Fair Labor Standards Act (FLSA) Overview September 2016

Fair Labor Standards Act (FLSA) Originally enacted in 1938 Contains provisions for: Federal minimum wage Overtime pay, compensatory time Defining regular rate of pay which is used in the calculation of overtime pay Child labor restrictions Determination of exempt classifications Determination of which activities constitute hours worked Recordkeeping requirements

Exempt vs. Nonexempt Exempt employees are exempt from the overtime pay provisions of the law. Nonexempt employees are not exempt, and must be paid at one and one-half times their regular rate of pay for hours worked over 40 hours in a scheduled work week.

Exemption Tests General speaking, all three (3) tests must be met in order for an employee to be classified exempt from the overtime provisions of the FLSA. Salary Limits Test Salary Basis Test Duties Test

Fair Labor Standards Act (FLSA) On May 18, 2016, after more than a year of speculation and debate, the U.S. Department of Labor (the DOL) released a controversial Final Rule updating regulations under the federal Fair Labor Standards Act (the FLSA) governing the “white collar” overtime exemption for executive, administrative, and professional employees. Most notably, the Final Rule more than doubles the salary threshold for claiming exemption from overtime, from $23,366 annually to $47,476, with weekly rate at $913 or higher. The Final Rule will go into effect on Dec. 1, 2016. There are no exemptions or exceptions to this federal law and we MUST comply.

Fair Labor Standards Act (FLSA) Many of our PDR, LTR, Research Associate I, Sponsored Programs Coordinator, Lab Coordinator I, Comm Specialist I, Training Coordinator and other employees are below the new mandated minimum salary threshold. Working with HR and College Business Officers to determine how to treat these impacted positions

Fair Labor Standards Act (FLSA) There would now be three categories: exempt professional nonexempt professional (MUST track hours and pay O/T if work exceeds 40 hrs per week) and non-exempt The exempt and nonexempt professionals will remain in the same fringe benefit rate (now and going forward). People will stay in same retirement plan that they are currently in, even if their position classification changes in terms of exempt v. non-exempt. The federal law mandates consistency across institutions, so if even ONE (job title) somewhere on campus cannot be paid at new minimum then ALL (job titles) on campus must be treated as non-exempt professionals.  If not possible to move ALL UD employees in these categories to $47,476, then ALL will be treated as nonexempt professional and their work hours must be tracked and if their work week exceeds 40 hours then they must be paid at the overtime.

Fair Labor Standards Act (FLSA) Results to date: PDR treat as exempt, move all to new minimum eff 1 Dec, new positions at minimum, issue = $$ LTR treat as nonexempt professional (no exceptions), attempt to classify LTR positions and HR will waive search action, new LTR positions will receive push back from CAS RA I treat as nonexempt professional (no exceptions) SPC TBD, several colleges unable to bring to new minimum Lab Coord I TBD, several colleges unable to bring to new minimum Comm Spec I exempt, waiting final word from two colleges Trg Coord exempt, waiting final word from one college

Fair Labor Standards Act (FLSA) Part-Time Employees: the minimum salary requirement ($913 weekly) CANNOT be prorated for part-time employees! Partial-Year Employment: salary threshold may be prorated for partial year employees whose salary is paid throughout the year

Fair Labor Standards Act (FLSA) COMP TIME – Non-exempt employees can continue to acquire comp time until 30 November 2016 Effective 1 December 2016 there will be NO comp time Employees have until 30 June 2017 to use all accumulated comp time. After that date must payout Encourage comp time usage now (currently on books) and do not grant anymore comp time, pay as straight time or O/T, if in excess of 40 hours

Fair Labor Standards Act (FLSA) QUESTIONS??

Exemption Requirements Salary Limits (Current) Test $455 per week ($23,660 annualized) for all exemptions except outside sales and “Teacher” Note: There is no provision to prorate the salary requirement of $455 per week for part-time employees. Salary Basis Test Employee is paid on a salary basis, not an hourly basis Duties Test Executive Administrative Professional (Learned and Creative) Computer Outside Sales

Salary Limits Test – December 2016 The Department of Labor (DOL) proposed that the salary limits test would change from the current $455 per week ($23,660 annualized) to $970 per week ($50,440 annualized) in 2016. The final rule announced a new salary limit of $913 per week ($47,476 annualized) effective December 1, 2016 The DOL’s final rule on overtime eligibility was announced and published on May 17. The DOL reviewed approximately 270,000 comments submitted by individuals and organizations on this change. The other two (2) tests (Salary Basis and Duties Test) remain in effect.

Impact of Increased Salary Limits Test Example: Limited Term Researchers All incumbents are currently Exempt because all meet the current Salary Limits Test of $455 per week ($23,660 annualized) (and the Salary Basis Test and the Duties Test). However, all incumbents do not meet the proposed Salary Limits Test of $913 per week ($47,476 annualized). Like positions must be classified consistently so if some incumbent salaries are below the threshold and other incumbent salaries are above, all like positions either exempt or non-exempt – so all incumbents are impacted.

Salary Limits Test Proposed Increase Compensation is currently reviewing the possible impact on all employees / jobs at UD. Compensation is examining approaches to include: Consistency of exempt classification for all positions within a job Where it may be feasible to increase salaries to meet the new salary limits (we expect these cases to be minimal) Administrative process to implement the position/incumbent changes (i.e. position, JED) Developing a communication and training plan for those impacted

Duties Test The following slides provide a summary of each of the Duties Tests Executive Administrative Professional (Learned and Creative) Computer Outside Sales

Executive Exemption – Duties Test Primary duty of managing the enterprise or a recognized department or subdivision. Management duties include: Interviewing, selecting, hiring, training, firing employees (or recommendations as to the hiring, firing, advancement, promotion or any other change of status must be given particular weight) Setting & adjusting rates of pay and hours of work Directing work Handling employee complaints and grievances and disciplining employees when necessary Planning the work; determining the techniques to be used Proportioning the work among the employees

Administrative Exemption – Duties Test Primary duty must be the performance of office or nonmanual work directly related to management policies or general business operations of the employer or the employer’s customers. Exercises discretion and independent judgment with respect to matters of significance, such as work affecting the development of policies or responsibilities to execute or carry out policy. Administrative duties do not include routine or structured tasks such as bookkeeping, data tabulation, or clerical duties.

Professional Exemption (Creative) – Duties Test Primary duty of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic endeavor These fields typically include music, writing, acting and graphic arts. Examples of professions that could meet the duties test: Actors, Musicians, Composers, Conductors, Soloists Painters Cartoonists Essayists, Novelists, Journalists

Professional Exemption (Learned) – Duties Test Primary duty of the performance of work requiring advance knowledge, defined as work that is predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment. Advanced knowledge must be in a field of science or learning. Advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction (i.e., 4 year college degree). Professions which are covered by exemption include: Law Medicine Nursing Accounting Actuarial computation Engineering Teaching Various types of physical, chemical and biological sciences

Computer Exemption – Salary Basis Test Exception Employee receives: A salary of at least $455 per week or An hourly rate of not less than $27.63 per hour And must also meet the duties test (see next slide)

Computer Exemption – Duties Test Employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the following duties: (A) application of systems analysis techniques and procedures, including consulting with users to determine hardware, software or system functional applications; OR (B) design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes based on and related to user or system design specifications; OR (C) design, documentation, testing, creation or modification of computer programs related to machine operating systems; OR (D) a combination of the duties described in (A), (B) and (C), the performance of which requires the same level of skills.

Outside Sales Exemption – Duties Test Primary duty of making sales 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. Employee must be customarily and regularly engaged away from the employer’s place or places of business.

Time Suffered or Permitted Important Time Suffered or Permitted Work not requested by the employer, but suffered or permitted by the employer, is work time. Management cannot accept the benefits of work completed without compensating employees for performing that work. Employees working overtime hours without management approval may be a performance issue. Employees cannot waive their rights under FLSA.

Recordkeeping Requirements for Nonexempt Employees Hours worked each workday and total hours worked each workweek must be recorded. UD Time is not the official record. UD departments must maintain records. FLSA requires that records be maintained for three (3) years In the event of a claim, and in the absence of employer recordkeeping, the Department of Labor may use the employee’s records to determine back pay due. All employees: records on wage, hours and other information must be recorded and saved for at least three years. Exempt employees: no particular form of recordkeeping is required Nonexempt employees: Name, home address and birth date, gender and occupation Hour and day when the workweek begins for the employee Regular hourly pay rate for any week when overtime is worked Hours worked each workday and total hours worked each workweek Total daily or weekly straight time earnings Total overtime pay for the workweek Deductions or additions to wages and total wages paid each pay period Date of payment and pay period covered

References Department of Labor, Wage and Hour Division website: www.wagehour.dol.gov FLSA Compliance, An Overview for the HR Professional, WorldatWork, 2004, Scottsdale