Why this matters.
The Fair Labor Standards Act (FLSA) establishes the federal minimum wage, overtime pay standards, recordkeeping requirements, and child labor rules that apply to most private and public employers in the United States. Failure to comply can result in back pay liability, liquidated damages equal to the unpaid wages, civil penalties up to $2,374 per violation, and in willful cases, criminal prosecution. The Department of Labor’s Wage and Hour Division conducts thousands of investigations annually, recovering hundreds of millions in back wages.
Misclassifying employees as independent contractors or exempt from overtime is one of the costliest mistakes an employer can make. Under FLSA Section 13, exemptions for executive, administrative, and professional employees require both a salary threshold (currently $684/week) and a duties test — paying a salary alone is not sufficient. State laws often set higher minimum wages and stricter overtime rules, meaning federal compliance is the floor, not the ceiling.