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FLSA: what to know for your small business

  • The federal Fair Labor Standards Act (FLSA) sets forth rules regarding minimum wage, overtime, recordkeeping, and child labor laws.
  • Non-exempt employees are entitled to minimum wage and overtime pay for hours in excess of 40 per workweek.
  • Homebase HR Pro experts can educate you on the FLSA and review your existing policies to help you remain compliant.

What is FLSA?

The FLSA meaning refers to the Fair Labor Standards Act (FLSA),  a federal law that sets forth rules regarding minimum wage, regular rates of pay, overtime pay, child labor laws, and recordkeeping for private employers and employees and those participating in government ventures.

The FLSA was enacted in 1938 and is meant to protect workers in the United States, both part-time and full-time employees. It is enforced by the Wage and Hour Division of the US Department of Labor (DOL).

Under the labor laws, all employees who are not considered exempt must be paid at least the national minimum wage of $7.25 per hour. Many states have a higher minimum wage rate, which management or general business owners must adhere to, unless it is lower than the national wage.

For example, Georgia’s minimum wage is lower than the national minimum wage rate at $5.15, so Georgia employers must pay the national rate instead.

If a business owner employs workers who make tip money, they may pay workers who receive at least $30 in tips a month a lower minimum wage rate of $2.13 an hour. However, most states have their own rules in regards to tipped minimum wage, so check your state labor law guide to learn more.

There are also FLSA overtime rules that business owners must follow in order to stay compliant and avoid heavy fines and penalties imposed by the federal government. Employers must provide an overtime rate of at least time and a half pay for all hours worked in excess of 40 in a workweek.

For example, if an employee makes $10 per hour and works 50 hours in one workweek, they must be paid $15 for the extra 10 hours worked. This means they would make an extra $150 for the week.

The FLSA also sets standards for recordkeeping, including what information employers need to store, and for how long. Employers need to maintain payroll, collective bargaining, and sales and purchase records for at least three years. Time cards and other wage calculation records need to be maintained for at least 2 years.

Additionally, the FLSA includes rules and regulations around employing minors. Take a look at our information on child labor laws to learn more, and remember, there are additional state laws around hiring minors. Check your state labor law guide to ensure you are compliant.

Need help learning the ins and outs of the FLSA? Homebase HR Pro offers access to certified human resources experts who can review your employee handbook policies and let you know if you are operating under compliance for all labor laws like wage and hour laws, employee rights, blue laws, minimum wage rules, workplace safety, and the FMLA.

What is an FLSA non-exempt employee?

Whether or not a business owner needs to adhere to the rules and regulations under the FLSA depends on the FLSA status (also known as an FLSA classification) of their employees. The two different types of statuses are exempt or nonexempt.

Non-exempt employees are entitled to the federal minimum wage and overtime pay.

An employee who is non-exempt earns less than $684 per week or $35,568 per year. This was enacted by a final rule on January 1, 2020.

Non-exempt employees are also:

  • directly supervised by managers or business owners
  • not employed in a “bona-fide executive, administrative, outside salesman, or professional capacity”
  • expected to follow orders without making their own management decisions.

Examples of non-exempt employees include job titles such as construction workers, maintenance, assembly line workers, and other hourly employees that work at a small business.

Homebase HR Pro experts can help you determine the status of your employees and give you some insight on whether or not they are covered under the FLSA. Get started today to learn more about how HR Pro can help you stay compliant and avoid labor law issues.


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What is an FLSA exempt employee?

An FLSA exempt employee does not have rights under the FLSA, and business owners who employ exempt workers do not have to adhere to rules such as overtime and more.

To determine if your employee is not covered under federal law, you can conduct an FLSA exempt test. Generally, exempt employees must be paid a salary of more than $684 per week or $35,568 per year instead of an hourly wage, and fall under the following categories:

  • Executive
  • Professional
  • Administrative
  • Computer
  • Outside Sales

There are also certain exceptions and qualifications based on the industry the employee works in. Take a look at the Department of Labor’s fact sheet on the FLSA to learn more.

Each type of exemption comes with its own test:

  • Executive exemption: Employees must primarily manage an enterprise or department of an enterprise. They must also direct at least two employees and have the authority to hire, fire, or recommend another person of authority do so.
  • Administrative exemption: Employees must primarily perform office or non-manual work related to management or general business operations. Their primary duty must include the exercise of discretion and judgment on important matters.
  • Professional exemption: Employees must primarily perform work that requires advanced knowledge, such as a field of earning acquired by specialized study.
  • Computer exemption: Employees must be skilled in the computer field and have job responsibilities that meet exemption requirements.
  • Outside sales exemption: Employees must primarily make sales or obtain orders or contracts and conduct their work away from the physical location of the business.

Navigating through the rules and tests of the FLSA can be confusing for business owners, but Homebase HR Pro can help. Not only will you receive access to experts who can answer questions you may have, but you will also be able to utilize training and information that cover everything you need to know to run a compliant business.