disability, parent status, pregnancy, or other personal characteristics. Therefore, it is unlawful to discriminate against an individual based on these characteristics in terms of employment conditions.

There are many things to consider to remain compliant with the FLSA code, so always make sure to double-check all the information and don't forget to always be up to date with your state labor laws too.