What do small businesses need to know to comply with the Fair Labor Standards Act (FLSA)?

This White Paper introduces FLSA requirements in plain terms, focusing on minimum wage, overtime, recordkeeping, and child labor protections. It explains enterprise coverage and individual employee coverage, along with the most common exemptions for executive, administrative, professional, and highly compensated employees. It also discusses the uncertain future of DOL salary-threshold rules and their potential retroactive impact. Designed as a practical guide, it helps small business owners understand how to assess positions, structure compensation, and put compliance systems in place to reduce risk and ensure fair treatment of employees.

White Paper

Fair Labor Standards Act 101: A Primer for Small Businesses

Jessica Ross, Esq.
Theresa Lynn Sidebotham, Esq.

Telios Law PLLC
19925 Monument Hill Rd. | Monument, CO 80132
ph. 855-748-4201 | f. 775-248-8147

Jessica Ross — jer@telioslaw.com
Theresa Lynn Sidebotham — tls@telioslaw.com

The Fair Labor Standards Act (“FLSA”) was originally passed in response to abuse of workers during the Industrial Revolution. It ensures workers receive minimum wage, overtime pay, and protection under labor standards.

This article provides an overview of how FLSA applies, common exemptions, and what businesses must do to comply.

I. Is My Business Subject to FLSA?

FLSA has a broad reach and applies either to the business as an enterprise or to individual employees engaged in commerce.

A. Is Your Business an Enterprise?

An enterprise is covered if it has employees engaged in commerce and generates at least $500,000 in annual business, or operates institutions such as schools or hospitals.

B. Are Your Employees Protected?

Even if a business is not an enterprise, employees engaged in interstate commerce (including phone calls or transactions) are typically covered.

Because of the broad definition of commerce, most businesses are subject to FLSA in some capacity.

II. Common Exemptions from FLSA

Some employees are exempt from minimum wage and overtime requirements. These typically include executive, administrative, and professional roles.

A. Executive, Administrative, and Professional Exemptions

To qualify, employees must meet both a duties test and a salary threshold.

1. Executive Exemption

Manages the business or a department
Supervises at least two employees
Has hiring or firing authority

2. Administrative Exemption

Performs non-manual work related to business operations
Exercises independent judgment

3. Professional Exemption

Requires advanced knowledge
Typically includes professions like law, medicine, or teaching

B. Highly Compensated Employees

Employees earning $100,000+ may qualify for exemption if they perform certain duties.

C. Salary Threshold Rule

A proposed increase in salary thresholds was blocked by courts, but businesses should remain cautious about future changes.

III. What if FLSA Applies?

A. Minimum Wage

Employees must be paid at least the federal minimum wage ($7.25/hour), or higher state minimums where applicable.

B. Overtime

Employees must receive 1.5x pay for hours worked beyond 40 per week unless exempt.

C. Recordkeeping

Employers must maintain records including:

Employee details
Hours worked
Wages and deductions
Overtime pay

Payroll records must be kept for three years, and supporting documents for two years.

D. Youth Employment

FLSA restricts child labor, including minimum age requirements and limits on hazardous work.

IV. Conclusion

FLSA compliance depends on the specific facts of each business and employee role. Establishing proper policies ensures both legal compliance and fair treatment of employees.

The Fair Labor Standards Act (“FLSA”) was originally passed in response to abuse of workers in the Industrial Revolution. It was intended to make sure that workers got paid for overtime, got paid a living wage, and that children were protected. FLSA governs equal pay, minimum wage, overtime, and record-keeping requirements for most employers in the U.S. Though the law has been in effect for decades, small businesses see it as difficult to implement and confusing.

Download this white paper for a general overview of FLSA, explaining how a business or its employees may be subject to the Act, how common exemptions from the law work, and what is required of businesses to ensure compliance.

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White Papers: Fair Labor Standards Act 101—A Primer for Small Businesses