Changes to the FLSA Overtime Rule Office of Human Resources and Workforce Diversity

TABLE OF CONTENTS What is the FLSA? Whais is the Difference? Exemption tests Changes to the minimum salary threshold Special minimum salary threshold Who will be affected? Who will not be affected? What needs to be done? Implementation considerations Titles needing special consideration Communication and change management Questions

WHAT IS THE FLSA? The Fair Labor Standards Act of 1938 is the US Department of Labor (DOL) federal wage and hour law. Everyone is “covered” but some employees are exempt and some are nonexempt. The FLSA requires nonexempt employees to be compensated at time-and-one-half for all hours worked over 40 in a workweek, with payment in overtime (OT) or compensatory time pay.

WHAT IS THE DIFFERENCE BETWEEN EXEMPT AND NONEXEMPT? Hourly Paid based on an hourly rate for time worked Leave accounted for in 15 minute increments Eligible for OT/compensatory time Salaried Paid based on an annual salary Leave accounted for in half-day increments Not eligible for OT/compensatory time

EXEMPTION TESTS Exemption from FLSA overtime pay requirements is based on qualifying for all three of the tests: Salary Basis Test. Employees must be paid on an annual salary basis; and Minimum Salary Test. Currently, employees must be paid above a salary threshold amount of $455 per week or $23,660 annually; and Duty and Discretion Tests. Employees must qualify as an executive, administrative, professional or computer professional.

CHANGES TO THE MINIMUM SALARY THRESHOLD The US DOL has announced that it will raise the minimum salary threshold to the 40th percentile of weekly earnings for full-time salaried workers in the lowest wage Census region. This increase sets the threshold at $913 weekly or $47,476 annual salary, more than double the current threshold. The final rule was announced on May 18, 2016. It will be effective December 1, 2016.

CHANGES TO THE MINIMUM SALARY THRESHOLD Pay for part-time appointments will not be pro-rated. An employee with a 12-month (A-basis) 75% appointment, to a position that would pay $60,000 (above the $47,476 threshold) for 1.0 FTE, is actually being paid $45,000. As $45,000 is below the $47,476 threshold, the employee will be nonexempt and eligible for OT/comp time.

CHANGES TO THE MINIMUM SALARY THRESHOLD An employee with a nine-month (C-basis) appointment that makes less than $913 per week during the nine months, is below the threshold. This employee will be nonexempt and eligible for OT/comp time.

SPECIAL MINIMUM SALARY THRESHOLD Academic Administrative Employees FLSA permits special salary threshold, using the entry level salary for “teachers.” At UWS institutions, Acad. Admin salary is set at entry rate for Associate Lecturers, $33,092 for 12 months or $15.90 per hour For employees with primary duties that are administrative functions directly related to academic instruction or training Not many will qualify

WHO WILL BE AFFECTED? If an employee’s rate of pay is below the new minimum salary level, that employee must be nonexempt unless he or she qualifies for an exception. Some exempt university staff and noninstructional academic staff will become nonexempt because their salaries will be below the new threshold. Academic staff that become nonexempt will become hourly academic staff. Nonexempt academic staff will be paid on a biweekly payroll.

WHO WILL NOT BE AFFECTED? Faculty and instructional academic staff whose primary duties are teaching are exempt regardless of salary. Teachers, lawyers, and doctors qualify for this professional exemption. Existing nonexempt university staff will not be affected.

WHAT NEEDS TO BE DONE? Identify all FLSA exempt employees (except “teachers”) with an annual salary less than $47,476 and evaluate the options. Make certain that the primary duties of the position are genuinely exempt. “Primary duty” means the principal, main, major or most important duty that the employee performs. Determination of primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the job as a whole.

WHAT NEEDS TO BE DONE? For each employee, compare the cost of increasing his or her salary to $47,476 to the cost of anticipated OT. New timekeeping procedures for hourly academic staff are under consideration. Human Resources must identify and resolve issues that arise when the FLSA designation of employees is uncertain.

IMPLEMENTATION CONSIDERATIONS Raise the salaries of those close to the threshold who are likely to incur OT, or Pay overtime for hours worked over 40 in a workweek. Does the institution or School/College/Division need to adopt internal policies to limit the earning of OT and/or compensatory time?

IMPLEMENTATION CONSIDERATIONS Can 12-month appointments be reduced to 9- or 10-month appointments, and be paid at least $913 per week? Can part-time employees be given 100% appointments to raise them above $913 per week? Watch out for pay compression between peer employees or between supervisor and employee relationships.

TITLES NEEDING ADDITIONAL CONSIDERATION Coaches Athletic Trainers Residence Hall Directors Postdoctoral Scholars Admissions Counselors and other staff

COMMUNICATION AND CHANGE MANAGEMENT Communicate the changes in the FLSA regulations and in timekeeping to the affected staff and governance groups Communicate the changes in the FLSA regulations to supervisors who will approve hours in HRS Prepare employees likely to become nonexempt for more controlled work schedules and more record keeping and time reporting.