8 Common FLSA Violations — and How to Avoid Them

The Department of Labor's Wage and Hour Division recovers over $200 million in back wages annually. The majority of violations come from a small set of recurring mistakes — many of which employers could prevent with a basic understanding of FLSA requirements. Here are the eight most common violations and how to avoid each.

Violation 1: Misclassifying Employees as Exempt

Calling someone a "manager" or giving them a salary does not make them exempt. The FLSA white-collar exemptions under 29 CFR Part 541 require both a salary test ($684/week — see our 2026 salary threshold guide) and a specific duties test. Failing either test makes the employee non-exempt — entitled to overtime regardless of their title.

Prevention: Conduct periodic exemption audits. For each employee classified as exempt, document how their duties satisfy the specific exemption criteria. Be especially careful with job redesigns: a role that was legitimately exempt can lose that status when duties change.

Violation 2: Off-the-Clock Work

Employees must be compensated for all hours "suffered or permitted" to work, even if the employer didn't explicitly request or authorize the work. If a manager knows (or should know) an employee is working, that time is compensable.

Common off-the-clock scenarios:

• Pre-shift work (setting up equipment, booting computers)
• Post-shift work (finishing reports, cleanup)
• Work during unpaid meal breaks
• After-hours emails and calls for non-exempt employees

Prevention: Train supervisors that they cannot instruct or permit non-exempt employees to work off the clock, and that "don't bother clocking it" violates the FLSA. Use timekeeping systems that require employees to clock in and out for actual work periods.

Violation 3: Improper Deductions from Salary

Exempt employees must receive their full salary for any week in which they perform work. Docking an exempt employee's pay for partial-day absences, slow business days, or quality issues destroys the "salary basis" and can eliminate the exemption — making all overtime previously unpaid into a violation.

Permitted deductions are limited: full-week personal absences, workplace conduct suspensions (full days), first/last partial week of employment, and unpaid FMLA leave.

Prevention: Train HR and payroll staff on what deductions are permissible. If an impermissible deduction is discovered, correct it immediately and pay back any amount deducted.

Violation 4: Mishandling the Regular Rate

Paying overtime at 1.5x the base hourly rate sounds correct, but is often wrong. The FLSA requires 1.5x the regular rate, which must include non-discretionary bonuses, shift differentials, and most other forms of additional compensation paid that week.

Example: An employee earns $15/hr, works 50 hours, and receives a $150 attendance bonus. The regular rate is ($15 × 50 + $150) ÷ 50 = $18/hr — not $15. Overtime must be paid at 1.5 × $18, not 1.5 × $15.

Prevention: Audit your payroll system to confirm it includes non-discretionary bonuses in the regular rate calculation before computing overtime. Use our FLSA Overtime Calculator to verify specific weeks.

Violation 5: Averaging Hours Across Workweeks

Some employers average hours across a two-week pay period to avoid overtime — e.g., an employee works 44 hours in week 1 and 36 hours in week 2, and the employer says "80 hours total, no overtime." This is illegal. The FLSA requires overtime to be calculated per workweek, not per pay period.

Prevention: Ensure your payroll system calculates overtime for each individual workweek within a pay period, not for the combined total.

Violation 6: Illegal "Comp Time" for Non-Exempt Employees

Private-sector employers cannot offer non-exempt employees paid time off in a future week instead of overtime pay. Giving an employee 4 hours of "comp time" next week instead of 4 hours of overtime pay this week is an FLSA violation.

Note: Comp time arrangements are permitted for state and local government employees under specific conditions.

Prevention: Pay overtime in cash for the workweek in which it is earned. Do not instruct managers to "comp it out" next week.

Violation 7: Independent Contractor Misclassification

Classifying employees as independent contractors to avoid FLSA coverage is a common and increasingly scrutinized practice. The FLSA uses an "economic reality" test to determine worker status — the key question is whether the worker is economically dependent on the employer or truly in business for themselves.

The 2024 DOL rule (effective March 2024) clarified a six-factor economic reality test:

1. Opportunity for profit or loss
2. Investments made by the worker and potential employer
3. Degree of permanence
4. Nature and degree of control
5. Whether the work is integral to the potential employer's business
6. Skill and initiative

No single factor is determinative, and the factors are considered together.

Prevention: Review your contractor relationships against the six-factor test. If a worker looks like an employee under the economic reality test, they should be classified as one.

Violation 8: Record-Keeping Failures

The FLSA requires employers to keep specific records for non-exempt employees: hours worked each day and total hours each workweek, wage rates, total daily or weekly earnings, overtime pay, deductions, and gross and net wages. Records must be kept for at least three years.

Poor records don't just create audit risk — in litigation, courts often resolve uncertain hours disputes in the employee's favor when the employer has inadequate records.

Prevention: Use reliable timekeeping systems and retain records for at least three years. For exempt employees, document the basis for the exemption.

What Happens During a DOL Investigation

DOL Wage and Hour Division investigations can be triggered by an employee complaint, industry-wide enforcement initiatives, or random audits. The consequences of a finding can include:

• Back wages for up to two years (three years for willful violations)
• Liquidated damages equal to the back wages (effectively doubling the liability)
• Civil money penalties up to $1,000 per violation for child labor violations; up to $10,000 for repeat/willful overtime violations
• Attorney fees if the employee brings a private lawsuit

The DOL also publishes some settlement amounts publicly, which can create reputational damage beyond the financial penalty.

Getting the Math Right

Avoiding violations starts with accurate calculations. Our FLSA Overtime Calculator implements the correct regular rate formula, including bonus handling, and flags state-specific rules that may require additional pay.

Sources

• U.S. DOL — Wage and Hour Division Enforcement
• 29 CFR Part 541 — Exemptions
• 29 CFR Part 516 — Records to be kept by employers
• U.S. DOL — Fact Sheet #13: Am I an Employee?