What Is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) is a U.S. law that is intended to protect workers against certain unfair pay practices. As such, the FLSA sets out various labor regulations regarding interstate commerce employment, including minimum wages, requirements for overtime pay, and limitations on child labor. The FLSA—which was passed in 1938 and has seen numerous changes—is one of the most important laws for employers to understand, as it sets out a wide array of regulations for dealing with employees, whether salaried or paid by the hour.

Key Takeaways

  • The FLSA protects workers against unfair practices.
  • FLSA rules specify when workers are considered on the clock and when they should be paid overtime.
  • Employees are deemed either exempt or nonexempt with regard to the FLSA.

How the Fair Labor Standards Act (FLSA) Works

The FLSA specifies when workers are “on the clock” and which times are not paid hours. There are also elaborate rules concerning whether employees are exempt or nonexempt from the FLSA overtime regulations. The law requires overtime to be paid at 1.5 times the regular hourly rate (“time-and-a-half”) for all hours worked in excess of 40 hours during a seven-day workweek.

The FLSA applies to workers who have an employer and are engaged in interstate commerce or in the production of goods for commerce; it also applies to workers who are employed by an enterprise engaged in commerce or the production of goods for commerce. Further included are domestic service workers (housekeepers, cooks, full-time babysitters) and employees of hospitals; schools for mentally or physically disabled or gifted children; educational institutions at any level, from preschools to universities; and public agencies. 

It does not apply to independent contractors or volunteers because they are not considered employees. Employers that have at least $500,000 per year in gross sales or other business are subject to the requirements of the FLSA, which means that their employees are eligible for FLSA protections.

$500,000

The amount in annual gross sales that requires a business to be governed by the FLSA

Fair Labor Standards Act and Workers

Nonexempt employees are entitled to overtime pay, while exempt employees are not. Most FLSA-covered employees are nonexempt. Some hourly workers are not covered by the FLSA but are subject instead to other regulations. For example, railroad workers are governed by the Railway Labor Act, and truck drivers fall under the purview of the Motor Carriers Act.

White-collar workers (executive, professional, and administrative workers) are not protected by FLSA rules when it comes to overtime. Farmworkers may be considered jointly employed by a labor contractor, who recruits, organizes, transports, and pays them, and a farmer, who needs their services and pays the labor contractor for their services. Such situations sometimes see employers falsely categorize such workers as volunteers when they meet the definition of “employee” under the FLSA.

The FLSA also sets the groundwork for how to treat jobs that are primarily compensated by way of tipping. In such a case, an employer must pay the minimum wage to the employee unless they regularly receive more than $30 per month from gratuities. If that employee’s pay (tips included) does not equal minimum wage, then the employer must make up the difference. Such workers must either receive all their tips or be included in a tip pool, for which the FLSA sets guidelines. Busboys are meant to be included in a tip pool under FLSA rules because of the customer-visible nature of their work.