Common FLSA Mistakes That Lead to Employer Liability

 Posted on June 20, 2026 in Employer Defense

Many employers make mistakes under the Fair Labor Standards Act without knowing it until a complaint is filed or a lawsuit shows up. Some of these mistakes come from honest confusion about a complicated law. Regardless, the consequences can be severe, including back pay, penalties, and legal fees that add up quickly. If your business is facing an FLSA claim in 2026 or you want to make sure you are not at risk, a Schaumburg employment lawyer can look at your practices and help you get on solid ground.

What Is the FLSA and Who Does It Cover?

The Fair Labor Standards Act, found at 29 U.S.C. Section 201, is the federal law that sets the rules for minimum wage, overtime pay, recordkeeping, and child labor. It applies to most private businesses as well as federal, state, and local governments.

Most employees are covered by the FLSA, but some exceptions allow certain workers to be paid differently. Those exceptions have very specific requirements that many employers get wrong, which is one of the most common ways businesses end up in legal trouble under this law.

What Are the Most Common FLSA Mistakes Employers Make?

Knowing where employers tend to go wrong is the first step toward avoiding these problems. The mistakes that come up most often fall into a few clear areas.

Misclassifying Employees as Exempt

This is one of the most frequent and costly FLSA mistakes. The law has several exemption categories, including executive, administrative, professional, and outside sales exemptions. To qualify for most of these, an employee has to meet both a duties test and a minimum salary requirement.

Misclassifying Workers as Independent Contractors

Another common mistake is treating workers as independent contractors when they are actually employees under the law. Courts generally apply an economic reality test to figure out whether a worker is truly independent. Factors like how much control the employer has over the work, whether the worker has other clients, and whether the work is central to the business all play a role.

When a worker is misclassified, they miss out on minimum wage protections and overtime pay. If the mistake is discovered, the employer may owe a significant amount of back pay and penalties.

Not Paying for All Hours Worked

Employers have to pay employees for every hour they actually work, including work the employer knows or should know is being performed, even if it was not officially scheduled or approved. This is an area where many employers fall short without realizing it.

Common examples include requiring employees to attend pre-shift meetings without pay, not compensating workers for time spent putting on or removing required safety gear, allowing employees to answer work emails or calls outside of work hours without additional pay, and not counting short breaks of 20 minutes or less as paid time, which the FLSA generally requires.

Calculating Overtime Incorrectly

Overtime must be paid at one and a half times the employee's regular rate of pay for all hours worked over 40 in a workweek. The regular rate of pay is not always the same as the hourly wage. It has to include certain extra compensation like non-discretionary bonuses, shift differentials, and commissions.

Many employers calculate overtime based on the base hourly rate alone and forget to include these additional payments. That leads to underpayment that can add up significantly over time, especially for employees who regularly earn bonuses.

Poor Recordkeeping

Under 29 U.S.C. Section 211, employers are required to keep accurate records of hours worked and wages paid for each employee. When records are incomplete or missing, it becomes very hard to defend against a wage claim. In cases where employer records are poor, courts may give significant weight to the employee's own estimates of hours worked, which can work against the employer.

Good recordkeeping is not just a legal requirement. It is one of the best defenses a business has if a claim is ever filed.

What Are the Consequences of FLSA Violations?

The consequences of getting the FLSA wrong can be significant. Employees who win an FLSA claim can recover their unpaid wages plus an equal amount in what are called liquidated damages. That effectively doubles what the employer owes. Employees can also recover attorney fees and court costs.

Willful violations can extend the time period employees can look back when calculating damages from two years to three years. In cases involving many employees, group claims can result in very large judgments that seriously hurt a business.

Can an Employer Avoid Liquidated Damages?

If an employer can show they acted in good faith and had reasonable grounds to believe their practices were lawful, a court has the option to reduce or eliminate the extra damages. This is not easy to prove. However, it shows why documenting your compliance efforts and getting legal advice early matters so much.

Schedule a Free Consultation With Our Schaumburg, IL FLSA Litigation Attorney

FLSA compliance is more complicated than it looks, and the cost of getting it wrong can be much higher than the cost of doing it right from the start. Attorney Miller brings a perspective that very few employment attorneys can offer. In addition to his law degree, he holds an MBA in Finance. That background gives him a deep understanding of how wage and hour issues affect a business from both a legal and a financial standpoint, which means the guidance he provides is practical and grounded in real-world business realities.

To learn more, contact the Schaumburg employment lawyer at The Miller Law Firm, P.C. by calling 847-995-1205 to schedule your free consultation today.