If you read this blog, attend presentations on wage and hour issues, or just shudder every time you read about another overtime or minimum wage lawsuit, you might assume that all employees are covered by the federal Fair Labor Standards Act (FLSA) and its regulations. However, in some rare circumstances, the FLSA may not cover very small and, importantly, local businesses, meaning that those businesses’ employees may not be entitled to the minimum wage or overtime pay under the FLSA. A quick warning before we start: as we have highlighted in the past, though, most states and an increasing number of local governments do not provide exemptions from state and local minimum wage laws, even for small businesses. With a very few exceptions, the fact that the FLSA does not apply only resolves one half of the question; you almost certainly still have to contend (and comply) with state and local laws, that may have different standards and penalties.

Setting aside state and local issues for a moment, the FLSA provides two different ways for coverage to apply: and “enterprise coverage” and “individual coverage.” Setting aside more complex corporate structures that can implicate “joint employer” or similar tests, both coverage tests are straightforward. For most businesses, the FLSA’s enterprise coverage provisions will apply if the business meets two tests. First, the business must be involved in interstate commerce. Second, the business’s gross annual revenue must be at least $500,000. If a business meets both tests, then all employees working for the business are covered, regardless of whether they ever engage in interstate commerce. Notwithstanding these limits, the FLSA also automatically covers some businesses, such as schools, hospitals, nursing homes, or other residential care facilities as well as all governmental entities (regardless of the level of government), no matter how big or small.


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