What is FLSA?
Fair Labor Standards Act (FLSA), first enacted in 1938, establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.
- Established tests that must be met in order for an employee to be exempt from overtime pay eligibility.
- Tests/Rules for classifying covered employees as "exempt" or "nonexempt"
- Requires overtime compensation to nonexempt employees for all hours over 40 in a workweek
- Usually 1.5 times regular pay rate – Government Agencies can award Compensatory Time.
Upcoming Changes – Final Rule for Overtime
On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay.
The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.
In the final rule, the Department is:
- raising the "standard salary level" from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
- raising the total annual compensation requirement for "highly compensated employees" from the currently enforced level of $100,000 per year to $107,432 per year;
- allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices
- The final rule is effective on January 1, 2020.
How and When does this change affect Marshall University?
As a result of these changes, the University will be increasing the number of non-exempt/hourly employees.
- INCREASED nonexempt/HOURLY (overtime eligible) employees.
- MANAGERS will have to manage overtime more closely. Overtime will need to be approved and budgeted in advance.
- EMPLOYEES converted from Exempt to Hourly will have to be paid for all hours worked over 40 in the work week. This may also include compensatory time.
- Checking email and doing work outside of the normal work schedule will change the way these converted employees accomplish the "day to day" work after January 1, 2020.
- Converted employees are now eligible for overtime.
- They must track hours worked in TimeClock Plus.
- Clock in & out, track all hours worked, observe start/stop times, observe meal & break periods.
Employee Classifications who are NOT IMPACTED by the Change (BUSINESS AS USUAL)
- Teaching Faculty (Adjuncts, Full Time, Tenured, Instructional)
- Graduate Assistants (Graduate Teaching Assistant)
- Resident Assistants
- Research Assistants
- Postdoctoral Fellows (Primary Teaching Duties Only)
- Faculty Coach (recruiters only are effected)
- Nonexempt employees (Hourly Employees)
Employee Classifications IMPACTED by the change
- Current Exempt employees who are paid under $35,568 annually and fall within one or more of the below classifications.
- Current Exempt Employees who are paid over $35,568 annually will be reviewed under the duties test and may be converted to non-exempt.
- Non-teaching faculty
- With the effective date being Jan 1,2020, the University has developed a timeline for the Implementation Plan.
- View the complete PowerPoint presentation on the FLSA-Overtime Rule Change.
Can an Employee Maintain their Exemption Status?
In order for exempt employees to maintain an exemption status they must meet both the "salary" & "duties" test.
- In order for exempt employees to maintain an exemption status they must meet both the "salary" & "duties" test.
- Duties Test – the employee’s job duties must primarily involve executive, administrative, professional, computer or outside sales duties (also known as "white collar" duties).
- Salary Basis/level Test – the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
- The employee must be paid $35,568 or more annually.
- Must satisfy the HR duties test assessment worksheet.
- Must receive approval on HR Exemption Justification Worksheet.
- Must satisfy an overtime assessment.
- Must have an updated job description.
- Must have Senior VP and freeze committee approval.
- Applies to each position individually based on duties and responsibilities.
The types of duties/exemption tests shown below are:
- Based on primary job duties, not job title.
- Most important duties that account for 50% of time spent working.
- Paid on a salaried basis for the job, not the number of hours worked.
- Administrative Exemption Test
- Primary duty must be office or non-manual work; and
- Directly related to management or general business operations of the employer or employer’s customers; and
- Customarily and regularly requires the exercise of discretion and independent judgment with respect to matters of significance
- Sample Jobs (Grants Specialist, HR Generalist, Internal Auditor, Budget Analyst, Accountant, Resident Directors, Admissions counselors, some supervisors)
- Professional Exemption Test . . . Learned
- Must perform work requiring advanced knowledge in a field of science or learning; and
- The advance knowledge must be customarily acquired by a prolonged course of study/specialized instruction.
- Predominantly intellectual
- Sample Jobs (Physician, Nurse Practitioner, Architect, Lawyer, Engineers, Athletic Trainers (certified), Clinical Social Worker, Chefs (4-yr degree program))
- Executive Exemption Test
- Primarily manages a division, department or subdivision; and
- Directs the work of two or more full-time employees
- Must have the authority or influence over the hiring, firing, promotion, demotion, discipline and recommendation to change employee status.
- Sample Jobs (Vice President, AVP, Director, Assoc/Asst Director, some departmental managers.)
- Professional Exemption Test . . . Creative
- Primary duty must be the performance of work requiring invention, imagination, originality, or talent
- Performs work in a recognized field of artistic or creative endeavor
- Sample Jobs (Musicians, Composers, Actors, Painters, Writers)
- Outside Sales Exemption Test
- The employee’s primary duty must be making sales (as defined in the FLSA, see DOL fact sheet 17F), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
- The employee must be customarily and regularly engaged away from the employer’s place or places of business.
- Sample Jobs (Door to Door sales, commission based sales offsite).
- Computer Worker Exemption Test
- Employed as a computer systems analyst, programmer, software engineer or similar skilled worker.
- Primary duties consist of:
- Applications of systems analysis techniques or
- Design, development, documentation, analysis, creation, testing, or modification of computer systems or programs.
- Design, documentation, testing, creation, or modification of computer programs related to machine operating systems.
What are the next steps of the duties/exemption test?
If you believe that your employee meets the "duties test" and you want to explore the option of making them an exempt employee. You will need to take the following steps:
Travel & Time Management for Non-Exempt Employees
- All hours over 40 in the workweek are eligible for 1.5 times salary or compensatory time paid.
- All hours over 37.5 in the workweek are eligible for 1.0 times salary or compensatory time paid.
- The workweek is currently Saturday through Friday.
- Employee can’t voluntarily opt-out of getting overtime compensation.
- We will discipline repeat offender who work overtime without approval after receiving notification.
- Managers are responsible to ensure employees are working as directed & reporting time properly.
- Pay Period Calendar
Establish procedures and Expectations
- Overtime approval processes.
- Rules for working and tracking working outside of normal workday.
- Flex Time – may be used to avoid accruing overtime (within workweek).
- Overtime Compensatory Leave – May be used to reduce overtime costs.
- "Unauthorized" work performed (with or without Supervisor’s knowledge).
- Employee arrives early to work & begins working.
- Meal time if an employee is not "free" from work duties.
- If overtime is needed, complete and submit an Overtime Pre-Authorization Form for approval prior to any overtime work being performed.
- Employees who travel during the workday must be paid.
- Employees must be paid for time spent working regardless of location or time of day. Includes after hours work from home/hotel (emails/texts/calls)
- Regular travel to and from work
- "Downtime" while away from home
- Time spent as a "common carrier" passenger after working hours
Additional FLSA Resources
The Department of Labor has additional resources and tools regarding the Overtime changes.