Fair Labor Standards Act (FLSA) — 2026 Complete Guide

Q1. What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) is a federal law enacted in 1938, codified at 29 U.S.C. § 201 et seq., that establishes federal minimum wage, overtime pay, recordkeeping, and child labor standards. The FLSA is administered and enforced by the Wage and Hour Division (WHD) of the U.S. Department of Labor. The FLSA applies to most private sector employees and to state, local, and federal government workers.

Source: DOL — Fair Labor Standards Act

Q2. What is the current federal minimum wage in 2026?

The current federal minimum wage in 2026 is $7.25 per hour, effective July 24, 2009. Congress has not enacted legislation to increase the federal minimum wage since that date. Where a state or local minimum wage exceeds $7.25 per hour, the higher rate applies to covered employees.

Source: DOL — Minimum Wage

Q3. Who is covered by the FLSA?

The FLSA covers employees under two primary frameworks. Under enterprise coverage, all employees of a business that has $500,000 or more in annual sales or business volume are covered. Under individual coverage, any employee engaged in interstate commerce or the production of goods for interstate commerce is covered. Additionally, employees of hospitals, schools, and government agencies are automatically covered regardless of size or revenue.

Source: DOL Fact Sheet #14 — FLSA Coverage

Q4. What is the FLSA overtime rule?

Under 29 U.S.C. § 207, non-exempt employees are required to receive overtime pay at a rate of not less than 1.5 times the regular rate of pay for all hours worked in excess of 40 hours in a workweek. A workweek is a fixed, recurring 168-hour period (seven consecutive 24-hour periods). The FLSA does not require daily overtime pay; that requirement exists only under certain state laws.

Source: DOL — Overtime Pay

Q5. What is the difference between exempt and non-exempt employees?

Non-exempt employees are entitled to the FLSA’s minimum wage and overtime protections. Exempt employees are excluded from those protections based on their job duties, salary basis, and salary level. For the primary white-collar exemptions (executive, administrative, professional), three requirements must be satisfied: the employee is paid on a salary basis, earns at least $684 per week, and primarily performs qualifying executive, administrative, or professional duties.

Source: DOL Fact Sheet #17A — EAP Overtime Exemptions

Q6. What is the FLSA salary threshold for 2026?

The current federal FLSA salary threshold for the white-collar exemptions is $684 per week ($35,568 per year). This threshold is set under 29 C.F.R. § 541.600. The DOL’s 2024 final rule that would have increased this threshold was vacated by a federal court in November 2024, and the threshold reverted to $684 per week. Several states, including California ($1,352/week) and Washington ($1,541.70/week), maintain higher state-level thresholds.

Source: DOL — Overtime Salary Levels

Q7. What is the “no tax on overtime” deduction?

The “no tax on overtime” deduction is a federal income tax deduction created by the One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025. The deduction covers the premium portion only of FLSA-required overtime pay — the additional 0.5× above straight-time wages. The deduction is available for tax years 2025 through 2028. The maximum deduction is $12,500 per return ($25,000 for married filing jointly).

Source: IRS — One Big Beautiful Bill Act: Tax Deductions for Working Americans

Q8. Who qualifies for the overtime tax deduction?

The overtime tax deduction is available to employees who are covered by the FLSA and are not exempt from its overtime requirements, who receive overtime pay that is required by the FLSA (for hours worked over 40 in a workweek at 1.5× the regular rate), who have a valid Social Security Number issued for employment, and who do not file as Married Filing Separately. Exempt salaried employees who receive voluntary overtime do not qualify.

Source: IRS — Questions and Answers About the Deduction for Qualified Overtime Compensation

Q9. How is the overtime tax deduction calculated?

Under IRS Notice 2025-69, where an employee is paid at 1.5× (time-and-a-half), the deductible amount equals one-third (1/3) of total overtime pay received for the year. Where paid at 2× (double time), the deductible amount equals one-quarter (1/4) of total overtime pay. Only overtime required by the FLSA qualifies; state-law-only overtime and voluntary employer overtime premiums are excluded.

Source: IRS Notice 2025-69

Q10. What is the maximum overtime tax deduction amount?

The maximum qualified overtime compensation deduction is $12,500 per return for individual filers and $25,000 per return for married filing jointly. The deduction phases out for taxpayers with Modified Adjusted Gross Income (MAGI) above $150,000 (single) or $300,000 (married filing jointly).

Source: IRS — One Big Beautiful Bill Act Guidance

Q11. Does the FLSA apply to remote workers?

The FLSA applies fully to remote workers. All hours a non-exempt employee works remotely — whether from home, a co-working space, or another location outside the employer’s premises — are required to be compensated at the applicable minimum wage, with overtime for hours exceeding 40 in the workweek. Employers are required to track remote employee hours to the same extent as hours worked on-site.

Source: DOL Fact Sheet #22 — FLSA Hours Worked

Q12. What records are employers required to keep under the FLSA?

Under 29 C.F.R. Part 516, employers are required to maintain records for each non-exempt employee that include: the employee’s name, address, date of birth (if under 19), sex, occupation, hours worked each day and week, regular and overtime pay rates, total wages paid each period, and deductions. Payroll records are required to be retained for 3 years; time cards, schedules, and wage rate tables for 2 years.

Source: DOL Fact Sheet #21 — FLSA Recordkeeping

Q13. What happens if an employer violates the FLSA?

Employers found to have violated the FLSA’s minimum wage or overtime provisions are required to pay: (1) back wages for all underpaid amounts; (2) liquidated damages in an amount equal to the back wages owed; and (3) civil monetary penalties of up to $1,000 per violation for repeated or willful violations. Willful violations may also result in criminal prosecution under 29 U.S.C. § 216(a), with fines up to $10,000 and imprisonment for repeat offenders.

Source: DOL — FLSA Enforcement

Q14. Does the FLSA require meal or rest breaks?

The FLSA does not require employers to provide meal or rest breaks. Short breaks of 20 minutes or less, when provided voluntarily by employers, are required to be counted as compensable work time under FLSA. Bona fide meal periods of 30 minutes or more — during which the employee is completely relieved of duties — are not required to be compensated. Many states impose break requirements through state law.

Source: DOL — Fair Labor Standards Act

Q15. Does the FLSA regulate vacation or sick leave?

The FLSA does not require employers to provide vacation, sick leave, holiday pay, or other paid time off. These benefits are governed by state law, employer policy, or employment contract where applicable. Several states have enacted mandatory paid sick leave laws.

Source: DOL — Fair Labor Standards Act

Q16. What are the FLSA child labor laws?

Under 29 U.S.C. § 212, the FLSA establishes minimum age standards for employment. The general minimum age for non-agricultural employment is 16 years. Employees under 18 are prohibited from working in the 17 hazardous occupations designated by the DOL. Employees ages 14 and 15 are permitted to work in certain non-agricultural jobs with restrictions on hours and types of work. Agricultural employment is governed by a separate, distinct set of standards.

Source: DOL — Child Labor

Q17. What is the FLSA tipped minimum wage?

Under 29 U.S.C. § 203(m), employers of tipped employees are required to pay a cash wage of at least $2.13 per hour, provided that the employee’s tips bring total hourly compensation to at least the federal minimum wage of $7.25 per hour. If tips are insufficient to bring total compensation to $7.25, the employer is required to pay the difference. Several states prohibit the use of a tip credit and require the full state minimum wage be paid before tips.

Source: DOL — Minimum Wage for Tipped Employees

Q18. What is the economic reality test for independent contractors?

The economic reality test is the standard used by the DOL under 29 C.F.R. Part 795 to determine whether a worker is an employee or an independent contractor under the FLSA. The test examines six factors: (1) opportunity for profit or loss; (2) worker investments; (3) permanency of the relationship; (4) nature and degree of control; (5) whether the work is integral to the employer’s business; and (6) skill and initiative. No single factor is determinative; the totality of the economic relationship is assessed.

Source: DOL Fact Sheet #13 — FLSA Employment Relationship

Q19. Can employers give comp time instead of overtime pay?

Under 29 U.S.C. § 207(o), state and local government employers are permitted to provide compensatory time off at 1.5 hours per overtime hour in lieu of overtime pay. Private sector employers are not permitted to substitute comp time for overtime pay under the FLSA. Non-exempt employees of private employers are required to receive cash overtime compensation for all hours worked over 40 in a workweek.

Source: DOL — Overtime Pay

Q20. What is the FLSA regular rate of pay?

The regular rate of pay under the FLSA is the basis on which overtime is calculated and includes all remuneration for employment except certain statutory exclusions. The regular rate includes hourly wages, salary, non-discretionary bonuses, commissions, and most other compensation. It excludes gifts, vacation pay, discretionary bonuses, expense reimbursements, and premiums paid for work on holidays or weekends where those premiums are agreed upon rather than required by the FLSA.

Source: DOL — Overtime Pay

Q21. What are the penalties for FLSA violations?

FLSA violations carry multiple potential consequences: back wages owed to employees; liquidated damages equal to the back wages owed (under 29 U.S.C. § 216(b)); civil monetary penalties of up to $2,451 per child labor violation or up to $1,000 per minimum wage/overtime violation for willful or repeat violations; and criminal penalties of up to $10,000 and imprisonment for willful violations under 29 U.S.C. § 216(a). Private lawsuits by employees are also authorized under 29 U.S.C. § 216(b).

Source: DOL — FLSA Enforcement

Q22. Does the FLSA apply to small businesses?

The FLSA applies to small businesses depending on whether enterprise or individual coverage applies. Enterprise coverage requires $500,000 or more in annual dollar volume. Businesses with less than $500,000 in annual sales are still subject to the FLSA if individual employees are engaged in interstate commerce. Additionally, hospitals, schools, and government agencies are covered automatically regardless of size or revenue.

Source: DOL Fact Sheet #14 — FLSA Coverage

Q23. How do I file a wage complaint with the DOL?

Wage complaints under the FLSA are filed with the Wage and Hour Division of the U.S. Department of Labor. Complaints are accepted online through the WHD complaint portal, by telephone at 1-866-4US-WAGE (1-866-487-9243), or in person at a local WHD office. The WHD investigates complaints and, where violations are found, requires employers to pay back wages and applicable liquidated damages.

Source: DOL — File a Wage and Hour Complaint

Q24. When do state wage laws override the FLSA?

Under 29 U.S.C. § 218, state wage and hour laws override — or more precisely, apply in addition to — the FLSA when the state standard is more protective to the employee. A state minimum wage above $7.25 per hour overrides the federal rate. A state daily overtime requirement (such as California’s 8-hour daily overtime) applies in addition to the FLSA’s 40-hour weekly standard. State exemption thresholds above $684 per week apply in lieu of the federal standard.

Source: DOL — State Minimum Wage Information

Q25. What changed with the FLSA salary threshold in 2024–2026?

The DOL issued a final rule in April 2024 that would have raised the EAP salary threshold from $684/week to $844/week on July 1, 2024, and to $1,128/week on January 1, 2025. A federal district court in Texas vacated that rule in November 2024. As a result, the threshold reverted to $684 per week ($35,568 per year) — the level set by the 2019 final rule — and that level remains operative for 2026. The DOL has indicated plans to revisit the threshold through future rulemaking.

Source: DOL — Overtime Salary Levels

Q26. Are salaried employees always exempt from overtime?

Salaried employees are not automatically exempt from FLSA overtime. To qualify for a white-collar exemption, a salaried employee is required to satisfy all three parts of the applicable test: payment on a salary basis, earning at least $684 per week, and primarily performing qualifying executive, administrative, or professional duties. A salaried employee who does not meet the duties test remains entitled to overtime pay.

Source: DOL Fact Sheet #17A — Overtime Exemptions

Q27. What is the FLSA enterprise coverage test?

The FLSA enterprise coverage test determines whether an entire business — and all its employees — is covered by the FLSA. Enterprise coverage applies when a business: (1) has at least two employees; and (2) has annual dollar volume of sales or business of at least $500,000. Businesses below this threshold may still be subject to FLSA requirements through individual coverage of specific employees.

Source: DOL Fact Sheet #14 — FLSA Coverage

Q28. Does the overtime tax deduction apply to state taxes?

The qualified overtime compensation deduction established by P.L. 119-21 is a federal income tax deduction only. It does not automatically apply to state income taxes. State income taxes on overtime compensation continue to apply at the applicable state rate unless the individual’s state has enacted a separate conforming provision. As of early 2026, the applicability of the deduction at the state level varies by jurisdiction.

Source: IRS — Questions and Answers About the Deduction for Qualified Overtime Compensation

Q29. What is the PAID program for FLSA compliance?

The Payroll Audit Independent Determination (PAID) program is a voluntary WHD compliance program that allows employers to self-audit their pay practices, identify potential FLSA overtime and minimum wage violations, calculate amounts owed, and pay affected employees the full amount of back wages. Employers who participate in and complete the PAID program for identified violations are not assessed liquidated damages for those violations. The program does not cover child labor violations.

Source: DOL — PAID Program

Q30. Where can I access official FLSA resources?

Official FLSA resources are published by the U.S. Department of Labor Wage and Hour Division at dol.gov/agencies/whd/flsa. The WHD publishes more than 70 compliance fact sheets on specific FLSA topics at dol.gov/agencies/whd/fact-sheets. For overtime tax deduction information, the IRS publishes guidance at irs.gov/newsroom/questions-and-answers-about-the-new-deduction-for-qualified-overtime-compensation.