9.1 Fair Labor Standards Act (FLSA), Wage and Hour Rules, and Overtime Math

Labor is one of the largest and most heavily regulated direct costs on any construction project. Both federal investigators from the U.S. Department of Labor Wage and Hour Division (WHD) and state regulators from the Tennessee Department of Labor and Workforce Development (TDLWD) actively audit construction payrolls for minimum wage, overtime, recordkeeping, and child labor compliance. On the Tennessee Contractor Business and Law exam, you must master both the legal boundaries of the Fair Labor Standards Act (FLSA) (29 U.S.C. § 201 et seq.) and the exact mathematical formulas used to calculate regular rates and overtime pay.

Fair Labor Standards Act (FLSA) Overview and Minimum Wage

Enforced by the U.S. Department of Labor's Wage and Hour Division (WHD), the Fair Labor Standards Act (FLSA) establishes four core federal baseline standards for private-sector and public-sector employment: (1) federal minimum wage, (2) overtime pay, (3) employer recordkeeping, and (4) child labor standards.

• Federal and Tennessee Minimum Wage (\$7.25 per Hour): The federal minimum wage is $7.25 per hour. Because the State of Tennessee does not have a separate state minimum wage statute, the federal $7.25 per hour rate is the controlling minimum wage for covered construction employers across Tennessee. (If a state or locality ever enacts a valid minimum wage higher than the federal rate, the employer must pay the higher rate that provides the greater benefit to the employee.)
• Youth Minimum Wage Exception: Under the FLSA, an employer may pay newly hired employees who are under 20 years of age a special youth minimum wage of not less than $4.25 per hour during their first 90 consecutive calendar days of employment with that employer, provided no existing workers are displaced to hire youth workers.

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The 40-Hour Workweek and Strict Prohibition on Averaging Weeks

Under the FLSA, overtime is calculated strictly on a workweek basis:

• Definition of a Workweek (168 Hours): A workweek is a fixed and regularly recurring period of 168 hours—that is, seven consecutive 24-hour periods. A workweek does not have to coincide with the calendar week (Sunday through Saturday); a contractor may establish any day of the week and any hour of the day as the start of the workweek, provided the schedule remains fixed and is not manipulated to evade overtime.
• The Core Overtime Mandate ($1.5\times$ Regular Rate Over 40 Hours): Unless an employee qualifies for a specific statutory exemption, every non-exempt employee must receive overtime pay at a rate of not less than one and one-half times ($1.5\times$) their regular rate of pay for all hours actually worked in excess of 40 hours in a single workweek.
• What the FLSA Does NOT Require: Exam questions frequently test common misconceptions about federal wage law. Absent a collective bargaining agreement, employment contract, or federal public works statute, the FLSA does NOT require:
  • Overtime pay solely for working more than 8 hours in a single day (if total weekly hours worked do not exceed 40);
  • Overtime or premium pay solely for working on Saturdays, Sundays, holidays, or night shifts;
  • Paid vacation, holiday, sick leave, or severance pay; or
  • Counting unworked paid leave hours (such as 8 hours of paid holiday, paid vacation, or paid sick time) toward the 40-hour overtime threshold. Only hours actually worked count toward the 40-hour trigger.
• Never Average Hours Across Two or More Workweeks: Even if a contractor pays employees biweekly (every two weeks), semimonthly, or monthly, each 7-day (168-hour) workweek stands alone. An employer is strictly prohibited from averaging hours across two workweeks to reduce or eliminate overtime.

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Overtime Calculation Formulas and Worked Construction Payroll Examples

On the Tennessee Business and Law exam, you must be ready to compute weekly gross pay under three different FLSA compensation structures: (1) Standard Hourly Rate, (2) Piece-Rate and Qualifying Fluctuating-Workweek Methods, and (3) Weighted-Average Regular Rate for Two or More Hourly Job Rates.

1. Standard Single Hourly Rate Formula

When a non-exempt worker is paid a single hourly rate $R$ and works $H > 40$ hours in a single workweek, both the Standard Method (40 straight-time hours plus overtime hours at $1.5R$) and the Half-Time Premium Method (all hours at $1.0R$ plus overtime hours at $0.5R$) yield the exact same gross pay:

$$\text{Gross Weekly Pay} = (40 \times R) + \big((H - 40) \times 1.5 \times R\big) = (H \times R) + \big((H - 40) \times 0.5 \times R\big)$$

• Worked Example (Standard Hourly Worker): A plumber is paid $28.00/hour and physically works 48 hours during a single workweek.
  • Regular Straight-Time Pay (40 hours): $40 \times \text{\textdollar}28.00 = \text{\textdollar}1,120.00$
  • Overtime Rate ($1.5 \times R$): $1.5 \times \text{\textdollar}28.00 = \text{\textdollar}42.00/\text{hour}$
  • Overtime Pay (8 hours over 40): $8 \times \text{\textdollar}42.00 = \text{\textdollar}336.00$
  • Total Gross Weekly Pay: $\text{\textdollar}1,120.00 + \text{\textdollar}336.00 = \text{\textdollar}1,456.00$ (which equals $48 \times \text{\textdollar}28.00 + 8 \times \text{\textdollar}14.00 = \text{\textdollar}1,344.00 + \text{\textdollar}112.00 = \text{\textdollar}1,456.00$).

2. Piece-Rate, Non-Exempt Weekly Salary, and Production Bonus Formula

For piece-rate pay, total straight-time compensation divided by hours worked gives the regular rate; an additional half-time premium is due for overtime hours because straight time already covers those hours. Nondiscretionary bonuses generally enter the regular rate and may require an overtime adjustment.

A fixed salary does not automatically permit this half-time method. If a salary covers 40 hours, divide by 40 and pay the applicable overtime premium for extra hours. The fluctuating-workweek method under 29 CFR 778.114 requires fluctuating hours, a fixed salary covering all straight-time hours, a clear mutual understanding, minimum-wage compliance, and the additional overtime premium. Evaluate every condition before dividing a weekly salary by all hours. The piece-rate exercise below assumes all straight-time earnings are already included:

$$R = \frac{\text{Total Straight-Time Earnings (Piecework + Base + Non-Discretionary Bonus)}}{H}$$ $$\text{Gross Weekly Pay} = \text{Total Straight-Time Earnings} + \big((H - 40) \times 0.5 \times R\big)$$

• Worked Example (Piece-Rate Drywall Hanger): A drywall installer is paid $11.00 per board installed. In one workweek, the installer works 50 hours and hangs 100 boards, earning $\text{\textdollar}1,100.00$ in straight-time piecework.
  • Step 1 — Regular Rate ($R$): $R = \frac{\text{\textdollar}1,100.00}{50\text{ hours}} = \text{\textdollar}22.00/\text{hour}$ (which satisfies the $\ge \text{\textdollar}7.25/\text{hr}$ minimum wage test).
  • Step 2 — Half-Time Overtime Rate ($0.5 \times R$): $0.5 \times \text{\textdollar}22.00 = \text{\textdollar}11.00/\text{hour}$.
  • Step 3 — Overtime Premium (10 hours over 40): $10\text{ hours} \times \text{\textdollar}11.00/\text{hr} = \text{\textdollar}110.00$.
  • Step 4 — Total Gross Weekly Pay: $\text{\textdollar}1,100.00 + \text{\textdollar}110.00 = \text{\textdollar}1,210.00$.

3. Weighted-Average Overtime for Two Different Job Rates in One Workweek

In construction, a single employee often performs two different trade classifications at two different hourly pay rates during the same workweek. Under 29 CFR § 778.115, the employee's Regular Rate ($R$) for that week is the weighted average of all straight-time rates worked during the week:

$$R_{\text{weighted}} = \frac{(H_1 \times R_1) + (H_2 \times R_2)}{H_1 + H_2}$$

• Worked Example (Two-Rate Weighted-Average Overtime): In a single workweek, a construction worker logs 30 hours as a general laborer at $20.00/hour and 20 hours as a backhoe operator at $30.00/hour, for a total of 50 hours worked.
  • Step 1 — Total Straight-Time Earnings: $(30 \times \text{\textdollar}20.00) + (20 \times \text{\textdollar}30.00) = \text{\textdollar}600.00 + \text{\textdollar}600.00 = \text{\textdollar}1,200.00$.
  • Step 2 — Weighted-Average Regular Rate ($R_{\text{weighted}}$): $\frac{\text{\textdollar}1,200.00}{50\text{ total hours}} = \text{\textdollar}24.00/\text{hour}$.
  • Step 3 — Half-Time Overtime Premium Rate ($0.5 \times R_{\text{weighted}}$): $0.5 \times \text{\textdollar}24.00 = \text{\textdollar}12.00/\text{hour}$.
  • Step 4 — Overtime Premium for 10 Hours Over 40: $10\text{ hours} \times \text{\textdollar}12.00 = \text{\textdollar}120.00$.
  • Step 5 — Total Gross Weekly Pay: $\text{\textdollar}1,200.00 + \text{\textdollar}120.00 = \text{\textdollar}1,320.00$.

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Exempt vs. Non-Exempt Employees (29 CFR Part 541)

Under FLSA regulations (29 CFR Part 541), an employee is presumed to be Non-Exempt (entitled to both minimum wage and overtime) unless the employer proves the employee meets BOTH of the following criteria for a recognized white-collar exemption (Executive, Administrative, or Learned Professional):

1. The Salary Basis and Salary Level Test: The employee must be paid on a salary basis—receiving a predetermined, fixed amount of compensation each pay period that is not subject to reduction because of variations in the quality or quantity of work performed—at or above the federal statutory/regulatory weekly salary threshold.
2. The Primary Duties Test: The employee's actual day-to-day job duties must primarily involve exempt white-collar responsibilities:
   • Executive Exemption: Primary duty is managing the enterprise or a recognized department/subdivision; customarily and regularly directs the work of 2 or more full-time employees (or equivalent part-time employees); and has authority to hire or fire employees (or carries particular weight in hiring, firing, or promotion decisions).
   • Administrative Exemption: Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and includes the exercise of discretion and independent judgment with respect to matters of significance (e.g., a senior project manager or chief estimator who sets company policy or commits the firm financially).
   • Learned Professional Exemption: Primary duty is the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction (e.g., a licensed Professional Engineer, registered architect, or CPA).

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Compensable Time (Portal-to-Portal Act), Child Labor, and FLSA Recordkeeping

1. Travel, Waiting, and Break Time (Portal-to-Portal Act)

• Commuting vs. Jobsite-to-Jobsite Travel: Ordinary home-to-jobsite and jobsite-to-home commuting before and after the regular workday is NOT compensable work time. However, if an employer requires workers to report to a central shop or equipment yard to load tools, receive instructions, or pick up company trucks before driving to the site, or to travel from one jobsite to another during the workday, all such travel time IS compensable hours worked.
• "Engaged to Wait" vs. "Waiting to Be Engaged": When an employee is on duty and "engaged to wait"—such as a concrete finisher waiting at the jobsite for a delayed ready-mix truck or a flagger waiting while utility lines are cleared—that waiting time IS compensable work time. Conversely, when an employee is completely relieved of duty for a predetermined period long enough to use the time effectively for their own purposes, they are "waiting to be engaged" (not compensable).
• Rest Breaks vs. Meal Periods: Short rest or coffee breaks (typically 5 to 20 minutes) must be counted and paid as compensable hours worked. Bona fide meal periods (typically 30 minutes or more) during which the employee is completely relieved from duty are not work time and may be unpaid. (Note: Under Tennessee state law, T.C.A. § 50-2-103(h), employees scheduled to work 6 consecutive hours must be provided a 30-minute unpaid rest or meal break, except in workplaces where the nature of the business provides ample opportunity to rest or take an appropriate break.)

2. FLSA Child Labor Rules in Construction

3. FLSA Recordkeeping Retention Periods (29 CFR Part 516)

• 3-Year Retention Minimum: Complete payroll records (employee full name, Social Security number, address, birth date if under 19, sex and occupation, start of workweek, regular hourly rate, hours worked each day and total hours each workweek, straight-time earnings, overtime premium earnings, deductions, net pay, and date of payment), collective bargaining agreements, and employment contracts must be preserved for at least 3 years.
• 2-Year Retention Minimum: Supplementary basic wage and time records—such as daily timecards, piece-work tickets, wage rate tables, and work-time schedules—must be preserved for at least 2 years.

The executive, administrative, and learned-professional exemptions require their applicable salary and duties tests; a job title alone is insufficient. DOL’s current general salary level is $684 per week following invalidation of the 2024 increase. Outside-sales and certain computer exemptions have different salary rules. Blue-collar duties do not qualify for Part 541 white-collar exemptions. Child-labor hazardous-occupation rules have limited specified apprentice/student-learner exceptions; they should not be assumed without satisfying every condition.

Source check (October 13, 2026): DOL overtime guidance.