FLSA Compliance Checklist and FAQs for Employers

This is the third page on the Fair Labor Standards Act (FLSA). It turns the rules and numbers into a yearly check, lists the errors the Department of Labor's guidance points to, and answers common questions. For the basics, see the FLSA overview.

The Punch-to-Paycheck Trace

The Punch-to-Paycheck Trace is our name for a yearly review that follows one worker's hours from the time clock to the paycheck. January is a common time to run it.

1. Sort every worker as non-exempt, exempt or contractor, and write down why. A white-collar exempt employee generally needs a salary of at least $684 a week and a qualifying duties test.
2. Check each pay rate against the federal $7.25 minimum wage and any higher state rate; the higher one applies. The Illinois page covers the state tax side.
3. Rebuild one overtime week: hours over 40 in the fixed workweek, with nondiscretionary bonuses in the regular rate and no averaging across weeks.
4. Review breaks and tips: short rests of about 5 to 20 minutes are paid, and a meal period is unpaid only if the employee is fully relieved.
5. Confirm the records exist: hours worked each day and week and wages paid, kept 3 years for payroll and 2 years for time cards.
6. Check the April 2023 poster, child labor hours for 14- and 15-year-olds and a private lactation space.
7. Review each 1099 worker against the DOL and IRS tests described in our contractor guide.

Common mistakes

• Assuming a salaried employee is exempt without checking duties and the $684 weekly level.
• Treating a worker as a contractor because of a signed agreement or a Form 1099.
• Averaging hours over two weeks, or paying straight time for overtime hours.
• Leaving nondiscretionary bonuses out of the regular rate.
• Treating short breaks as unpaid, or a meal period as unpaid when the employee keeps working.
• Taking a tip credit without telling the employee, or letting a manager keep tips.
• Assuming a nonprofit, or a company under $500,000 in sales, is outside the FLSA.

When to talk to an attorney

A CPA cannot answer legal questions like these, so employers commonly turn to an employment attorney for:

• A Wage and Hour Division investigation, a demand letter or a lawsuit, including a collective action.
• A close call on exempt status or contractor status, where back pay could span years and several workers.
• A retaliation complaint, or a firing soon after an employee raised a pay question.
• A settlement or release of wage claims, or a decision about the PAID program.

Frequently asked questions