The Fair Labor Standards Act (FLSA) is a key part of U.S. labor law, ensuring fair wages, reasonable work hours, and protections for workers, including minors. For small businesses and startups, understanding and complying with FLSA rules is important to avoiding costly penalties and lawsuits. This 2025 guide outlines everything employers need to know, from overtime laws to child labor standards, exemptions, and classification tools.
The FLSA overtime rules for small business state that non-exempt employees are entitled to time-and-a-half pay for hours worked beyond 40 in a workweek. However, this doesn’t apply to exempt employees. To qualify as exempt in 2025, workers must meet a salary threshold of $1,128 per week, effective January 1, 2025.
FLSA exemptions for part-time employees 2025 depend more on job duties and earnings than hours worked. The administrative exemption, for instance, applies only if the employee’s role involves independent judgment and office work related to business operations.
To simplify compliance, use an FLSA overtime calculator for employers to properly calculate wages owed. And to clarify confusion: federal law does not mandate double time pay, though some states or union contracts might.
Knowing the difference between exempt and non-exempt FLSA workers is critical for payroll accuracy. A common pitfall for startups is misclassifying independent contractors vs employees. According to the IRS and DOL, behavioral control, financial control, and the nature of the relationship determine classification.
Using an FLSA classification tool for HR managers can help ensure employees, including remote workers, are accurately classified. For instance, remote employees must still track hours if they are non-exempt, and employers are responsible for enforcing break times and overtime.
Remember: wrongly treating a W-2 employee as a 1099 contractor doesn’t shield you from FLSA liability. The FLSA rules for 1099 contractors stress proper classification and control tests.
FLSA child labor provisions for teen workers are strict. Workers aged 14 and 15 may only work 3 hours on school days and 8 hours on non-school days, with a weekly limit of 18 hours during the school year.
There are specific FLSA child labor rules for restaurants, minors cannot operate fryers, ovens, or slicers, nor work past 7 p.m. during the school year. Employers should know the age limits for youth employment under FLSA and how many hours a minor can work based on federal and state law.
For unpaid interns, the FLSA internship rules for students follow a 7-factor “primary beneficiary” test. If the intern benefits more from the arrangement than the employer, they may be unpaid.
The FLSA minimum wage federal vs state comparison matters because the federal minimum wage is still $7.25/hour in 2025, but many states, like California and New York, set much higher levels. Employers must pay whichever rate is higher.
FLSA tipped employee rules allow employers to pay as low as $2.13/hour if the employee's tips bring them up to the minimum wage. However, employers must track tips carefully or risk violating wage laws.
The regular rate of pay explained includes base pay, commissions, and nondiscretionary bonuses, it’s the basis for overtime calculations. Regarding wage deductions allowed under FLSA, only lawful deductions such as taxes or wage garnishments are permitted. Deductions must not reduce pay below minimum wage.
Proper recordkeeping requirements under FLSA for startups include maintaining employee names, hours worked, wages paid, and overtime. Employers must retain payroll records for at least 3 years.
Employers must also follow FLSA poster requirements by displaying the official DOL poster in a prominent location.
If you’re unsure where to begin, follow an FLSA compliance checklist for small business to ensure all boxes are ticked, from classifications to rest breaks and overtime.
Do startups need to follow FLSA? Yes, there’s no size exemption. All covered employers must comply, regardless of company age or staff count.
The DOL conducts audits based on complaints or randomly. While there’s no rule on how often the DOL audits FLSA, industries like food, retail, and hospitality are frequent targets. To prepare, use an FLSA audit checklist for employers, and train managers on wage rules (DOL Enforcement Data).
To stay on top of wage law changes, invest in the best FLSA software for payroll compliance. These tools help with time tracking, wage calculations, and report generation, reducing the risk of errors and penalties.
FLSA compliance in 2025 isn’t just about avoiding fines, it’s about treating employees fairly and building a legally sound workplace. From how to classify remote employees under FLSA to calculating overtime and complying with youth employment standards, there’s a lot to manage, but you're not alone.
Let PayProNext help you stay FLSA-compliant. We handle payroll, overtime calculations, and classification, so you stay focused on growing your business without worrying about labor law headaches.
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