FLSA Compliance Guide for HR: 2025 Policies, Pay & Risk

The Fair Labor Standards Act (FLSA) isn’t just legal fine print – it’s the backbone of how you classify jobs, track time and pay employees. Slip up, and it’s more than a paperwork problem. 

In FY 2024 alone, the Department of Labor’s Wage and Hour Division recovered nearly $150 million in back wages tied to FLSA violations. That’s 125,000+ workers shortchanged – and a wake-up call for employers.

The heat is rising too. This year, penalties for willful or repeated violations jumped from $2,451 to $2,515 per offense.

If your wage and hour policies haven’t had a recent checkup, now’s the time. This guide breaks down the essentials – from employee classification to overtime – and gives you practical strategies to tighten FLSA compliance, reduce risk and protect your bottom line.

Why FLSA Compliance Matters to HR

FLSA compliance is a critical foundation for fair pay and legal protection. HR plays a key role in ensuring organizations meet these standards to avoid costly risks and maintain workforce trust. 

Breaking Down FLSA Compliance: Core Requirements for HR

The FLSA sets clear standards for wages, hours and employee classification. Understanding how these requirements work in practice is critical for HR teams managing compliance across diverse workforces.

Federal and State Minimum Wage Requirements

HR must navigate the federal minimum wage as a baseline while managing higher state or local wage mandates. Many states and cities have minimum wages that exceed the federal rate, which means HR teams need to track and apply the highest applicable rate to avoid violations. This task becomes even more complex for multistate employers.

Some workers, such as tipped employees, minors and certain industries, have special pay rules. If these rules aren’t followed, the company could face expensive penalties. HR should work closely with payroll and carefully track updates to applicable laws and wage rates to stay compliant.

Understanding Overtime Pay and Eligibility

Accurate overtime calculations are critical to protecting employee rights and preventing expensive back pay claims. Under the FLSA, non-exempt employees must receive overtime pay at 1.5 times their regular rate for hours worked over 40 in a workweek. HR teams need to clearly identify which employees are non-exempt and track their hours precisely.

Common challenges include properly calculating the “regular rate” when employees receive bonuses, commissions or shift differentials, and correctly accounting for hours worked during remote or flexible schedules. Missteps in overtime pay are a top cause of wage and hour violations, often resulting in costly audits and litigation.

HR must establish clear policies and leverage accurate timekeeping systems to ensure overtime is calculated correctly. Regular training for managers and payroll teams on overtime rules reduces errors and helps maintain compliance.

Employee Classification: Exempt vs. Non-Exempt

Misclassifying employees is one of the most frequent and costly FLSA violations. The law distinguishes between exempt employees, who are not entitled to overtime pay, and non-exempt employees, who must be paid overtime for hours worked beyond 40 in a workweek. Understanding these employee classifications is essential to avoid wage disputes and legal exposure.

To qualify as exempt, employees must generally meet three criteria: they must be paid on a salary basis, earn at least the minimum salary threshold, and pass the applicable duties test. Exemptions are not based on job titles alone – HR must evaluate the actual work performed.

The primary white-collar exemptions include:

• Executive – Manages the business or a department, supervises at least two full-time employees, and has input into hiring or firing decisions.
• Administrative – Performs non-manual work related to business operations and uses independent judgment on important matters.
• Professional – Includes learned professionals (e.g., doctors, lawyers) and creative professionals (e.g., artists, writers) whose work requires specialized education or creative talent.
• Computer employee – Covers analysts, programmers and software engineers performing high-level systems or programming tasks.
• Outside sales – Regularly works away from the office, making sales or securing contracts.
• Highly compensated employees (HCE) – Earn above a specific compensation threshold and perform at least one exempt duty.

Each exemption has its own duties test. Misapplication – such as assuming exemption based on job title or partial duties – can result in back pay liabilities and penalties.

Hybrid roles, remote work and fluid job descriptions introduce additional classification risk. To stay compliant, HR should conduct detailed job analyses, review classifications regularly and keep documentation that supports exemption decisions.

FLSA Recordkeeping Rules for HR Teams

Under the FLSA, employers must maintain records relating to payroll. Keep the following records for three years: 

• Records containing employees’ names, addresses, dates of birth, occupations, pay rates and weekly compensation
• Collective bargaining agreements and changes/amendments to those agreements 
• Individual contracts
• Written agreements under the FLSA, and
• Sales and purchase records.

As for basic employment and earnings records, like wage rate tables used to calculate wages; salary, wages and overtime pay info; work schedules; and additions to or deductions from wages – keep these records for two years. 

Maintaining this documentation helps prove compliance, resolve disputes and avoid penalties. 

HR should implement standardized recordkeeping practices, ensure secure storage and regularly audit records to catch errors before they become issues.

Actionable Strategies to Strengthen FLSA Compliance

Beyond knowing the law, HR teams need clear strategies to proactively reduce risk and embed FLSA compliance into everyday operations.

How to Conduct an Internal FLSA Compliance Audit

Regular internal audits help HR identify compliance gaps early and show good faith in case of external investigations. An effective audit should include:

• Employee Classification Review. Verify exempt and non-exempt status based on current job duties and salary thresholds. Compare current job descriptions against the latest FLSA salary thresholds and duties tests. For example, ensure that exempt employees meet the updated salary minimum and perform qualifying executive, administrative, or professional duties.
• Wage and Overtime Verification. Randomly sample payroll records to verify that wages and OT are calculated correctly. Pay special attention to employees who work remotely or have hybrid schedules. These arrangements can complicate time tracking.
• Recordkeeping Audit. Ensure all required documents, such as timesheets, pay records and employment agreements, are complete and retained according to FLSA timelines.
• Policy and Handbook Review. Regularly confirm that your policies align with the latest FLSA standards and regulatory updates. Outdated handbooks increase legal risk and can invite litigation. Keeping your policies current protects your business and supports compliance.
• Regular Audit Schedule. Plan your compliance audits ahead of time – quarterly or twice a year works best for most businesses, but you may need to adjust based on your company size and risk level. Bigger companies or those with complicated payrolls should check in more often to stay on top of any issues before they become problems. No matter your size, sticking to a regular audit schedule helps keep you in line with labor laws and ready for any DOL review.
• Documentation and Action Plan. When you spot any issues – like misclassifications, wrong wage calculations, or missing records – make sure to jot down the details. For every problem you find, map out a clear plan to fix it: Maybe you need to update a job description, fix a payroll mistake or tighten up your documentation process. Assign the right people to handle each task and give them a deadline, so everyone knows what needs to get done and when.
• Staff Training. Training HR and payroll teams on audit procedures goes beyond routine instruction. When people understand how audits work and what to look for, they become more observant and prepared for real-world compliance challenges. This kind of learning helps teams recognize potential issues sooner and respond with confidence, rather than waiting for problems to surface. By making training a regular part of your approach, you encourage ongoing improvement and adaptability.

Updating HR Policies for FLSA Compliance

HR policies must align with current FLSA rules, especially around exempt status, breaks and remote work.  Regular updates are crucial to keep pace with new regulations and court decisions. Focus on:

• Clear definitions of exempt and non-exempt roles
• Overtime eligibility and calculation
• Break time rules
• Time tracking for remote and hybrid workers, and
• Reporting procedures for pay issues.

Updated policies keep managers and employees on the same page. They reduce confusion and help limit legal risk.

Build FLSA compliance into your daily processes. This makes it easier to adapt smoothly when rules or business needs change. Clear, current policies support ongoing compliance and keep your business protected.

Training Managers and Employees on Wage and Hour Laws

Training is your first line of defense against wage and hour mistakes. When managers and employees know what counts as hours worked and understand exempt versus non-exempt roles, time tracking and job classification become clear.

Set up simple ways for staff to report pay issues. This helps you spot and fix problems early. Remote and flexible work keep changing the rules. That is why training should be updated often.

A well-trained team lowers FLSA compliance risks, builds trust and keeps your business running smoothly. Effective training should focus on:

• Defining compensable time and ensuring consistent timekeeping practices
• Interpreting overtime rules in complex and evolving work environments
• Accurately classifying roles to align with regulatory standards and business strategy
• Establishing clear protocols for employees to raise and resolve pay concerns promptly
• Adapting wage law compliance to remote, hybrid, and flexible schedules, and
• Regularly updating training to reflect legal changes and organizational shifts.

Regular refreshers ensure policies stay top of mind as rules and work arrangements evolve. Well-informed teams reduce risk and boost compliance confidence.

Leveraging HR Technology to Stay Compliant

Using HR technology effectively can make FLSA compliance easier. Tools like time trackers, payroll software and HR systems help capture hours worked, calculate overtime and keep accurate records. Make sure your systems:

• Follow current FLSA rules on classification and pay
• Are regularly checked for errors or missed punches
• Provide clear reports for audits or reviews
• Track remote and flexible hours accurately
• Integrate with payroll to avoid manual errors, and
• Alert HR to potential compliance risks automatically.

Automation cuts human mistakes, speeds payroll and frees HR to focus on bigger issues. Choose tech that fits your existing tools, updates easily and comes with solid training and support.

Examples of HR Payroll Software That Support FLSA Compliance

The right HR technology helps manage FLSA compliance, especially when dealing with timekeeping, job classifications and overtime rules. These six HR tech vendors offer features designed to support employers’ compliance efforts: 

• Asure – Designed for small to mid-sized businesses, Asure includes automated time tracking, pay rule configuration and compliance dashboards to help stay on top of FLSA updates.
• BambooHR – Combines intuitive HR management with payroll processing and time tracking, making it easier to stay compliant with overtime and recordkeeping requirements.
• HiBob – Offers modern HR tools for global teams, with customizable workflows and built-in compliance alerts that help HR spot issues before they become risks.
• Paypro – Specializes in workforce automation, offering detailed labor reporting, time tracking and compliance tools for complex HR and payroll needs.
• PeopleGuru – Built for mid-sized organizations, PeopleGuru offers integrated timekeeping, labor rule enforcement and compliance features to support FLSA tracking, all within a unified HR and payroll platform.
• UKG – A powerhouse platform with granular control over time, pay and labor laws, ideal for multi-location and shift-heavy workforces.

Reliable HR technology cuts costly errors and keeps compliance manageable, freeing HR teams to focus on strategic priorities instead of scrambling to fix payroll problems.

HR Tech Oversight

We’d be remiss not to mention that HR technology is only as good as the oversight behind it. Even the best payroll or time-tracking systems can make mistakes if they aren’t set up or monitored correctly.

Your HR tech investment requires active management. Don’t let set-it-and-forget-it be the approach with your time-tracking or payroll systems. Regular oversight is critical to catch errors, prevent misclassifications, and ensure ongoing FLSA compliance.

Managing FLSA Compliance in Today’s Workforce

Remote work and flexible schedules are now standard, but the FLSA has not fully caught up. HR needs strategies to bridge this compliance gap effectively.

FLSA Compliance for Remote and Hybrid Work

Working from home does not mean working without rules. HR must track hours worked, manage overtime eligibility and monitor break times, even when employees are remote.

Key points include:

• Establishing clear policies for tracking remote work hours
• Using reliable timekeeping tools for flexible schedules
• Defining work hours and availability expectations
• Training managers on remote work compliance risks, and
• Ensuring consistent application of overtime rules regardless of location.

Maintaining compliance means adapting traditional FLSA requirements to modern work setups without cutting corners.

Using Digital Solutions to Reduce FLSA Risk

HR software can identify compliance issues faster and more accurately than manual spreadsheets. Automated alerts flag overtime errors, missed breaks and misclassified employees before they become costly problems.

Good digital tools offer:

• Real-time tracking of hours worked and overtime
• Automated classification checks to ensure correct exempt status
• Easy access to audit-ready reports
• Integration with payroll to prevent manual entry mistakes, and
• Dashboards that highlight compliance risks for HR teams.

By moving away from manual processes, HR reduces errors, speeds up payroll and creates a solid defense in case of audits or investigations.

Legal Trends and Enforcement Updates HR Must Know

With rules shifting and enforcement getting stricter, HR must stay sharp to avoid costly missteps. Keeping up with the latest developments is essential to maintain FLSA compliance and protect your organization.

FLSA Enforcement: The DOL Investigation Process 

The DOL is the agency charged with enforcing the Fair Labor Standards Act.

Its Wage and Hour Division (WHD) investigates workplaces to ensure compliance with FLSA requirements and can recover back wages, impose civil penalties and recommend corrective actions when violations are found. 

What’s the best way to handle an on-site DOL investigation?

Many employers want to know what they should do if they end up facing a DOL investigation. 

Having your FLSA documents ready is a good first step to show a good-faith effort in the process, employment attorney Michael Elkins previously told HRMorning.

It’s crucial to understand that employers are required to cooperate with DOL investigations and should be aware that retaliating against employees for filing complaints or participating in FLSA-related proceedings is prohibited by law. 

A good attitude goes a long way, Elkins stressed. “The DOL investigators are just doing their jobs. They’re humans, and thus, a good professional attitude helps make the process more efficient and hopefully less painful.”

Case Study: DOL Investigation of Meal Breaks

In 2023, a DOL investigation determined that a security services provider automatically deducted 45 minutes for meals from the workdays of its security employees, even though it sometimes required them to stay at their posts during some or all of that time. 

Under the FLSA, if an employer offers a 30-minute or longer meal break where the employee is fully relieved of duties, it can be unpaid. But if they’re still working, that’s not considered a bona fide meal period – and workers must be paid for that time. 

In this case, the employer had to pay nearly $550,000 in back pay and an additional equal amount in liquidated damages. On top of that, the DOL assessed a $50,000 civil penalty for the violations.

Case Study: DOL Investigation of Tip Pooling

The owners of a restaurant in Texas illegally kept a portion of employees’ tips and shared them with managers, according to a DOL investigation.

Under the FLSA, employers, managers and supervisors are prohibited from keeping any tips received by employees, regardless of whether the employer claims a tip credit. Tips always belong to employees who earned them.

The employer had to pay $230,353 in back wages to 274 affected workers.

Case Study: DOL Investigates FLSA Misclassification 

An investigation by the DOL’s Wage and Hour Division found a courier service in Boston misclassified 62 courier drivers as independent contractors rather than employees. 

The drivers were paid per delivery rather than an hourly wage and also required them to pay vehicle expenses (gasoline, maintenance and insurance). These practices resulted in the drivers making less than the federal minimum wage in violation of the Fair Labor Standards Act, the DOL said. The company also failed to maintain accurate records of hours worked.

To resolve the matter, the company paid a total of $575,000 ($287,500 in back wages and another $287,500 in liquidated damages) to the affected workers.

Case Study: DOL Investigates Child Labor Violations

An indoor adventure park in Florida violated child labor laws by allowing 55 minor employees, between the ages of 14 and 15, to work after 7 p.m. on school nights.

The company was assessed $43,505 in civil penalties for child labor violations and had to pay an additional $558 in back wages to 12 employees for additional FLSA violations.

Case Study: DOL Investigates Retaliation

According to a DOL press release, a northern California restaurant’s attempt to use an alleged priest to coerce employees into confessing workplace “sins” represents one of the most egregious efforts to intimidate and retaliate against workers.

An investigation found the restaurant denied employees overtime pay and illegally paid managers from the employee tip pool. The restaurant then threatened employees with retaliation and adverse immigration consequences for cooperating with the DOL’s investigation, the agency determined. Moreover, the restaurant fired the employee believed to be connected to the DOL complaint. 

In court, workers testified that the restaurant also brought in an individual claiming to be a priest, who urged workers to “get the sins out,” and asked the employees if they had stolen from the employer, been late for work, had done anything to harm their employer or if they had bad intentions toward their employer.

The restaurant owners paid $140,000 in back wages and damages to 35 employees – and a California federal court tacked on an additional $5,000 penalty due to the willful nature of the violations.

What FLSA Compliance Looks Like in Practice

Potential DOL investigations – and penalties – aren’t the only consequences of FLSA legal headaches. Many employers have had to defend their decisions in court.

These real cases show exactly what happens when FLSA compliance succeeds or fails. These examples offer practical lessons HR can use to strengthen their own compliance efforts and avoid costly mistakes.

Supreme Court Lowers Proof Standard for FLSA Exemptions

The U.S. Supreme Court delivered good news for employers by ruling unanimously that to prove an employee qualifies for an FLSA exemption, employers only need to meet the regular civil litigation standard, preponderance of the evidence, not the tougher “clear and convincing” standard previously required by the Fourth Circuit.

The case involved a food distributor’s sales reps who sued for unpaid overtime. The company claimed they were exempt outside sales reps, but the lower courts sided with the employees.

When the case reached the Supreme Court, it confirmed that the preponderance-of-evidence standard is the default standard in civil litigation. The Court remanded the case for further proceedings to determine whether the employees would fail to qualify as outside sales reps under the lower standard of proof. 

Key takeaway: Employers now face a less stringent evidentiary hurdle when classifying exempt employees under the FLSA. Even so, HR still needs solid, well-documented job descriptions and regular classification reviews to avoid costly missteps.

E.M.D. Sales, Inc. v. Carrera, No. 23-217, 2025 U.S. LEXIS 364 (U.S. 1/15/25).

‘Grace Period’ Pay for Donning and Doffing Time? $22M Verdict

In a major FLSA ruling, the Third Circuit upheld a $22.25 million jury award against East Penn Manufacturing for failing to pay nearly 12,000 employees for all hours worked, including time spent donning and doffing required protective gear and showering due to lead exposure.

East Penn tried to defend itself by pointing to “grace periods” it had built into employee shifts, five to 10 minutes for changing and showering. But the court rejected the argument, stating clearly that the FLSA requires pay for actual time worked, not an employer’s estimate of what is reasonable. The company did not track how long these activities actually took, which left it vulnerable.

The court also rejected East Penn’s claim that tracking exact minutes would reward employees for dragging their feet, noting that discipline is the appropriate response, not withholding wages.

While the court denied the DOL’s push for liquidated damages, finding East Penn had acted in good faith on legal advice, the decision still serves as a blunt reminder. When safety protocols require extra steps, those minutes must be paid. Employers carry the burden to prove otherwise.

Key takeaway: If employees are required to change clothes or shower on-site due to safety, you must track and pay for the actual time it takes. “Reasonable estimates” will not hold up in court.

Sec’y, United States DOL v. East Penn Mfg. Co., Nos. 24-1046, 24-1059, 2024 U.S. App. LEXIS 32204 (3d Cir. 12/19/24).

Ongoing FLSA Case to Watch: Pay for Booting Up Computers?

For the second time, the Ninth Circuit remanded a long-running FLSA dispute over whether call center agents must be paid for time spent booting up their work computers before logging into timekeeping software.

Customer Connexx required workers to log into systems before clocking in. That boot-up time went unpaid, according to the employees. They sued, alleging they were not paid for time spent booting up and shutting down computers in violation of the Fair Labor Standards Act (FLSA). 

The district court granted the company’s motion for summary judgment, finding the employees failed to show the time was more than de minimis. The Ninth Circuit said that was the wrong call because questions existed as to whether the time the employees spent booting up and shutting down computers was de minimis. The case was remanded for a second time with specific instructions that a trial was needed, as a reasonable jury could find the unpaid time qualifies as compensable work under the FLSA. 

Key takeaway: Booting up and logging into work technology may count as paid time under the FLSA. This ongoing case is one to watch for its impact on how employers handle compensable work time in tech-driven workplaces.

Cadena v. Customer Connexx LLC, No. 23-15820, 2024 U.S. App. Lexis 16836 (9th Cir. 7/10/24).

Inclement Weather and the FLSA

For a one-time weather-related closure, docking an exempt employee’s pay does not cause loss of exempt status under the FLSA, a Virginia court ruled.

The case involved Tonya Hansberger, a salaried exempt employee whose employer docked $100 from her paycheck after it closed due to bad weather. Hansberger claimed this improper deduction meant she was misclassified and should receive overtime pay.

The court disagreed, finding the deduction was a single, unusual event without evidence of an ongoing practice of improper pay docking. Under FLSA rules, only a consistent pattern of improper deductions can negate exempt status, and even then only for the affected pay period.

In this case, the one-time deduction did not defeat the restaurant’s defense that Hansberger was properly classified as exempt, the court held.

Key takeaway: A single improper pay deduction doesn’t automatically end exempt status under the FLSA. Courts focus on whether improper deductions are a regular practice or isolated incidents.

Hansberger v. L’Italia Rest., LLC, No. 5:16-cv-00056, 2017 U.S. Dist. LEXIS 144887 (W.D. Va. 9/7/17).

Can Employers Deduct Pay From a Salaried Exempt Employee?

Generally, employers cannot dock salaried exempt workers’ pay — but there are a few exceptions. A federal court in Massachusetts had to decide whether an exception applied in a case involving an employee’s negative PTO balance.

In a nutshell, the employee borrowed and took paid time off that he had not yet earned – and then he put in his notice. When the employer docked his final check, the worker sued under the FLSA. He said the employer couldn’t dock his check because he was an exempt employee.

Relevant here, the DOL has outlined specific circumstances where employers are permitted to make deductions from exempt employees’ paychecks. They are:

• When an employee is absent from work for one or more full days for personal reasons other than sickness or disability
• For absences of one or more full days due to sickness or disability, if the deduction is made under a bona fide plan, policy or practice of providing compensation for salary lost due to illness
• To offset amounts employees receive as jury or witness fees, or for military pay
• For penalties imposed in good faith for infractions of safety rules of major significance, and
• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

Moreover, employers are not required to pay the full salary in the initial or terminal week of employment, or for weeks that an exempt employee takes unpaid leave under the Family and Medical Leave Act.

In this case, conflicting evidence about the company’s PTO policies and practices raised questions, the court said. Specifically, there were discrepancies in testimony about how the company handled calculating the use of PTO for partial day absences and how it handled repayment of borrowed PTO time. That meant a jury needed to hear the case.

As such, the court denied the employer’s motion for summary judgment. 

Key takeaway: Docking an exempt employee’s final paycheck for a negative PTO balance isn’t a recognized FLSA exception and can lead to legal risk. Conflicting or unclear PTO policies may force a jury trial, so employers should strictly follow FLSA salary rules and clearly document policies and procedures.

O’Donnell v. Robert Half Int’l, Inc., No. 04-12719-NMG, 2009 U.S. Dist. LEXIS 143229 (D. Mass. 7/23/09).

Why Proactive FLSA Management Pays Off

By prioritizing FLSA compliance, HR contributes to positive business outcomes, including:

• Strengthened employee trust that supports retention and engagement
• Reduced turnover and related costs from clearer expectations and fair pay practices
• Enhanced HR credibility through consistent compliance and risk mitigation
• Improved operational efficiency by streamlining payroll and classification processes, and
• Greater confidence for leadership in managing workforce strategy with compliance as a foundation.

Next Steps to Prioritize FLSA Compliance

Effective FLSA management drives measurable business results and reduces costly risks. Taking clear, strategic steps now sets the foundation for compliance and long-term workforce stability.

Immediate Action Items for HR Professionals

Start by taking practical, targeted steps that address the most common FLSA compliance gaps:

• Conduct a thorough FLSA compliance audit
• Review employee classifications for accuracy
• Train managers on wage and hour basics
• Update policies to reflect current laws, and
• Check that timekeeping systems capture hours correctly.

Taking these steps early reduces risk and builds a stronger compliance foundation.

Stay Ahead of the Compliance Risks

Compliance isn’t static. Make reviewing and updating your processes a regular habit to stay in control and avoid surprises. Download our FLSA compliance checklist to keep your team on track and reduce costly mistakes.