Federal Minimum Wage Law: How the FLSA Actually Works

Federal minimum wage law — formally the Fair Labor Standards Act — is the foundational statute of US wage and hour law. Enacted in 1938 as part of the New Deal, it created the first federal minimum wage (25 cents per hour at the time), established the 40-hour workweek, and banned most child labor. It has been amended many times since, but its core structure remains the same.

What Is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (29 U.S.C. § 201 et seq.) is the federal law that governs minimum wage, overtime pay, recordkeeping, and child labor standards for employees in the private sector and in federal, state, and local governments. It was signed into law by President Franklin D. Roosevelt on June 25, 1938, and is administered by the Wage and Hour Division of the US Department of Labor.

The FLSA's stated purpose, as written in the law itself, is to correct "labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers."

The FLSA emerged from the depths of the Great Depression, when it was common for factory, mill, and cannery workers — including children — to work 60- or 70-hour weeks for wages that left families unable to afford food or rent. Congress passed the FLSA alongside other New Deal-era labor legislation intended to stabilize the economy by raising workers' purchasing power and spreading the available work across more people. In 1941, the Supreme Court upheld the law's constitutionality in United States v. Darby Lumber Co., ruling that Congress had authority under the Commerce Clause to regulate wages and hours for employees engaged in interstate commerce. That decision settled the legal question and cleared the way for the federal minimum wage law to expand steadily over the following decades.

Congress has amended the FLSA many times since 1938 to widen its reach and adjust the wage floor. The Equal Pay Act of 1963 amended the FLSA to prohibit paying men and women different wages for substantially equal work performed at the same establishment. Later amendments extended FLSA coverage to state and local government employees, most agricultural workers, and domestic service workers, groups that had originally been excluded from the law. The most recent change to the dollar amount came from the Fair Minimum Wage Act of 2007, which raised the federal rate in three annual steps — to $5.85 in 2007, $6.55 in 2008, and $7.25 on July 24, 2009 — where it has remained ever since.

What the FLSA Requires

The FLSA establishes four main requirements for covered employers:

1. Minimum Wage: Covered employees must be paid at least $7.25 per hour. States may set higher rates.
2. Overtime Pay: Covered employees must receive overtime pay at 1.5 times their regular rate for all hours worked over 40 in a workweek. There is no limit on the number of hours employees 16 and older may work.
3. Recordkeeping: Employers must keep accurate records of hours worked and wages paid for covered employees.
4. Child Labor: The FLSA restricts the hours and types of work that minors under 18 can perform.

The FLSA also builds in two exceptions to the standard minimum-wage figure. Employers may pay tipped employees a direct cash wage as low as $2.13 per hour, provided the employee's tips make up the difference to reach at least $7.25 per hour in every workweek; if tips fall short, the employer must cover the gap. This arrangement is known as a "tip credit," and a number of states restrict or bar it outright, requiring tipped workers to be paid the full state minimum wage before tips are counted. Separately, employers may pay employees under age 20 a reduced "youth minimum wage" of $4.25 per hour during their first 90 consecutive calendar days of employment, after which the standard minimum wage applies regardless of age.

Who Is Covered by the FLSA?

The FLSA covers employees through two types of coverage:

• Enterprise coverage: Applies to employees of businesses with annual gross sales or business done of at least $500,000, plus hospitals, residential care facilities, schools, and government agencies regardless of revenue.
• Individual coverage: Applies to workers who are individually engaged in interstate commerce or the production of goods for interstate commerce. This is interpreted broadly — making a phone call to another state, processing credit card transactions, or handling goods that have moved across state lines can trigger individual coverage.

FLSA Exemptions: Who Is Not Covered

The FLSA provides exemptions from minimum wage and/or overtime requirements for certain categories of workers. The most common are the "white collar" exemptions:

• Executive exemption: Employees whose primary duty is managing the enterprise or a department, who regularly direct the work of at least two employees, and who have authority to hire and fire.
• Administrative exemption: Employees whose primary duty is office or non-manual work directly related to management or general business operations, involving the exercise of discretion and independent judgment.
• Professional exemption: Employees whose primary duty requires advanced knowledge in a field of science or learning, or whose work is in a recognized artistic or creative field.
• Outside sales exemption: Employees whose primary duty is making sales or obtaining orders away from the employer's place of business. Unlike the other white-collar exemptions, it carries no minimum salary requirement.
• Computer employee exemption: Certain computer systems analysts, programmers, software engineers, and similarly skilled workers, which can be met on either a salary or an hourly basis.

To qualify for the salaried white-collar exemptions, employees must be paid on a salary basis at a rate of at least $684 per week ($35,568 annually) under current federal regulations. Some states set higher salary thresholds.

Meeting the salary threshold alone does not create an exemption — pay level and job title are not enough by themselves. The employee's actual job duties must also satisfy the applicable "duties test." The Department of Labor and courts look past titles like "manager" or "coordinator" to what the employee actually does day to day; someone called a "manager" who spends nearly all their time on the same manual or clerical tasks as the employees they supposedly supervise is generally not exempt, regardless of salary or title. Because misclassification disputes are common and expensive for employers who get them wrong, this duties analysis is one of the most frequently litigated areas of federal wage and hour law.

How the FLSA Is Enforced

Enforcement is what makes the FLSA more than words on paper. The Wage and Hour Division investigates complaints and conducts audits of employers. Workers who believe they have been underpaid can file a complaint with the WHD or bring a private lawsuit under the FLSA.

WHD investigations typically start one of two ways: an employee or third party files a complaint, or WHD opens a targeted investigation in an industry with a history of violations, such as agriculture, restaurants, or janitorial services. Investigators have the authority to enter a workplace, examine payroll and time records, and interview employees privately, without the employer present. When an investigation finds violations, WHD will generally require the employer to pay the back wages owed and may negotiate a compliance agreement covering future pay practices; disputed cases can also end up in federal court.

The statute of limitations for recovering back pay is two years from the date of the violation, extended to three years if the violation was willful — meaning the employer knew its pay practices violated the law, or showed reckless disregard for whether they did. Because that clock keeps running, workers who suspect they've been underpaid are generally better off filing a complaint sooner rather than later, since older unpaid wages can fall outside the recoverable window. The FLSA also makes it unlawful for an employer to fire, demote, or otherwise retaliate against an employee for filing a complaint or participating in an investigation; retaliation claims can be pursued separately from the underlying wage claim.

Remedies include back pay, liquidated damages (an amount equal to the back pay owed, effectively doubling the recovery), and attorney's fees in a successful lawsuit. Employers who willfully violate the FLSA may also face civil monetary penalties and, in serious cases, criminal prosecution — with fines and, upon a second conviction, potential imprisonment.

Frequently Asked Questions

What is the federal minimum wage right now?

The federal minimum wage is $7.25 per hour, in effect since July 24, 2009. States and cities may set higher minimums, and those higher rates take precedence over the federal rate for employees they cover.

Does the FLSA cover independent contractors?

No. The FLSA only applies to employees, not independent contractors. Misclassifying a worker as an independent contractor to avoid paying minimum wage or overtime is one of the most common FLSA violations; classification generally turns on the actual working relationship, not on a contract label or job title.

Can salaried employees still be owed overtime?

Yes. Being paid a salary does not automatically make an employee exempt from overtime. Only employees paid at least $684 per week on a salary basis whose job duties also meet one of the FLSA's specific exemption tests are exempt; a salaried employee who doesn't meet the duties test is still entitled to overtime pay.

What should I do if my employer isn't paying minimum wage?

You can file a complaint with the Wage and Hour Division online or by phone at no cost, or consult an employment attorney about a private lawsuit. WHD complaints can be filed confidentially, and the FLSA prohibits retaliation against employees who report suspected violations.

Does the FLSA's minimum wage apply to tipped workers?

Yes, but differently. Employers may pay a direct cash wage as low as $2.13 per hour if tips bring the employee's total pay up to at least $7.25 per hour in every workweek; if tips fall short, the employer must cover the difference. A number of states require tipped employees to be paid the full state minimum wage regardless of tips received.

How is the federal minimum wage law different from state minimum wage laws?

The FLSA sets a wage-and-hour floor, not a ceiling. States and cities are free to set higher minimum wages and stronger worker protections, and whichever rate is more generous to the employee — state, local, or federal — is the one that applies. As of 2026, most states have a minimum wage above the $7.25 federal rate, and a number of cities go higher still.

Related: Current Federal Minimum Wage Explained · What Is the FLSA? · Federal Minimum Wage Data Page