Wage and hour law refers to the body of law that establishes and regulates wage standards, including, but not limited to, minimum wage and overtime. The Fair Labor Standards Act (FLSA) sets the majority of wage and hour law at the federal level. Other factors, however, control minimum wage as well. The IRS, for example, sets the parameters for when an individual working for tips can work for less than the federal standard minimum wage.

Mastering HR Report: Overtime

Many states and some cities have wage and hour laws as well. These laws govern issues such as minimum wage, overtime, and meal breaks. The governing bodies in several urban areas throughout the country have voted to create a “living wage” on top of the FLSA and state standards.

The current federal minimum wage is $7.25 per hour.

State-by-state comparison of 50 employment laws in all 50 states, including wage laws

Overtime
Generally, the FLSA requires most employers to pay overtime to employees who work more than 40 hours in a given workweek at a rate of one and one-half times the employee’s regular rate of pay. At the federal level, wage and hour law is usually overseen by the U.S. Department of Labor (DOL) and it’s Wage and Hour Division (WHD).

HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including overtime and FLSA requirements

Exempt vs non-exempt employees
Of primary importance to overtime standards is whether an employee falls under exempt or non-exempt classifications. The FLSA contains dozens of exemptions, which basically provide that specific categories of employers and employees aren’t subject to the Act’s overtime requirements. Most common are the “white-collar” exemptions for executive, administrative, and professional employees, computer professionals, and outside sales employees.

Employers also need to be careful that workers classified as independent contractors and trainees meet those particular standards to avoid FLSA violations.

Learn more about wage laws and correctly classifying workers in the Wage and Hour Compliance Manual

Comp time
Comp-time systems are illegal only for non-exempt employees. Because employers don’t have to pay exempt employees overtime to begin with, comp time arrangements with them are usually fine, so long as they don’t interfere with the salaried basis of pay if that’s a requirement for their particular exemption.

There’s no need for the public employers reading this to panic and start cashing out their comp-time banks. Public-sector employers are a bit different. Public agencies, such as local, state, and federal governments, are permitted to implement comp-time systems under strict statutory requirements.

Audit your wage and hour and employee classification policies and practices with the Employment Practices Self-Audit Workbook

Bottom line
Employers must pay close attention to these federal standards for overtime and minimum wage, but also any state laws regarding payroll specifications (direct deposit and paycheck deductions), employee tips, pay periods, and much more at the state level as well.