Key Facts at a Glance
| Requirement | Federal Rule | Agency |
|---|---|---|
| Federal Minimum Wage | $7.25/hour | DOL |
| Tipped Minimum Wage | $2.13/hour (with tip credit) | DOL |
| Overtime Threshold | 40 hours/week at 1.5x | DOL |
| Exempt Salary Threshold | $43,888/year ($844/week) | DOL |
| Social Security Tax | 6.2% (employee + employer each) | IRS |
| Social Security Wage Base | $176,100 (2025) | IRS |
| Medicare Tax | 1.45% (employee + employer each) | IRS |
| Additional Medicare Tax | 0.9% on wages over $200,000 | IRS |
| FUTA Tax Rate | 6.0% (0.6% effective with state credit) | IRS |
| FUTA Wage Base | $7,000 | IRS |
| FMLA Leave | 12 weeks unpaid (50+ employees) | DOL |
| COBRA Coverage | 20+ employees (18-36 months) | DOL |
| ACA Employer Mandate | 50+ FTE employees | IRS |
| Form I-9 Deadline | Within 3 business days of hire | USCIS |
| New Hire Reporting | Within 20 days of hire | State |
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.
Coverage
- Enterprise coverage: Businesses with annual gross sales of $500,000 or more, hospitals, schools, and government agencies
- Individual coverage: Employees engaged in interstate commerce or producing goods for interstate commerce
Minimum Wage
States and localities may have higher minimum wages. Employers must pay the higher of federal, state, or local minimum wage.
Overtime Requirements
Salary Threshold for Exempt Employees
$43,888 per year ($844 per week) - effective July 1, 2024
The salary threshold increased on July 1, 2024 from $35,568 to $43,888. A further increase to $58,656 scheduled for January 1, 2025 was blocked by federal courts. Always verify current thresholds.
White-Collar Exemptions (Duties Tests)
- Executive: Primary duty is management; regularly directs 2+ employees; has authority to hire/fire
- Administrative: Primary duty is office/non-manual work related to management or business operations; exercises discretion and independent judgment
- Professional: Primary duty requires advanced knowledge in a field of science or learning; or is creative
- Computer: Systems analyst, programmer, software engineer, or similar; paid at least $27.63/hour
- Outside Sales: Primary duty is making sales away from employer's place of business
- Highly Compensated: Total annual compensation of $151,164+; performs at least one exempt duty
Child Labor
Minimum Age: 14 years for most non-agricultural employment; 18 for hazardous occupations
Hours for 14-15 Year Olds
- School days: 3 hours per day
- Non-school days: 8 hours per day
- School weeks: 18 hours per week
- Non-school weeks: 40 hours per week
- Time restrictions: 7 a.m. to 7 p.m. (9 p.m. June 1 through Labor Day)
16-17 Year Olds: No federal hour restrictions, but hazardous occupation restrictions apply
Federal Taxes & Withholding
Employers must withhold federal income tax based on Form W-4 using IRS Publication 15-T methods.
Deposit Schedules
- Monthly: Tax liability $2,500 or more per quarter but less than $50,000 in lookback period
- Semi-weekly: Tax liability $50,000 or more in lookback period
- Next-day: Accumulated liability of $100,000 or more on any day
Must use EFTPS (Electronic Federal Tax Payment System) for deposits
FICA (Social Security & Medicare)
Social Security
Employee: 6.2%
Employer: 6.2%
Wage Base: $176,100 (2025)
Medicare
Employee: 1.45%
Employer: 1.45%
Additional Medicare: 0.9% (employee only, no employer match)
No wage base limit for Medicare tax. Employer must withhold Additional Medicare Tax when wages exceed $200,000, regardless of filing status.
FUTA (Federal Unemployment Tax)
FUTA is employer-paid only. Credit reduction states (if any) result in higher effective FUTA rate.
FMLA (Family & Medical Leave Act)
The Family and Medical Leave Act provides eligible employees with up to 12 workweeks of unpaid, job-protected leave per year for specified family and medical reasons.
Coverage Requirements
- Employer: Private employers with 50 or more employees within 75 miles for 20+ workweeks
- Employee: Employed for at least 12 months, worked 1,250 hours in previous 12 months, works at location with 50+ employees within 75 miles
Qualifying Reasons
- Birth of a child and care for newborn within first year
- Placement of child for adoption or foster care within first year
- Care for spouse, child, or parent with serious health condition
- Employee's own serious health condition preventing work
- Qualifying exigency arising from spouse, child, or parent's active military duty
Leave Amount: 12 workweeks in a 12-month period
Job Protection: Employee must be restored to same or equivalent position with equivalent pay, benefits, and terms
COBRA
Consolidated Omnibus Budget Reconciliation Act provides continuation of group health coverage that otherwise might be terminated.
Coverage: Employers with 20 or more employees on more than 50% of business days in prior year
Qualifying Events
- Voluntary or involuntary termination (except gross misconduct)
- Reduction in hours resulting in loss of coverage
- Employee becoming entitled to Medicare
- Divorce or legal separation
- Death of covered employee
- Dependent child losing dependent status
Duration: 18 months for termination/reduction in hours; 36 months for other qualifying events; 29 months for disability
Premium: Up to 102% of full premium cost (employer + employee portions); 150% for disability extension
Notice: Employer must notify plan administrator within 30 days; administrator must notify qualified beneficiary within 14 days
Penalties: Excise tax of $100 per day per affected individual; up to $200 per day for multiple beneficiaries
ACA Employer Mandate
Affordable Care Act requires certain employers to offer health coverage to full-time employees or pay a penalty.
Applicable Large Employer (ALE) Threshold
50 or more full-time equivalent (FTE) employees in prior year
Affordability: Employee's required contribution for self-only coverage cannot exceed 8.39% of household income (2024)
Minimum Value: Plan must cover at least 60% of total allowed cost of benefits
Reporting: Forms 1094-C and 1095-C due to IRS by February 28 (March 31 if electronic); 1095-C to employees by March 2
Penalties: Penalty A: ~$2,970 per FTE if no offer of coverage; Penalty B: ~$4,460 per affected employee if coverage unaffordable (2024)
Form I-9 & Employment Eligibility
Deadline: Section 1 (employee) - by first day of work for pay; Section 2 (employer) - within 3 business days of hire
Form I-9 Sections
- Section 1: Employee completes - name, address, DOB, SSN (optional for most), citizenship/immigration status, signature
- Section 2: Employer examines documents and completes - document title, issuing authority, number, expiration, certification
- Section 3: Reverification and rehires - used for work authorization updates or rehires within 3 years
Retention: Retain for 3 years after hire date OR 1 year after termination, whichever is later
Penalties: Civil penalties from $281 to $2,789 per Form I-9 for first offense; up to $27,894 for pattern violations; criminal penalties for knowingly hiring unauthorized workers
E-Verify
E-Verify is an internet-based system that compares Form I-9 information to government records to verify employment eligibility.
Wage Garnishments
Consumer Credit Garnishments
Lesser of: 25% of disposable earnings, OR amount by which disposable earnings exceed 30 times federal minimum wage
Cannot terminate employee solely because of garnishment for single indebtedness
Child Support
50% if supporting another family; 60% if not supporting another family; add 5% if more than 12 weeks in arrears
IRS Tax Levies
IRS can levy wages with Form 668-W; takes priority over most other debts
Required Federal Postings
| Poster | Law | Coverage |
|---|---|---|
| Fair Labor Standards Act (FLSA) | Minimum wage, overtime, child labor | All employers |
| Employee Polygraph Protection Act (EPPA) | Prohibits most lie detector tests | All employers |
| Family and Medical Leave Act (FMLA) | Job-protected leave | 50+ employees |
| Occupational Safety and Health (OSHA) | Workplace safety rights | All employers |
| Equal Employment Opportunity (EEO) | Anti-discrimination laws | 15+ employees (varies by law) |
| USERRA | Military leave rights | All employers |
| E-Verify Notice | Work authorization verification | E-Verify participants |
| Right to Work Notice | E-Verify anti-discrimination | E-Verify participants |
Where to Post: Conspicuous location where employees and applicants can easily read them
Federal Agency Contacts
U.S. Department of Labor - Wage and Hour Division
FLSA (minimum wage, overtime, child labor), FMLA, federal contract labor standards
Internal Revenue Service (IRS)
Federal income tax withholding, FICA, FUTA, Form 941, employment tax deposits
Social Security Administration (SSA)
Social Security numbers, earnings records, benefits
U.S. Citizenship and Immigration Services (USCIS)
Form I-9, E-Verify, work authorization
Equal Employment Opportunity Commission (EEOC)
Employment discrimination (Title VII, ADA, ADEA, GINA)
Occupational Safety and Health Administration (OSHA)
Workplace safety and health standards
Employee Benefits Security Administration (EBSA)
ERISA, employee benefit plans, COBRA
Office of Federal Contract Compliance Programs (OFCCP)
Affirmative action, federal contractor EEO
Common Pitfalls to Avoid
Misclassifying employees as exempt
Many employers incorrectly classify employees as exempt from overtime. Ensure employees meet BOTH the salary threshold ($43,888/year) AND duties tests. Salary alone is not sufficient.
Not tracking hours for all employees
Even if you believe an employee is exempt, tracking hours protects you if that classification is later challenged. Many audit settlements require back pay plus liquidated damages.
Ignoring state law differences
Federal law sets the floor, not the ceiling. Many states have higher minimum wages, daily overtime, stricter child labor laws, or additional leave requirements. Always apply the more protective standard.
Missing FICA tax deposits
Late deposits result in failure-to-deposit penalties ranging from 2% to 15% depending on how late. Set up automated EFTPS deposits to avoid this.
Incomplete Form I-9s
I-9 violations are heavily penalized during audits. Ensure all sections are complete, documents are properly examined, and forms are retained for the required period.
Not offering COBRA timely
COBRA notice must be sent within 44 days of the qualifying event. Late notices expose employers to excise taxes and potential lawsuits.
Miscounting FMLA eligibility
An employee needs 12 months of employment AND 1,250 hours worked AND work at a location with 50+ employees within 75 miles. Missing any element means no FMLA eligibility.
Incorrect supplemental wage withholding
Using the 22% flat rate when wages exceed $1 million, or aggregating when separately stated. Errors can result in underwithholding penalties.
Not counting all hours for overtime
Time worked includes waiting time, on-call time (if restricted), training, travel between job sites, and breaks under 20 minutes. Failure to count all hours is a wage violation.
Missing ACA reporting deadlines
Forms 1095-C must be furnished to employees by March 2 and filed with IRS by February 28 (March 31 electronic). Penalties are per form, per day late.
Deducting FUTA for employees
FUTA is an employer-only tax. Never deduct FUTA from employee wages. This is a clear violation and easy to catch.
Not posting required notices
Federal posting requirements apply to most employers. Failure to post can result in fines and may affect your defense in employee claims.