The Fair Labor Standards Act is the baseline for overtime in the United States. Most private-sector employers with annual revenue over $500,000, or any business involved in interstate commerce, fall under it. The core rule: non-exempt employees earn 1.5x their regular rate for every hour worked beyond 40 in a workweek.
Federal law does not require daily overtime. A 12-hour day doesn't trigger overtime under FLSA as long as total weekly hours stay under 40. Several states override this.
Exempt vs. non-exempt
The exemption question is where most employers make mistakes. Paying an employee a salary doesn't automatically make them exempt. Three conditions must all be true for the executive, administrative, and professional exemptions to apply:
- The employee is paid on a salary basis
- The salary reaches at least $684 per week (the DOL threshold - verify the current figure at dol.gov, as it may update)
- The employee's primary duties meet the specific criteria for their exemption category
Getting this wrong is expensive. Misclassified employees can recover up to two years of back wages - three years for willful violations - plus an equal amount in liquidated damages.
State rules that go further
California overtime law adds daily thresholds: 1.5x for hours over 8 in a day, and 2x for hours over 12 in a day. California employees also earn 1.5x for the first 8 hours worked on a seventh consecutive day in a workweek, and 2x after that.
Colorado and Nevada have similar daily overtime requirements. Alaska and Puerto Rico also have their own rules. Employers operating across multiple states need to track applicable law by location, not just the federal baseline.
Record-keeping requirements
FLSA requires employers to retain time records for all non-exempt employees for three years. The law does not prescribe a specific format. Records must show:
- Hours worked each day
- Total hours worked each week
- The basis on which wages are paid
- Total regular and overtime wages paid each period
Paper timesheets, digital records, and time-tracking software all satisfy this requirement - the data just needs to be accurate and retained.
A DOL audit can reach back two years for standard violations and three years when violations appear willful. Penalties include back wages and liquidated damages in equal amounts. Repeated violations carry civil money penalties up to $1,100 per violation.
Practical compliance for small employers
Track hours precisely for every non-exempt employee. Don't estimate. Don't round in ways that consistently favor the employer. "We always assumed she worked 40 hours" is not a defense in an audit.
Review exempt classifications against current DOL criteria. The salary threshold has changed before and will change again.
Build a paper trail. The absence of records doesn't prove compliance - it makes violations easier to assert and harder to contest.
Rezano tracks time with timestamped check-ins, generates weekly hour summaries per employee, and flags when non-exempt staff approach 40 hours. See how it works at rezano.lv.