The Fair Labor Standards Act (FLSA) is one of the most foundational employment laws in the United States, governing issues such as minimum wage, overtime pay, recordkeeping, and child labor standards. While essential for protecting workers, the FLSA can pose significant compliance challenges for employers, particularly small and mid-sized businesses without large HR departments or in-house counsel.
Failing to comply with the FLSA can lead to costly litigation, government audits, penalties, and even reputational damage. That’s where a Professional Employer Organization (PEO) can make a difference.
What Is the Fair Labor Standards Act (FLSA)?
Enacted in 1938, the FLSA establishes critical employment standards in four primary areas:
- Minimum Wage: Currently set at $7.25 per hour at the federal level (states may set higher rates).
- Overtime Pay: Employees must receive one-and-a-half times their regular rate of pay for hours worked over 40 in a workweek, unless exempt.
- Recordkeeping: Employers must maintain accurate records of hours worked and wages paid.
- Child Labor: Restrictions exist regarding the types of jobs minors can perform and the hours they can work.
The law applies to most employers and employees, but complexities arise in classifying employees correctly, applying exemptions, and ensuring accurate time tracking.
The FLSA sets federal minimum standards, but many states—and even municipalities—enforce stricter labor laws.
Employer Liability Under the FLSA
When employers violate the FLSA or their local equivalents, whether by misclassifying employees, failing to pay overtime, or neglecting recordkeeping requirements, they can face:
- Wage and Hour Lawsuits: Both individual and class-action suits are common.
- Back Wages and Penalties: Employers may be liable for unpaid wages, often covering two to three years plus interest and substantial penalties.
- Reputational Damage: Public lawsuits and audits can impact brand perception and recruiting.
For many businesses, especially those experiencing growth or high turnover, managing compliance with the FLSA can be daunting. That’s where PEOs provide critical support.
What Is a PEO and How Does It Work?
A Professional Employer Organization (PEO) like C2 Essentials is a firm that enters into a co-employment relationship with a business. Under this model, the PEO becomes the employer of record for tax and administrative purposes, while the client retains control over day-to-day operations. Since the employees are paid under the PEO employer tax ID number, the client organization is completely immune to any payroll and payroll tax liabilities.
Key services PEO’s like C2 Essentials offer include:
- Protection from Employment Related Liability
- Payroll processing and reporting
- Complete employee lifecycle HR services
- HR compliance – Federal, State, and Local
- Benefits administration
- Workers’ compensation and risk management
- Employment law support
This co-employment model allows businesses to offload many of the administrative burdens and potential liabilities associated with employment compliance while maintaining complete operational autonomy.
Legal and Regulatory Monitoring
FLSA regulations evolve over time through legislation, administrative rule changes, and case law. Staying ahead of these developments is essential, but can be time-consuming for small businesses. When your workforce spans multiple jurisdictions, a PEO becomes a vital resource for maintaining consistent and lawful employment practices across the board. For a full list of state labor departments and applicable wage laws, the U.S. Department of Labor offers an interactive resource here..
Final Thoughts: A Strategic Shield Against Liability
For employers navigating the complex world of FLSA compliance, a PEO like C2 Essentials is more than an outsourced service provider—it’s a strategic partner. By offering expertise in employee classification, wage and hour law, documentation, and ongoing compliance, a PEO helps businesses reduce risk and focus on growth.
While no partnership can eliminate all liability, a well-structured co-employment relationship backed by proven systems and legal knowledge puts businesses in a far stronger position to meet their obligations under the FLSA.
C2 Essentials: Your Trusted HR Compliance Partner
At C2 Essentials, we help employers navigate the complexities of wage and hour laws through proactive HR management, reliable payroll processing, and expert compliance support. Whether you’re looking to mitigate risk or strengthen your internal processes, our team is ready to help you stay protected and focused on your business goals.
Contact us today to learn how a PEO relationship with C2 Essentials can support your compliance with the FLSA.