FLSA Overtime Rule Changes Chief Human Resources Officer

Meeting Objectives Briefly review FLSA rule changes & terminology Update on FLSA legal challenge FLSA determination process Changes to University Classification Policy Impact to employees New and revised policies Timesheet Review

Background/Overview

FLSA Regulations Establishes minimum salary & overtime standards Establishes overtime threshold Specifies record-keeping requirements Distinguishes between covered employee (non-exempt) and excluded employees with a Duties Test The FLSA has been in effect since 1938. It’s a 20th century law living in a 21st century business environment.

FLSA Terminology Exempt Employees Non-exempt Employees Paid on a fixed salary basis regardless of hours worked. Not eligible for overtime. Job duties must meet one of the FLSA exemption tests. Based on work performed, not job title. Paid on a fixed salary basis up to 40 hours. Eligible for overtime. Must record time. Cannot work off the clock.

DOL RULE MAKING CHANGES Agency action not Congressional action

Primary Change – Salary Threshold Old Overtime Rule New Overtime Rule Salary threshold: $23,660 annual or $455 week Highly Compensated Individuals (HCIs): $100,000 annual No automatic adjusting Salary Threshold: $47,476 annual or $913 week HCIs: $134,004 annual Salary threshold reviewed every 3 years beginning in 2020 Effective date of new overtime rule: December 1, 2016 Implementation date at W&M: November 25, 2016

Estimated Automatic Increases Year Minimum Salary Level 2017 $47,476 2020 $51,168 2023 $55,148 2026 $59,437 2029 $64,060 2032 $69,042 2035 $74,411

Remember… Salary Test alone does not make you exempt. You must meet the Duties Test also.

Uncertainty Two federal lawsuits were recently filed in an attempt to stall or halt the implementation of the new FLSA Overtime rules: 21 states led by Nevada and Texas filed a Complaint for declaratory and injunctive relief in federal court in Texas, claiming the new rule violates APA rulemaking procedures and the Constitution. 50 business groups claiming the new salary threshold is so high, that it effectively removes the exemption for entire categories that were previously exempt.

How will the DOL respond? December 1 effective date Secretary Perez issued a statement expressing his confidence in the legality of the final rule and criticizing the lawsuits as “obstructionist tactics” Unclear whether these lawsuits will delay the effective date or if the DOL will extend the date Proceeding as planned unless and until there is definitive judicial, legislative or regulatory action

How will W&M respond? Reclassifying due to salary Reclassifying due to duties No new budgetary support for OT $45,500 merit pool threshold New policies pending Overtime must be absorbed by existing budgets

Class & Comp Process

FLSA Determination Process is Made by HR STEP 1: Salary Basis Test Is the employee paid at least $913 per week ($47,476 annual) and is there an exception? Step 2: Exemption Applicability Does the employee meet any of the following exemptions? Teaching Executive Administrative Professional/Creative Computer Professional Outside Sales YES YES EMPLOYEE IS EXEMPT NO NO EMPLOYEE IS NON-EXEMPT EMPLOYEE IS NON-EXEMPT

What You Need to Know Most exempt positions below the salary threshold become overtime eligible Exempt positions above the salary threshold who do not meet the duties test become overtime eligible If position is currently exempt and remains exempt, employee will experience no change Exemption status change is not a demotion Non-exempt employees will benefit from overtime eligibility

FLSA and Higher Education Duties Test does not apply to Instructional Faculty Certain teaching and graduate assistant positions are not affected Some athletic coaches, assistant coaches, and trainers if primary duty is instructing Compensatory time option (for public universities) to offset OT expense

Administrative Duties

Administrative Duties Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Discretion and Independent Judgment Factors include, but are not limited to whether the employee: Provides consultation or expert advice to management Is involved in planning long term or short term business objectives Investigates and resolves matters of significance on behalf of management Represents the company in handling complaints, arbitrating disputes, or resolving grievances Formulates, affects, interprets, or implements management policies or operating practices Can commit the employer in matters that have significant financial impact, and/or negotiate and bind the company Waive or deviate from established policies and procedures without prior approval The comparison and evaluation of possible courses of conduct, and after considering the possibilities, acting or making a decision

Changes to University Classification Policy

Imp’t Policy Changes Any exempt employee hired after 11/25/2016 at W&M will be considered “Professional” Any non-exempt employee hired after 11/25/2016 at W&M will be considered “Operational” Refer to Employee Classification Policy at http://www.wm.edu/offices/hr/flsa/_______.

Grandfathering Any current Professional employee who is an exempt employee and who is reclassified as non-exempt will be grandfathered as a Professional employee No adverse impact to reclassified employees who become non-exempt Continue to participate in ORP Leave accruals will not change Remain a Professional in all respects except overtime When position is rehired, it will be reclassified as an Operational position

Employee Election Operational Exempt employees will have an open enrollment period in early 2017 to convert to Professional status If employee does not elect Professional status, position will be classified as Professional when incumbent leaves

Impact to Non-exempt Employees

FLSA Overtime Pay Pay for hours worked over 40 hours Based on work week NOT pay period W&M’s work week is Sunday – Saturday (Except for VIMS, Athletics & Police).

Increased Time Reporting Requirements Non-exempt employees must be paid for all hours actually worked Hours of work are tracked in Banner self-service Logged hours should reflect actual time worked, regardless of location Semi-monthly timesheets Leave/holidays do not count towards 40 hours

What is “work?” Primary duties Some travel Employer required training Break periods <15 minutes Working lunch Restricted On Call Email & Texting Working at home Depends on the facts…

What don’t I get paid for? Non-working lunch Unrestricted on-call duty Travel as passenger Incidental email or texting Depends on the facts…

Travel Time Pay Non-compensable work time Compensable work time Home-to-work travel or commuting Compensable work time Job site to job site Travel during normal work hours Travel outside normal work hours may be compensable if not the passenger Work during commute may be compensable Refer to Travel FAQs at http://www.wm.edu/offices/hr/flsa/overtimeandtravel/index.php.

Meetings & Training for Non-exempt Employees Attendance at non-mandatory meetings, lectures, training programs can ONLY be excluded from time if the following four criteria are met: It is outside normal working hours It is voluntary It is not job related No other work is concurrently performed

Relevant William & Mary Policies

Hours of Work Policy Exempt employees Non-exempt employees must Required to work any hours necessary to perform the duties of the job. Generally, exempt employees do not receive overtime, compensatory time, or additional pay for hours worked or travel time outside their regular schedule. Responsible for accurately reporting use of any leave in the university’s record keeping time system. This time should be reported in hour increments. Non-exempt employees must Seek pre-approval of overtime from their supervisor. However, employee’s failure to obtain approval does not obviate employer’s OT payment obligations.

Hours of Work Policy Provides supervisors with scheduling discretion. Alternate work schedules are permissible. Adjustments to schedules may be made within the same workweek to reduce or eliminate OT. Failure to obtain prior approval is a violation of policy and may result in disciplinary action. All verifiable overtime hours must be paid. Non-exempt employees are neither expected nor required to read and respond to emails outside of normal working hours

May non-exempt employees: Volunteer to work off the clock? Waive rights to overtime? Track hours “off the record” and not enter hours in Banner self-serve? Work at home without supervisor’s approval? Work overtime without approval?

No!

Telework Policy Non-exempt employees may telework Must have telework agreement on file in HR Supervisor and employee must agree on a work schedule Provide training to employee with respect to what is considered “work” Increased supervisory responsibilities with respect to managing time

Comp Time and OT Leave Policy for Non-Exempt Employees Overtime Leave Employees must elect leave or pay. If no election, default to leave. Employees may accrue up to 120 hours of Overtime Leave (1.5 hours per hour of OT) Leave does not expire Any OT above the 120 hours cap is paid as wages Compensatory Leave Earned hour for hour if employee is required to work on a holiday or when university is closed All compensatory and overtime leave hours must be earned prior to use Compensatory leave must be taken before any accrued vacation, personal, family or sick leave Exempt employees do not receive overtime, compensatory leave, or overtime leave for additional hours worked.

On Call Policy Applies to hourly and non-exempt employees Dep’t should notify the employee in writing if the essential functions of the employee’s job requires him/her to maintain an on-call status. Employees receive 1 hour of on-call pay at their regular rate for each 8-hour of on-call status Employee receives a minimum of 2 hours of on-call pay per call back Otherwise, employee is paid for hours actually worked

Questions? John M. Poma, Chief Human Resources Officer jmpoma@wm.edu (757) 221-3115 Team Wren mailto:hrteamwren@wm.edu Team Griffin mailto:griffin@wm.edu Team Osprey mailto:osprey@wm.edu