The FLSA, or Fair Labor Standards Act, is the US federal law that sets the minimum wage, overtime pay, recordkeeping and youth employment standards for most private and public sector employees. As of October 2026, it requires a minimum wage of at least $7.25 an hour and overtime at one and a half times the regular rate for hours over 40 in a workweek.
If you employ anyone in the US, the FLSA is the baseline you can't go below. Many states set higher wages on top, but the FLSA's overtime, records and child labor rules still apply. Here's what the US Department of Labor's Wage and Hour Division says it covers.
What the FLSA covers
| Area | The federal rule (as of October 2026) |
|---|---|
| Minimum wage | $7.25 an hour, effective 24 July 2009 |
| Overtime | At least one and a half times the regular rate after 40 hours in a workweek |
| Tipped employees | Cash wage of at least $2.13 an hour, with a maximum tip credit of $5.12 |
| Recordkeeping | Time and pay records for each non-exempt worker, plus the official FLSA poster |
| Child labor | 16 is the basic minimum age; tighter hour limits for 14 and 15 year olds |
Where a state minimum wage is higher, the employee gets the higher rate. The FLSA sets the floor, not the ceiling.
Does the FLSA apply to your business?
There are two routes into coverage, and small businesses often assume they're too small for either. The first is enterprise coverage: businesses with at least two employees and annual sales or business of at least $500,000, plus hospitals, care providers, schools and government agencies. The second is individual coverage, and it's much wider. Even without enterprise coverage, an employee is protected if their work regularly involves interstate commerce.
This is the insight that catches small firms out. The Department of Labor's examples of interstate commerce include regularly making phone calls to people in other states, handling records of interstate transactions and producing goods that will be sent out of state. A two-person online business with customers across the country can easily be covered. Domestic workers such as housekeepers and full-time nannies are normally covered too.
The workweek rule
Overtime works on a workweek basis. A workweek is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods. It doesn't have to match the calendar week, but averaging hours over two or more weeks isn't allowed. So 50 hours one week and 30 the next means 10 hours of overtime, not zero.
- The FLSA doesn't require extra pay for weekends, holidays or rest days as such, only for hours over 40.
- There's no limit on how many hours employees aged 16 or older can work in a week.
- The regular rate includes most pay, so nondiscretionary bonuses and commissions feed into overtime; discretionary bonuses and gifts don't.
- A flat lump sum for overtime doesn't count as overtime pay, even if it's as much as the hourly premium would be.
Exempt employees
Some employees are exempt from minimum wage and overtime, mainly executive, administrative and professional staff. Fact Sheet #17A says they generally have to meet the duties tests and be paid on a salary basis of at least $684 a week. Highly compensated employees paid at least $107,432 a year can be exempt with a lighter duties test. Many states set a higher salary threshold than the federal one, so check your state too.
Young workers
The child labor rules are the part of the FLSA that small shops and cafes break most often without meaning to. Under Fact Sheet #43, 16 is the basic minimum age for employment, and 16 and 17 year olds can work unlimited hours in any job the Secretary of Labor hasn't declared hazardous. Workers aged 14 and 15 can only work outside school hours in non-hazardous, non-manufacturing jobs, and for no more than 3 hours on a school day, 8 hours on a non-school day, 18 hours in a school week and 40 hours in a non-school week. Once someone turns 18, the federal youth rules no longer apply.
Records you must keep
- Each non-exempt worker's full name and Social Security number.
- When the workweek begins, and the hours worked each day and week.
- The basis of pay, such as an hourly rate, a weekly salary or piecework.
- Straight-time earnings, overtime earnings, and every addition or deduction.
- Total wages paid each period, the pay date and the period covered.
Keep payroll records for at least three years, and the records wages are worked out from, such as time cards and schedules, for two years. Any timekeeping method is fine as long as it's complete and accurate.
How staff are classified is explained in our guide to exempt and non-exempt employees.
What happens if you get it wrong
The Department of Labor can recover back wages and an equal amount in liquidated damages for employees, and can assess civil penalties for child labor violations and repeat or willful violations. An employee can also sue privately for back wages, the same amount again in liquidated damages, plus attorney's fees and court costs. Willful violations can bring criminal penalties, including fines and imprisonment. In other words, an underpayment can cost double before any penalty is added.
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Mixing employees and contractors is where many owners get into trouble, so read my guide to 1099 contractors versus W-2 employees. A time clock app covers the hours records the FLSA expects.
My verdict
The FLSA is shorter than its reputation: a $7.25 floor, overtime after 40 hours, honest records, and limits on young workers. Most problems come from three places: assuming you're too small to be covered, averaging hours across weeks, and calling someone exempt because they're salaried. Avoid those and keep good records, and you've done most of the work.
The current rate is in our federal minimum wage guide.
Frequently asked questions
What does the FLSA stand for?
The Fair Labor Standards Act, the federal law setting minimum wage, overtime, recordkeeping and youth employment standards in the US.
What is the federal minimum wage under the FLSA?
As of October 2026, it's $7.25 an hour, effective since 24 July 2009. A higher state rate applies where there is one.
When is overtime due under the FLSA?
For covered non-exempt employees, after 40 hours in a workweek, at not less than one and a half times their regular rate.
Does the FLSA apply to small businesses?
Often, yes. Even without $500,000 in annual sales, employees are covered individually if their work regularly involves interstate commerce, such as calls or records crossing state lines.
Does the FLSA require holiday or weekend pay?
No. It doesn't require extra pay for Saturdays, Sundays or holidays as such, only for hours over 40 in a workweek.
How long must employers keep FLSA records?
At least three years for payroll records and two years for records wages are calculated from, such as time cards.
