Generally, you, as an employer, are subject to the federal wage and hours law (officially called the Fair Labor Standards Act or FLSA) if you meet two tests. If you meet these tests, then all of your employees are covered under the FLSA, and you must classify employees as exempt or nonexempt under the FLSA. Even if you don't meet the tests, some of your employees might be individually protected by the law.
Commerce test. The first test is what's known as the commerce test, and it says that you are subject to the law if you are engaged in an element of commerce over which the federal government has control. This means that you meet the test if you satisfy any of the following:
For the commerce coverage test to be satisfied, there must be some actual participation by you or your employees in interstate commerce. Some examples of workers engaged in commerce are those in telephone, telegraph, radio, television, and railroad jobs; those who purchase or order goods from other states; those who unload, unpack, check, or otherwise handle goods on receipt directly from outside the state; those who maintain records of such interstate activities; those who regularly travel across state lines in the performance of their duties; and those who regularly use instrumentalities of commerce, such as the telephone, the telegraph, and the mails, for interstate communication. Since virtually all businesses use the phone and the mail, virtually all will be considered to be "in commerce."
Hospitals, nursing homes, and schools need only meet the commerce test in order to be subject to the federal wage and hours law. Public agencies are presumed to meet the commerce test.
Dollar test. All enterprises other than hospitals, nursing homes, schools, and public agencies must also meet a second test, the dollar test, which says that only enterprises with gross yearly sales of at least $500,000 are subject to the law. Therefore, if you do not meet the dollar test, you are not covered by the federal law, even if you're engaged in interstate or foreign commerce. However, remember that some of your employees may be individually protected under the federal wage and hours law even if you don't meet this dollar test.
Enterprise definition. An important point to note here is that the federal law uses the term enterprise rather than "company" or "business." The reason for the distinction is that Congress wanted the federal wage and hours law to apply to a broader array of organizations than just single companies or businesses. Thus, several establishments operated by the same person might be covered by the law if they meet the dollar test when considered together, even though each of them independently would not be. How closely related two separate businesses have to be to qualify under enterprise coverage depends on the degree of common day-to-day management, the trading of skills, the sharing of credit, and interconnected advertising, marketing, or distribution setups and whether one business "materially supports" another. If you are unsure about whether your separate lines of business would make you subject to enterprise coverage under the FLSA, check with an attorney who can analyze your specific fact situation.
Under enterprise coverage, a business is subject to FLSA requirements with respect to all of its employees if two or more of them are engaged in interstate commerce, in the production of goods for interstate commerce, or in handling goods or materials that have been moved in or produced for commerce.
Family business exception. There is a mom-and-pop exception to the enterprise definition. If the business you own has as its only regular employees the owner or persons standing in the relationship of parent, spouse, child, or other member of the owner's immediate family, you are expressly excluded from enterprise coverage.
If you determine that your business is subject to the FLSA, be sure that you are complying with the following areas: