Wage and Hour Law Basics

Wage and hour law sets the basic economic terms of employment: how much workers must be paid, when overtime is owed, which workers are exempt from these protections, and what records employers must keep. The federal Fair Labor Standards Act establishes the nationwide floor, and state laws frequently provide greater protections, with the more employee-protective standard applying where they differ. For businesses with employees, compliance with these rules is among the most fundamental legal obligations.

The federal minimum wage sets the lowest hourly rate most covered employees may be paid, and many states and localities set higher rates that supersede the federal floor for work performed there. Tipped employees may be paid a lower cash wage under specific conditions, with tips making up the difference to at least the full minimum wage, though states vary widely in whether and how they permit tip credits. Regular rate calculations for overtime purposes must generally include most forms of compensation beyond the base hourly rate, such as shift differentials and non-discretionary bonuses.

Overtime requires premium pay, typically one and one-half times the regular rate, for hours worked beyond forty in a workweek by non-exempt employees. The workweek is a fixed seven-day period, and hours cannot be averaged across weeks to avoid overtime. Misunderstanding when overtime is owed, such as assuming salaried workers are automatically exempt or that compensatory time off can substitute for overtime pay in the private sector, generates a large share of wage violations.

Exemptions from overtime

The most litigated wage and hour questions involve exemptions, particularly the white-collar exemptions for executive, administrative, and professional employees. Each exemption has a duties test examining what the employee actually does and a salary threshold that is periodically updated. Job titles do not determine exempt status; the actual job duties and compensation do. Employees whose duties do not satisfy the tests are non-exempt regardless of being paid a salary, a misconception that produces widespread misclassification.

Other exemptions and exceptions cover commissioned sales employees, certain computer professionals, outside salespeople, and seasonal and agricultural workers under specific conditions. Independent contractor classification is a related but distinct question: workers misclassified as contractors lose wage protections entirely, and enforcement agencies scrutinize these arrangements closely. The economic realities of the relationship, not the label the parties use, determine the correct classification.

Child labor, recordkeeping, and enforcement

Child labor provisions restrict the hours and types of work for minors, with stricter limits for younger teens and prohibitions on hazardous occupations for all minors. These rules reflect the judgment that education and safety take precedence over employment for young workers. Violations involving dangerous work or excessive hours draw significant penalties and public attention.

Recordkeeping requirements obligate employers to maintain accurate records of hours worked, wages paid, and related information for specified periods. These records are the employer's primary defense in wage disputes, and their absence creates a presumption favoring employees' reasonable estimates of their hours. Timekeeping systems should capture all hours worked, including pre-shift and post-shift activities that courts have found compensable, and should not permit off-the-clock work.

Common wage violations

Off-the-clock work is among the most common violations: employees performing tasks before clocking in, after clocking out, or during unpaid breaks at the employer's behest. Pre-shift preparation, post-shift closing duties, and responding to messages during breaks can all be compensable work time. Policies prohibiting off-the-clock work are insufficient if managers knowingly permit or encourage it; employers must actually prevent the practice and pay for any work suffered or permitted.

Misclassification of employees as exempt or as independent contractors generates systemic underpayment. Job titles suggesting exempt status, such as labeling retail supervisors as managers while their duties are primarily non-exempt, are a classic red flag. Similarly, treating workers as contractors while controlling their schedules, methods, and exclusive service typically fails classification tests. Both forms of misclassification deprive workers of overtime and other protections while exposing employers to back pay, penalties, and class litigation.

Tip-related violations include improper tip pooling with non-tipped employees or managers, failure to ensure tipped workers reach the full minimum wage, and illegal deductions from tips. Meal and rest break violations occur where employers fail to provide required breaks or require employees to remain on duty during them. Each of these violations follows patterns that compliance audits are designed to detect before enforcement agencies or plaintiffs' attorneys do.

Enforcement comes through the Department of Labor's Wage and Hour Division, which investigates complaints and can recover back wages and penalties, and through private lawsuits in which employees may recover unpaid wages, liquidated damages, and attorneys' fees. Collective actions allow groups of similarly situated workers to pursue claims together, creating exposure that can be substantial for systemic violations. Proactive audits of classification, overtime calculation, and timekeeping practices are the standard compliance approach.

This article provides general information only and is not legal advice.

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This article is general information, not legal advice. It does not create an attorney-client relationship.