Changes to the Fair Labor Standards Act (FLSA) Overtime Rule: Frequently Asked Questions
Q1: What is the current status of the mandated salary increases for certain exempt employees?
A1: Those increases were put on hold because of a federal court injunction. The U.S. Department of Labor issued regulations earlier this year that modified the test for determining exempt status under the Fair Labor Standards Act by doubling the salary floor required for maintaining exempt status. UVM Human Resources personnel undertook an extensive review, including close consultation with deans, directors and managers, to make decisions about employees who would be impacted by the new rule. Following this consultation, employees affected were notified that, under the new federal definitions, they either would receive increases in their pay to retain their exempt status or would be re-classified to a non-exempt status when the Department of Labor regulation was due to become effective on December 1, 2016.
Then, on November 22, a federal court entered a nationwide injunction blocking the U.S. Department of Labor from implementing this regulation on the ground that the Department of Labor exceeded its legal authority to impose the new regulation. The Department of Justice filed an appeal on December 1, but, as of now, the nationwide injunction remains in effect. The duration of the appeal process is unclear at this time.
Q2: How many staff employees were anticipating a pay increase as a result of the FLSA regulations?
A2: Sixty-nine employees would have received a salary increase as a result of the FLSA regulations.
Q3: How many staff employees were anticipating a change from exempt to non-exempt status as a result of the FLSA regulations?
A3: Seventy-nine employees would have been reclassified from exempt to non-exempt as a result of the FLSA regulations. This change would have meant that those employees would have become hourly employees eligible for overtime pay if overtime was approved for them.
Q4: Why did UVM suspend the implementation process for the new regulation?
A4: The reason for the anticipated changes in salaries or job classification was to comply with the new Fair Labor Standards Act regulations. Because enforcement of the new FLSA regulations has been enjoined by the federal court as unlawful, the University suspended implementation of all FLSA-related salary and classification changes that had been scheduled to take effect December 1, until the legal status of those regulations finally has been resolved.
Q5: What are other institutions doing?
A5: Information at present indicates that most institutions are doing what UVM has done in suspending implementation until the legal issues are resolved. There are reports that some institutions have implemented the changes originally ordered by the Department of Labor. Many of these institutions already had fully implemented the changes at an earlier date, before the regulation was declared unlawful by the court.
Q6: Why doesn’t UVM voluntarily implement the salary and classification changes, despite the court injunction?
A6: The University has in place well established procedures regarding a process for salary adjustments for all employees. The University regularly conducts market analyses of University salaries and adjusts salaries when it is determined that they are out of line with what the market indicates the salaries should be. In fact, UVM very recently conducted a campus-wide salary equity study. Also, the University constantly monitors the job market as we set salaries and job classifications. Monies available for compensation are distributed using these criteria as well as job performance. For all of these reasons, we believe that salaries at UVM are at market and are equitable among staff. Until the federal court litigation is finally resolved, UVM will continue current practices to assess and set compensation levels for all employees based on market conditions, individual performance, job responsibilities, and equity considerations. Additionally, the University has an established process by which individual salaries can be adjusted if they are determined to be out of alignment.
Q7: What can we expect going forward?
A7: While the case is on appeal, the nationwide injunction remains in effect. The University will monitor the appeal closely. In the meantime, UVM will continue to administer our compensation resources based on the criteria articulated above, which are focused on fundamental fairness for all employees.
Q8. What is the Fair Labor Standards Act?
A8. The Fair Labor Standards Act (FLSA) of 1938 is the United States’ federal wage and hour law, administered by the US Department of Labor. Among other things, it establishes the minimum wage and overtime pay provisions, affecting employees in the private and government sectors. Everyone is “covered” but some employees are exempt from FLSA regulations and some are non-exempt.
Q9. What does it mean to be exempt or non-exempt?
A9. Exempt employees are excluded from overtime payment. Non-exempt employees are subject to the payment of overtime. Most exemptions are based on qualifying for all three of the following tests:
- Salary Basis Test: Employee must be paid on an annual salary basis; and
- Minimum Salary Test: Up until December 1, 2016, employees must be paid above a minimum salary threshold of $455 per week or $23,660 annually; and
- Duty and Discretion Tests: Employee must qualify as an executive, administrator, professional, or computer professional.
Q10. What are the changes to the FLSA?
A10. The US Department of Labor raised the minimum salary threshold for exempt employees to $913 per week or $47,476 per year. The effective date will be December 1, 2016.
Q11. Who would the rule change affect?
A11. Classified exempt employees who have a rate of pay below the new minimum salary threshold (unless they qualify for one of the exceptions listed below in Q6) will become non-exempt.
Q12. What would the impact be on employees whose positions change to non-exempt?
A12. Employees whose pay is below the threshold and who are designated as nonexempt will have to account for their hours on an hourly basis, will accrue leave at the non-exempt accrual rate, and will be eligible for overtime pay.
Q13. Who would be excluded from these changes?
A13. Faculty and instructional academic staff whose primary duties are teaching will remain exempt regardless of their salaries. Teachers, lawyers, and doctors qualify for exemption as professionals regardless of their salaries. Certain academic administrative staff may remain exempt if they are paid at least the entry level salary of teachers at the institution. Those who support teaching activities without actual teaching interaction will most likely be designated as non-exempt.
Q14. How would this affect a part-time or a less-than-100% FTE and/or less than 12-month employee?
A14. Pay for part-time appointments would not be pro-rated under the new regulations. For example, an employee with a .75 appointment in a position that would pay $60,000 on an annualized basis (over the threshold) for 1.0 FTE, is actually paid $45,000. The rate of $45,000 is below the anticipated minimum salary threshold, and the employee would therefore be non-exempt.
Q15. Could I opt out of this change if I want to continue to be considered a salaried or exempt employee?
A15. No. The FLSA regulation does not permit employees to opt out.
Q16. How would tracking hours work differently for an hourly non-exempt employee?
A16. Non-exempt employees must account for their time worked rather than accounting for leave used. For example, non-exempt employees are not supposed to work during (unpaid) lunch breaks, and lunches of 30 minutes (or more) are unpaid time. All time worked must be reported on a weekly basis in Peoplesoft. Training about time reporting will be provided for all affected employees and their supervisors.
Q17. As a non-exempt employee, could I still work early and late? Could I check my messages from home?
A17. Non-exempt employees may be able to make arrangements with their supervisor to work from home occasionally, to check messages at night, or to adjust their daily schedules to different hours on occasion.
Q18. Would some employees receive a pay increase for the purpose of maintaining the employee’s exempt status?
A18. In some cases, the pay rates of employees that are close to the threshold may be adjusted up to the new minimum salary threshold in order to preserve their exempt status. However, the University is not required to move any employees to the new minimum salary threshold. Employees whose pay rates are not adjusted to the threshold, will have their positions reclassified as non-exempt according to the new FLSA Overtime Rule.
Last modified December 07 2016 01:23 PM