Business & Work

Fair Labor Standards Act

For-profit and nonprofit organizations must pay their employees or workers enough. The Fair Labor Standards Act (“FLSA”) states how employers must pay workers, such as minimum wage and overtime pay.

Both for-profit and nonprofit employers must:

• Pay covered workers at least the federal minimum wage or the state minimum wage if higher,
• Pay overtime when covered, non-exempt workers work more than 40 hours in one week, and
• Pay overtime to covered, non-exempt workers at a rate of at least one and one-half times their hourly pay.

The FLSA does not limit the number of hours workers age 16 and older can work. 

FLSA sets basic minimum wage and overtime standards and has rules about employing minors. There are a number of employment practices that FLSA does not regulate. For example, the FLSA does not cover:

• Vacation, holiday, severance, or sick pay,
• Meal or rest periods, holidays off, or vacations,
• Premium pay for weekend or holiday work,
• Pay raises or fringe benefits, or
• A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.

Other state and local laws may set rules about these things. Employers and employees can also make agreements about such benefits. 

Download the "Your Rights Under Illinois Employment Laws" poster to learn about employee rights in Illinois. This poster should be posted where employees can see it.

What does “covered” mean?

There are two ways that workers are “covered”, or protected, by the FLSA:

1. If they work for certain organizations ("enterprises"), or
2. If they are covered by the FLSA.

Most people that work as housekeepers, cooks, and babysitters are covered if their wages reach a certain amount and they work for more than eight hours per week for one or more employers.

Enterprise coverage

People are protected if they are workers of an enterprise doing business between states and their employer:

• Has annual gross sales of greater than $500,000, or
• Is a hospital, a place providing medical or nursing care for residents, a school or preschool, or a public agency.

Individual coverage

Even when they do not work for an employer with the above rules, workers can still be protected by the FLSA. The FLSA protects workers who produce or exchange goods across state lines. This can include mailing letters across state lines, making phone calls across state lines, producing or selling goods across state lines, and keeping records of interstate transactions.

A person whose for-profit or nonprofit company operates solely within the state and has revenues less than $500,000 is not covered under FLSA.

See the FLSA Reference Guide for more information.

If a person is a covered, non-exempt worker, they are protected by the FLSA’s rules and must be paid overtime for any hours worked over and above 40 hours per week.

When is someone exempt from overtime pay?

Certain workers are exempt and do not get overtime pay. The test to decide whether a worker is exempt has three parts:

1. Be paid a salary,
2. Be paid at least $684, and
3. Do a certain type of work.

A worker must pass all three parts of the test to be exempt. The salary requirements do not apply to teachers, outside sales workers, and workers practicing medicine or law. The third part of the test (type of work) is the hardest to define.

Type of work defined

An organization must classify its workers as either exempt or non-exempt based on the person’s type of work. Exemptions are defined under the FLSA. Organizations should carefully confirm the definitions prior to classifying workers. The following are some examples of exempt workers:

• Executive. An exempt executive employee’s work involves managing the work of 2 or more other workers and hiring, firing, and promoting other workers,
• Administrative. An exempt administrative employee performs office or non-manual work for a nonprofit and makes independent decisions regarding important matters,
• Professional. An exempt professional does work requiring an advanced degree or they do work that requires creativity, invention, or imagination in an artistic job, and
• Certain computer workers. The computer employee exemption refers to people with specialized knowledge of computer systems.

What can happen if an organization ignores the FLSA rules?

It is not an option to ignore FLSA rules. A person can file a lawsuit against their employer if they have not been paid properly. For example, workers can sue their employer if their employer:

1. Lists them as exempt from overtime payment by giving them important job titles but then requires them to perform non-exempt functions,
2. Requires them to work “off the clock” and then does not pay them for this work,
3. Fails to pay them for the number of hours worked, or
4. Fails to pay them the correct overtime rate of at least one and one-half times their regular hourly rate.

The FLSA allows the Department of Labor or an employee to recover back wages and an equal amount in damages when there have been minimum wage and overtime violations. There is generally a 2-year statute of limitations for back wages and damages. There is a 3-year statute of limitations for cases involving willful violations.

An organization must take the time to assign work tasks carefully. And it must classify, pay, and keep required records of workers to avoid lawsuits.