This guide is general legal information, not legal advice, and does not create an attorney–client relationship. Rules change and vary by state — verify current requirements with official sources or a licensed attorney.
Three questions decide most wage disputes in the United States: Were you paid at least the minimum wage for every hour you worked? Were you paid time and a half for hours over 40 in a week? And did your employer keep accurate records proving both? The federal Fair Labor Standards Act (FLSA) answers all three, and it has done so since 1938.
The answers are less obvious than they sound. Whether the FLSA applies at all, whether a worker is "exempt" from overtime, and which state's higher standards override the federal floor are the points where most claims are won or lost. This guide walks through each pillar as the rules stand in mid-2026.
Key takeaways
- The federal minimum wage remains $7.25 per hour, unchanged since July 2009, but 30 states and the District of Columbia set higher rates that covered employers must follow.
- Nonexempt employees must receive overtime at one and one-half times their regular rate for hours worked over 40 in a workweek under 29 U.S.C. § 207.
- As of August 2026, the salary threshold for the white-collar overtime exemptions is back at the 2019 level of $684 per week ($35,568 per year) after courts vacated the 2024 increase.
- Employers must keep payroll records for at least three years and wage-computation records (such as time cards) for two years.
- Wage claims generally reach back two years — three for willful violations — and can include back pay plus an equal amount in liquidated damages.
Who the FLSA covers — and who it does not
The FLSA applies to employees of "enterprises" with at least $500,000 in annual business and to most employees engaged in interstate commerce, which in practice sweeps in the vast majority of U.S. workplaces. Hospitals, schools, and government agencies are covered regardless of revenue.
Coverage protects employees only. Genuine independent contractors fall outside the statute, which is why classification fights matter so much: an employer that mislabels workers avoids minimum wage, overtime, and payroll taxes all at once. How courts and the Department of Labor decide who counts as an employee is its own subject, covered in our guide to employee versus independent contractor classification tests.
Certain occupations are also excluded or partially excluded by statute — some agricultural workers, certain seasonal amusement employees, and others. When the FLSA does not apply, state law often still does.
Minimum wage: the federal floor and the state ceiling
Federal law sets a floor, not a target. The rate under 29 U.S.C. § 206 has been $7.25 per hour since July 24, 2009 — the longest stretch without an increase in the statute's history. Because so many years have passed, most of the country now works under higher state or local rates, and the higher rate always wins for covered workers.
Tipped workers
Federally, an employer may pay tipped employees a direct cash wage of $2.13 per hour and claim a "tip credit" of up to $5.12, but only if tips actually bring the worker to at least $7.25 for the week. If they do not, the employer must make up the difference. Many states restrict or prohibit the tip credit entirely, so the state rulebook matters as much as the federal one.
Youth wage
The FLSA also permits a youth minimum wage of $4.25 per hour for employees under 20, but only during their first 90 consecutive calendar days of employment and only where state law allows it.
Overtime and the exemption battleground
The federal overtime rule is simple on its face: nonexempt employees earn one and one-half times their regular rate for all hours over 40 in a defined seven-day workweek. Federal law does not require daily overtime, weekend premiums, or holiday pay — though some states, notably California, add daily overtime on top.
The hard question is who is exempt. The best-known exemptions — executive, administrative, and professional, often called the "white collar" exemptions — require all three of the following:
- Salary basis: a fixed salary that does not fluctuate with hours or quality of work;
- Salary level: pay at or above the regulatory threshold; and
- Duties test: primary duties that are genuinely executive, administrative, or professional — job titles alone prove nothing.
Where the salary threshold stands in 2026
This number has had a turbulent few years. A 2024 Department of Labor rule raised the threshold to $844 per week in July 2024 and was set to reach $1,128 per week in January 2025. On November 15, 2024, a federal district court in Texas vacated the rule nationwide. The Department initially appealed, then dropped the appeal, and in May 2026 published a technical amendment formally restoring the 2019 levels, as described on the Department's overtime rulemaking page.
Current numbers: As of August 2026, the standard salary level is $684 per week ($35,568 per year), and the total-compensation threshold for the highly compensated employee exemption is $107,432 per year. Meeting the salary level alone never makes a worker exempt — the duties test must also be satisfied.
Recordkeeping: the quiet obligation that decides cases
The FLSA requires no particular time clock or format, but it does require employers to keep accurate records for every nonexempt worker. The Department of Labor's Fact Sheet #21 lists the required items. At minimum, records must capture:
- Full name, Social Security number, address, birth date (if under 19), sex, and occupation
- The time and day the workweek begins
- Hours worked each day and total hours each workweek
- The basis of pay (hourly, salary, piece rate) and the regular hourly rate
- Total daily or weekly straight-time earnings and total overtime earnings
- All additions to and deductions from wages
- Total wages paid each pay period, plus the date of payment and the period covered
Payroll records, collective bargaining agreements, and sales and purchase records must be kept at least three years. Records that wage computations are based on — time cards, schedules, piece-work tickets — must be kept two years. When an employer's records are missing or inaccurate, courts often accept the employee's reasonable estimate of hours worked, which is why sloppy timekeeping is an expensive habit.
Common violations and what enforcement looks like
The same patterns appear in wage cases year after year: off-the-clock work before or after shifts, automatic meal-break deductions when the break was never taken, misclassifying employees as exempt or as contractors, averaging hours across two weeks to dodge overtime, and unlawful paycheck deductions that pull pay below the minimum.
Workers can file a confidential complaint with the Department of Labor's Wage and Hour Division or sue directly. Claims generally reach back two years, or three years for willful violations, and successful claimants typically recover back wages plus an equal amount in liquidated damages. Retaliation — firing or punishing a worker for complaining about pay — is separately illegal, and a retaliatory termination can also intersect with the issues discussed in our article on termination and severance agreements.
Pay disputes also overlap with discrimination law: unequal pay tied to sex or another protected trait can support a claim through the EEOC charge process in addition to an FLSA claim.
Frequently asked questions
Is a salaried employee automatically ineligible for overtime?
No. Salary is only one part of the test. A salaried employee who earns less than $684 per week, or whose actual duties do not meet the executive, administrative, or professional duties test, is still entitled to overtime. Employers cannot buy their way out of overtime with a title and a modest salary.
Does federal law require paid breaks, vacation, or holiday pay?
No. The FLSA does not require meal breaks, rest breaks, vacation, sick leave, or premium pay for weekends or holidays. However, when employers offer short breaks of roughly 5 to 20 minutes, federal rules treat that time as compensable. Many states impose their own break and leave requirements, so check your state's rules.
My employer pays me in cash and keeps no records. Do I have a claim?
Possibly a strong one. The recordkeeping duty belongs to the employer. If records are missing, you can support a claim with your own reasonable reconstruction of hours — calendars, texts, transit records — and courts may resolve doubts against the employer that failed to keep records.
How far back can I recover unpaid wages?
Under federal law, two years from when each paycheck was due, or three years if the violation was willful. Each underpaid payday is a separate violation, so the clock runs continuously. Some state laws allow longer periods — California and New York, for example, permit claims reaching back further under state statutes.
Practical next steps
If you are a worker, start by reconstructing your hours for the past two years and comparing them against your pay stubs; then check your state labor department's rates, since the state floor is probably higher than $7.25. If you are an employer, audit three things annually: exempt classifications against both the salary level and the duties test, timekeeping practices for off-the-clock exposure, and record retention against the three-year and two-year rules.
Because wage and hour law layers state rules on top of a federal floor — and because the federal salary threshold may change again through future rulemaking — treat the numbers in any article as a snapshot and verify current figures with the Department of Labor before acting. For related topics, our employment law hub collects guides on classification, discrimination, and restrictive covenants.
