Understanding Your Pay and Overtime Rules for Small or Startup Businesses

Just because a company is small or newly launched doesn’t mean it’s exempt from labor laws. Whether you’re joining a startup or working for a business that just crossed the $500,000 sales mark, the Fair Labor Standards Act (FLSA) might already apply.

Even if your employer hasn’t hit that revenue threshold yet, the FLSA may still protect you depending on the type of work you do. If your employer isn’t following the rules, you could be missing out on wages you’re legally owed.

How to Know If You're Covered by the FLSA

The FLSA offers two main paths for coverage: enterprise coverage and individual coverage. Most employees qualify under at least one of these categories.

Enterprise coverage applies when your employer earns at least $500,000 in gross annual revenue from sales or services.

But even if the business hasn’t reached that number, individual coverage might still apply. You’re likely covered if your work involves interstate commerce—even in indirect ways. That could mean:

• Processing credit card transactions
• Shipping or receiving goods across state lines
• Sending emails or documents out of state
• Cleaning or maintaining a business involved in interstate operations

The bottom line is that if your work involves business across state lines, the FLSA will likely protect you.

What The FLSA Guarantees You

If you’re covered under the FLSA, here’s what you’re legally entitled to:

Minimum Wage

You must be paid at least the federal minimum wage (currently $7.25 an hour, unless your state requires more).

Overtime Pay

If you work more than 40 hours in a workweek, you’re entitled to time-and-a-half pay for those extra hours.

Youth Employment Protections

If you're under 18, there are limits on what jobs you can do and how many hours you can work. For example, you cannot do any of the following:

• Operating power-driven meat processing equipment
• Using power saws
• Working in roofing or similar high-risk jobs

Youth Minimum Wage

If you’re under 20 and starting a new job, your employer may pay you as little as $4.25 per hour for the first 90 consecutive days of employment. After that, you must receive at least the regular minimum wage. Importantly, employers can’t fire other workers just to hire someone at the lower youth rate; that’s illegal.

Accurate Recordkeeping

Your employer must maintain clear records of your hours worked and wages paid. This helps ensure you’re receiving the pay you’re owed.

What Counts As "Time Worked"?

This is where many employers make mistakes. Under the Fair Labor Standards Act, you must be paid for all the time you spend working, not just your scheduled shifts.

That includes, but isn’t limited to:

• Remote work: Tasks done from home still count as work time
• Travel time: In certain situations, such as traveling between job sites
• Waiting time: If you're required to be on the premises or ready to work
• Training or orientation: Mandatory sessions must be compensated
• Prep and clean-up: Activities before or after your shift that are necessary for your job

If your employer expects you to complete work-related tasks, whether off the clock, at home, or outside your usual schedule, you’re legally entitled to be paid for that time.

Who’s Not Covered By Minimum Wage Or Overtime Rules?

Some jobs are legally exempt from minimum wage and/or overtime pay, but only if strict criteria are met.

Common exemptions include:

• Executive, administrative, or professional employees (this can include certain tech roles)
• Outside sales employees
• True independent contractors
• But this is where many employers get it wrong.

A job title like “manager” or being paid a salary doesn’t automatically make you exempt. The law focuses on what you do, not what your business card says. To legally deny minimum wage or overtime, your role must meet specific duties tests that the Department of Labor laid out.

Common FLSA Violations in New or Small Businesses

Even well-meaning startups and small businesses can violate labor laws—sometimes without realizing it. But those mistakes can still cost you money. Watch for these common red flags:

• Being paid a salary but not receiving overtime, even when you regularly work more than 40 hours a week
• Unpaid work outside scheduled hours, like cleaning, prepping, restocking, or completing paperwork
• Being misclassified as an independent contractor, despite working like a regular employee
• Illegal deductions for things like uniforms, cash register shortages, or accidental damage
• Minors assigned to prohibited tasks or working beyond legal hour limits
• Inaccurate or missing time records, especially if you're hourly or paid per piece
• Getting “comp time” instead of overtime pay, which is generally not allowed in the private sector

These are some of the most frequent violations the U.S. Department of Labor investigates—and more often than not, they’re found to be unlawful.

What to Do If You Think Your Rights Are Being Violated

If something doesn’t feel right, such as unpaid wages, missing overtime, or misclassification, don’t assume it’s just part of the job. The U.S. Department of Labor’s Wage and Hour Division investigates these issues every day. You can contact them at 1-866-487-9243 or visit their website to file a complaint.

In the meantime, document everything: your hours, pay, and any communication with your employer. Keeping accurate records strengthens your case.

Disclaimer: This information is based on fact sheets provided by the Department of Labor.

If you believe you’ve been denied wages, shorted on overtime, or misclassified in a way that’s costing you money, the employment lawyers at Morgan & Morgan may be able to help. As America’s largest injury firm, we’ve helped workers across the country stand up for their rights. Get in touch for a free, confidential case review.