FLSA Compliance Self-Audit Checklist for Texas Employers

A plain-language framework to help Texas employers identify FLSA exposure before a lawsuit or DOL investigation

Prepared by Prasla Law Firm PLLC · Greater Houston, Texas

Why a self-audit matters

Most FLSA violations Texas employers face are not intentional — they are the product of pay practices that grew organically, exemption classifications inherited from prior owners or managers, or unfamiliarity with technical regular-rate rules. The problem is that the FLSA does not care whether the violation was intentional. Liquidated damages (doubling the wages), attorney's fees, and — at scale — collective actions mean a quiet compliance problem can become an expensive lawsuit quickly.

This checklist is a starting framework for Texas employers to assess their own FLSA posture. It is not a substitute for legal review, and completing it does not create an attorney-client relationship. Serious compliance concerns should be evaluated with experienced counsel under privilege.

Section 1 — Exemption classifications

Confirm every position classified as "exempt" actually meets an FLSA exemption test. Common exemptions and what they require:

Executive exemption

[ ] Employee earns a salary that meets the federal salary-basis threshold (REQUIRES VERIFICATION — confirm current threshold at dol.gov)
[ ] Primary duty is managing the business or a recognized department
[ ] Customarily and regularly directs the work of at least two full-time employees (or equivalent)
[ ] Has genuine authority to hire, fire, or significantly influence those decisions

Administrative exemption

[ ] Employee earns a salary meeting the threshold
[ ] Primary duty is office or non-manual work directly related to management or general business operations
[ ] Primary duty includes the exercise of discretion and independent judgment on matters of significance

Professional exemption

[ ] Employee earns a salary meeting the threshold
[ ] Primary duty is performing work requiring advanced knowledge in a field of science or learning, acquired through prolonged specialized instruction; OR
[ ] Work requiring invention, imagination, originality, or talent in a recognized creative field

Computer employee exemption

[ ] Employee's primary duty is systems analysis, programming, software engineering, or similar work
[ ] Compensation meets either the salary threshold OR the hourly threshold (REQUIRES VERIFICATION)

Outside sales exemption

[ ] Primary duty is making sales or obtaining orders/contracts
[ ] Customarily and regularly engaged away from the employer's place of business

Highly compensated employee exemption

[ ] Total annual compensation meets the highly-compensated threshold (REQUIRES VERIFICATION)
[ ] Customarily and regularly performs at least one of the duties of an exempt executive, administrative, or professional employee

Common red flags for misclassification:

"Managers" who primarily do the same work as the employees they supervise
"Administrative" employees performing routine procedural work
Assistant managers in retail or restaurant environments who mainly run registers or line operations
IT workers paid hourly below the computer-professional thresholds
Paralegals classified as exempt (usually non-exempt)
Inside sales staff classified under the outside-sales exemption

Section 2 — Regular rate calculation

For non-exempt employees, the "regular rate" used to calculate overtime must include more than base pay:

[ ] Non-discretionary bonuses are included in the regular rate for the period earned
[ ] Commissions are included in the regular rate
[ ] Shift differentials and location premiums are included
[ ] Production bonuses, attendance bonuses, and longevity bonuses are included
[ ] Stand-by pay and on-call pay (when required) is included where applicable
[ ] Properly identified discretionary bonuses (truly discretionary as to fact and amount) are excluded

If any of these are NOT currently included in the regular rate for overtime calculations, exposure exists.

Section 3 — Off-the-clock work

[ ] No pre-shift tasks are required or permitted without pay (donning/doffing, equipment setup, booting systems)
[ ] No post-shift tasks are required or permitted without pay (cleanup, closing tasks, paperwork)
[ ] Meal breaks where employees are not fully relieved of duties are being paid
[ ] After-hours email and phone response by non-exempt employees is captured and paid
[ ] Required training outside paid hours is compensated
[ ] Policies prohibit off-the-clock work AND supervisors actually enforce the prohibition
[ ] Time records are not being edited or adjusted downward without employee authorization
[ ] Rounding practices (if any) average out neutrally over time — not systematically favoring the employer

Section 4 — Independent contractor classification

For each worker classified as an independent contractor (1099), the actual relationship supports that classification:

[ ] Worker controls how the work is performed
[ ] Worker provides their own tools, equipment, and workplace (or their own remote setup)
[ ] Worker offers services to other clients and is free to do so
[ ] Worker's services are not integral to the employer's core business function
[ ] Relationship is project-based or finite, not long-term and open-ended
[ ] Worker bears financial risk of profit or loss
[ ] Written contract reflects an independent contractor relationship
[ ] Worker invoices as a business, not receives a paycheck

Warning signs of misclassification:

Setting hours the contractor must work
Providing an employee-style workspace or equipment
Integrating the contractor into team structures (meetings, reporting lines)
Long-term relationships with no project endpoint
Paying contractors in the same way as employees (regular paychecks vs. invoice-based)

Section 5 — Recordkeeping

[ ] Accurate daily time records for every non-exempt employee
[ ] Records include hours worked each day, total hours each workweek, regular rate, and overtime earnings
[ ] Records are maintained for at least three years (REQUIRES VERIFICATION — confirm current DOL retention requirements)
[ ] Records can be produced quickly in response to a DOL investigation
[ ] Payroll processor output matches time records (no gaps, adjustments, or reconstructions)

Section 6 — Specific high-risk pay methods

Fluctuating workweek method

If used:

[ ] Employee is paid a fixed weekly salary regardless of hours
[ ] Hours actually fluctuate from week to week (above and below 40)
[ ] There is a clear mutual understanding of the arrangement in writing
[ ] The fixed salary divided by total weekly hours never results in a regular rate below minimum wage in any workweek
[ ] Overtime is paid at an additional half-time premium (not full time-and-a-half)
[ ] Bonuses and commissions are incorporated correctly (if at all — bonuses can complicate the method)

"Chinese overtime" or similar methods

[ ] Any non-standard pay method has been validated against current FLSA rules and case law
[ ] Written documentation of the method exists and has been communicated to employees

Tip credits

If used:

[ ] Employees receive proper written notice of the tip credit
[ ] Employees retain their tips (other than in valid tip pools)
[ ] Tip pools do not include managers, owners, or non-tipped employees (other than permitted arrangements under current DOL rules)
[ ] Tip credit plus tips equals at least the federal minimum wage
[ ] The "80/20" or "30-minute" rules for sidework are being tracked if applicable (REQUIRES VERIFICATION — rules in this area have been volatile)

Piece rate

If used:

[ ] Overtime is calculated correctly on piece-rate earnings
[ ] Minimum wage is met for every workweek based on total compensation divided by hours worked

Section 7 — Retaliation posture

[ ] No employee has been disciplined, demoted, reassigned, or terminated within a reasonable period after raising a wage concern, complaining about pay, or filing a claim
[ ] Policies prohibit retaliation for FLSA-protected activity and are communicated to supervisors
[ ] Supervisors have been trained to escalate — not respond to — wage complaints

Retaliation claims carry their own FLSA damages, and a retaliation claim on top of an underlying wage claim significantly increases exposure and case value from the plaintiff's perspective.

Section 8 — Documentation and policies

[ ] Written handbook addresses overtime, time-reporting, meal and rest breaks, and anti-retaliation
[ ] Written job descriptions exist for every position and describe actual duties
[ ] Written exemption classification memos exist for positions classified as exempt
[ ] Handbook, offer letters, and written policies are internally consistent
[ ] Periodic review of classifications and policies is documented

Section 9 — If you find a problem

Identifying an FLSA issue does not automatically mean you face a lawsuit. What matters is what you do next. Options typically include:

Self-correction going forward — reclassify positions, fix pay practices, update handbooks and job descriptions.
Back-wage payment — pay affected employees for recent unpaid wages, often reducing the window of actionable damages.
Compliance agreement with DOL — in certain cases, negotiating a compliance plan with DOL can resolve identified issues.
Litigation hold — if a claim is reasonably anticipated, document preservation should start immediately.

Do these under privilege with counsel. Communications with outside counsel about compliance issues are typically privileged; communications with HR or internal personnel about the same issues often are not. Structure the investigation to preserve privilege.

Section 10 — Red flags suggesting immediate counsel involvement

A group of similarly situated employees all have the same classification or pay practice, and you have just identified a problem with it (collective action risk)
An employee has raised a specific wage concern verbally or in writing
You have received a DOL Wage and Hour Division contact or investigation notice
An employee has resigned and mentioned pay concerns in the exit conversation
An employee or former employee has filed a claim, sent a demand letter, or retained counsel
You are considering reclassifying a group of employees (reclassification itself can signal a prior classification problem)

Next step

If this self-audit surfaced questions or concerns, a compliance consultation — under privilege — is typically the appropriate next step. We handle FLSA compliance reviews for Texas employers, DOL investigation response, and FLSA defense when claims arise.

Schedule an employer consultation: 713-955-4045 · znp@praslalaw.com

Note: The firm represents both workers and employers in FLSA matters, but never both sides of the same dispute. Every engagement is preceded by a conflict check.

IMPORTANT LEGAL NOTICES

The information in this checklist is for general educational purposes only and is not legal advice. Reading this checklist does not create an attorney-client relationship. FLSA compliance is fact-specific and turns on the particulars of each workplace. For advice about your specific situation, consult a licensed attorney.

Prasla Law Firm PLLC · 800 Bonaventure Way, Suite 154, Sugar Land, Texas 77479

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