The FLSA in plain English: wages, overtime and records
A short cheat sheet on the federal law behind minimum wage, overtime and payroll records, with the numbers in force in October 2026 and the changes that are still only proposals.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 29, 2026.
The Fair Labor Standards Act (FLSA) is the federal wage and hour law, enforced by the U.S. Department of Labor. Our Pay-Week Pit Stop below turns it into a routine. The official text starts at 29 U.S.C. 201.
- Minimum wage is $7.25 an hour, and overtime is 1.5 times the regular rate after 40 hours in a week.
- Businesses with 2 or more employees and $500,000 or more in sales are covered, as are some single workers.
- Most white-collar exemptions need $684 a week and the right duties.
- Payroll records are kept 3 years, and the current poster goes up.
Who it covers
| Group | Covered? | Note |
|---|---|---|
| 2 or more employees and $500,000 or more in yearly sales | Yes | Hospitals, care facilities, schools and governments at any sales level |
| Worker at a smaller firm | Sometimes | Covered alone if the job regularly crosses state lines |
| Nonprofit | Sometimes | Charity work is not counted; a gift shop is |
| White-collar staff | Only if both tests fit | Duties plus salary; a few jobs, such as outside sales, need no salary test |
The numbers
| Item | Amount | Year in force |
|---|---|---|
| Minimum wage | $7.25 an hour | 2026 |
| Salary line, most white-collar exemptions | $684 a week | 2026 |
| Suit window for back pay | 2 years, or 3 if willful | Current |
| Top civil penalty, repeated or willful pay violation | $2,515 each | 2025 amount, in force in 2026 |
Source: U.S. Department of Labor
Our checklist
The Pay-Week Pit Stop is our four-stop look at one payroll week.
- Sort each worker: exempt, non-exempt or contractor.
- Check hours: a fixed workweek, no averaging, overtime at 1.5 times the regular rate.
- Check floors: $7.25 or the higher state rate, and no tips kept by employers.
- Check paperwork: records, time cards and the current poster.
Mistakes people make
- Treating a salary alone as proof of exemption.
- Relying on a 1099 or signed agreement alone.
- Treating 5 to 20 minute breaks as unpaid.
Talk to an attorney about a Wage and Hour investigation, a demand letter or a lawsuit.
Common questions
Do I owe overtime to a salaried employee?
Not always. Most white-collar exemptions need $684 a week and the right duties.
Does federal law require breaks?
No. Rests of about 5 to 20 minutes count as paid time, and a real meal period need not be paid. Illinois adds a 20-minute meal period for many employees scheduled for 7.5 continuous hours (820 ILCS 140/3). See [Illinois laws](/small-business-laws/illinois/).
Can I treat a worker as an independent contractor?
A 1099 or signed agreement alone does not decide it. As of October 27, 2026, new contractor and joint-employer rules are only proposals, and the Department of Labor told its investigators in 2025 not to use the 2024 contractor test.
Official sources
- U.S. Department of Labor, Wage and Hour Division: Fair Labor Standards Act
- U.S. Department of Labor: Minimum wage
- U.S. Department of Labor: Civil money penalties
- Federal Register: exempt salary rule restored, 91 FR 27833
- IRS Publication 957: back pay and wages
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