The Fair Labor Standards Act sets the US federal minimum wage at $7.25 an hour and requires overtime at one and a half times regular pay for hours over 40 in a workweek. It applies to non-exempt employees. Whether someone is exempt depends on three tests covering how they are paid, how much, and what they actually do.
Misclassifying an employee as exempt is the most common and most expensive FLSA mistake. Job title has nothing to do with it. Last updated September 2026.
| Requirement | What it means |
|---|---|
| Minimum wage | $7.25 per hour federally; many states set higher |
| Overtime | 1.5x regular rate over 40 hours in a workweek |
| Recordkeeping | Hours and wages, retained for set periods |
| Child labour | Restrictions on hours and hazardous occupations |
| Exemptions | Salary basis, salary level and duties, all three |
A federal law enacted in 1938 that sets minimum wage, overtime, recordkeeping and child labour standards across the private sector and in federal, state and local government.
It is enforced by the Wage and Hour Division of the US Department of Labor.
State law applies alongside it. Where a state sets a higher minimum wage or a stricter overtime rule, the state standard governs.
$7.25 an hour federally, unchanged since 2009. Many states and cities set considerably higher rates, and the higher figure applies.
One and a half times the regular rate for hours worked over 40 in a workweek.
Two points people get wrong. The regular rate is not always the base hourly rate: it includes non-discretionary bonuses and shift differentials, so overtime calculated on base pay alone can be short. And the FLSA uses a fixed seven-day workweek, not a pay period, so averaging hours across two weeks to avoid overtime does not work.
Employers must keep accurate records of hours worked and wages paid. In disputes, incomplete records generally work against the employer rather than the employee.
Restrictions on the hours minors may work and the occupations they may work in, with tighter rules for hazardous roles.
The part that causes most litigation, and the part the term "exempt employee" obscures.
To be exempt from overtime, an employee generally has to meet all three of the following:
Salary basis. Paid a predetermined fixed salary that does not vary with quality or quantity of work.
Salary level. Paid at or above a threshold amount. This figure has been the subject of recent rulemaking and litigation, so confirm the current level with the Department of Labor rather than relying on a published figure.
Duties. The employee's actual day-to-day work must fall within an exemption category, principally executive, administrative, professional, outside sales or certain computer roles.
The duties test is where employers most often go wrong. Calling someone a manager does not make them exempt. Paying a salary does not make them exempt. What they actually spend their time doing decides it, and a "manager" who mostly performs the same work as their team is usually non-exempt regardless of title or pay.
Back pay for unpaid overtime, typically going back two years and three years for wilful violations, often with liquidated damages that double the amount, plus legal costs.
Wage and hour claims are also frequently collective, so a single misclassified role can become a claim covering everyone in that role.
They are separate tests answering different questions, and confusing them is common.
Exempt versus non-exempt asks whether an employee is entitled to overtime. Employee versus contractor asks whether the person is an employee at all. Someone can fail both, which means they are a misclassified employee who is also owed overtime.
The contractor tests are covered in the risks of hiring global contractors.
The FLSA does not apply. Each country has its own rules on working time, overtime and minimum pay, and several are stricter.
Common differences: weekly hour caps rather than an overtime premium, mandatory rest periods, overtime thresholds below 40 hours, and rules that cannot be waived by contract even where the employee agrees.
Applying US assumptions abroad is a reliable way to create liability. Country-level requirements are in CountryPedia, and global wage floors in our minimum wage by country guide.
We employ people on your behalf across 214 countries and territories, with contracts, payroll and working time rules applied correctly in each jurisdiction.
Talk to our team about where you are hiring.
The Fair Labor Standards Act, enacted in 1938. It sets federal minimum wage, overtime, recordkeeping and child labour standards in the United States.
Non-exempt employees are entitled to overtime at one and a half times their regular rate over 40 hours a week. Exempt employees are not, but only if they meet the salary basis, salary level and duties tests together. Failing any one of the three makes them non-exempt.
No. Exemption depends on what the person actually does, how they are paid and how much. A manager who primarily performs the same work as the staff they supervise is generally non-exempt regardless of title.
One and a half times the regular rate for hours over 40 in a fixed seven-day workweek. The regular rate includes non-discretionary bonuses and shift differentials, not just base hourly pay, and hours cannot be averaged across weeks.
Back pay for unpaid overtime, generally two years or three for wilful violations, often doubled through liquidated damages, plus legal costs. Claims are frequently brought collectively across everyone in the affected role.
No. Employees working abroad are covered by the employment law of the country they work in, which may set stricter working time limits, lower overtime thresholds or mandatory rest periods that cannot be contracted out of.