E-Commerce & DTC Brands: Payroll Compliance Guide (2026)

The rules that reach e-commerce companies specifically

A business is covered by the FLSA as an enterprise when it has at least two employees and an annual dollar volume of sales or business done of at least $500,000. Even without enterprise coverage, individual employees are covered when their work regularly involves interstate commerce, such as handling goods that will be shipped out of state.

Non-exempt employees must receive overtime at not less than time and one-half the regular rate for hours worked over 40 in a workweek, and hours cannot be averaged across weeks. When an employee works at two or more different straight-time rates in one week, the regular rate is the weighted average of those rates.

The executive, administrative and professional exemptions do not apply to manual laborers or other blue collar workers who perform repetitive operations with their hands, physical skill and energy. Such workers are entitled to minimum wage and overtime no matter how highly they are paid.

Employers must keep payroll records for at least three years and the records used to compute wages, such as time cards, work schedules and piece work tickets, for two years. Any timekeeping method is acceptable as long as it is complete and accurate.

The duties every employer carries

Federal income tax withholding, Social Security and Medicare, FUTA, deposits on the monthly or semiweekly schedule the lookback period sets, quarterly Form 941, annual W-2s and, for e-commerce companies paying contractors, 1099-NEC at the $2,000 threshold in force for tax years after 2025. A late deposit starts at a 2 percent failure-to-deposit penalty and climbs to 15 percent.

The IRS requires employers to keep all employment tax records for at least four years after filing the fourth quarter return for the year, including amounts and dates of wage payments, employee names, addresses, Social Security numbers and occupations, and copies of Forms W-4.