Why the FLSA Matters in Recruitment

Wage theft from misclassified and underpaid workers costs US employees an estimated $50 billion annually, and staffing agencies sit at the center of some of the most litigated wage-and-hour disputes in employment law. The Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201–219, sets the federal floor for minimum wage, overtime pay, recordkeeping, and child labor restrictions. Critically, the FLSA does not limit its reach to the entity issuing the paycheck — it applies to all employers in a joint employment relationship, which means a staffing agency and its client can both be liable for FLSA violations affecting placed workers.

The Department of Labor's Wage and Hour Division collected more than $274 million in back wages from FLSA investigations in fiscal year 2023. Staffing companies appear regularly in WHD enforcement actions, particularly in industries where workers are paid piece-rate, tips, or shift premiums, and where overtime calculations are complex. For a staffing agency, FLSA compliance is not just a payroll function — it determines whether placements are profitable or whether they expose the agency to back pay liability that exceeds the fees earned on the account.

How the FLSA Works

The FLSA's minimum wage requirement is $7.25 per hour at the federal level — a floor that many states and localities have set significantly higher. California's minimum wage is $16 per hour for most employers. New York City's is $16.50. Washington state is $16.28. A staffing agency that places workers in any of these jurisdictions must pay at least the applicable state or local minimum, whichever is highest. Federal minimum wage applies only where no higher state or local minimum exists.

The overtime rule is straightforward in principle: non-exempt employees who work more than 40 hours in a workweek must receive at least 1.5 times their regular rate of pay for each overtime hour. In practice, the complexity lies in calculating the "regular rate" correctly. If a worker receives a shift differential, a production bonus, or any compensation tied to hours worked or output, those amounts must typically be folded into the regular rate before calculating overtime — meaning overtime is often owed on the bonus, not just the base hourly wage. Staffing agencies that pay flat overtime on base wages while running bonus programs without incorporating those bonuses into the regular rate calculation are systematically underpaying overtime.

The FLSA exemption from overtime applies to employees in bona fide executive, administrative, professional, computer, or outside sales roles — provided both a duties test and a salary threshold are met. The current salary threshold for white-collar exemptions is $684 per week ($35,568 annually), established in 2020. The DOL proposed a higher threshold of $1,059 per week ($55,068 annually) in 2023, but as of 2025 the status of that rulemaking remains subject to litigation. Staffing agencies that classify placed workers as exempt must ensure both the duties and salary tests are satisfied — exempt classification is not simply a function of title or salary.

FLSA vs UK Working Time Regulations

The FLSA and the UK's Working Time Regulations 1998 (WTR) address similar concerns — maximum hours, rest periods, and paid leave — but through very different mechanisms. The FLSA imposes no maximum on the number of hours an adult employee may work; it simply requires overtime pay for hours over 40 per week. The WTR, by contrast, limits most workers to an average of 48 hours per week over a 17-week reference period (the "48-hour week"), allows workers to opt out individually, and mandates minimum daily rest periods (11 consecutive hours), weekly rest periods (24 hours per week), and rest breaks (20 minutes for shifts over 6 hours). UK workers are also entitled to 5.6 weeks of paid annual leave; the FLSA requires no paid leave at all.

Staffing agencies operating in both markets must understand that a UK worker placed on a long-term assignment cannot simply be scheduled past the 48-hour average without a valid opt-out agreement, and opt-outs must be voluntary and documented — an agency cannot make opt-out a condition of the placement.

FLSA in Practice

A manufacturing staffing agency places production line workers at a client facility in Texas. Workers are paid an hourly base rate plus a production bonus of $50 per week when output targets are met. Over a four-week period, 15 workers each work 45 hours per week. The agency pays overtime at 1.5x the base rate for the five weekly overtime hours per worker — but fails to incorporate the $50 weekly production bonus into the regular rate before calculating overtime. This is a systematic FLSA violation. The regular rate should include the bonus, increasing the effective hourly rate and therefore the overtime premium. Over 15 workers across four weeks, the underpayment is modest per person — perhaps $5–$8 per person per week — but the violation affects every worker who received the bonus and worked overtime, and the back pay obligation extends for up to two years (three for willful violations). A DOL investigation or class action converts that modest per-person underpayment into a significant aggregate liability.