1. Fair Labor Standards Act (FLSA)
Presented by:
Violet Bloom, University Director of Compensation
Scott Shimoda, Compensation Consultant
2012
We are going to review the provisions of the Fair Labor Standards Act and take a look at the policies that Indiana University has established to enforce them as they apply to overtime for non-exempt staff.

2. Fair Labor Standards Act (FLSA)
Overview of federal law
FLSA violations
Exempt vs. Non-exempt positions
Requirements for Non-exempt
Managers’ and employees’ responsibilities
Compensable time
Travel, training and volunteer time
Multiple jobs
Summary of common FLSA violations

3. Fair Labor Standards Act (1938)
Enacted to protect workers
Establishes minimum wage
$7.25 on July 24, 2009
Overtime pay
Record keeping
Required Posters
Child labor requirements
Compliance resources:
Basically, the Fair Labor Standards Act (also referred to as FLSA) is an employee protection law that was enacted in 1938 to protect workers during the Great Depression.
Commonly referred to as the Wage and Hour Law

4. Fair Labor Standards Act (FLSA)
U.S. Department of Labor (DOL), Wage & Hour Office
Administers act and investigates complaints
Burden of proof is on employer
– regulations, file complaints, etc.
Indiana University
Train managers and supervisors
Establish/update policies to ensure compliance
Classify positions as Exempt or Non-exempt
Research and resolve potential violations

5. FLSA Violations at IU May 2000, DOL provided IU with notice:
“If at any time in the future your firm (IU) is found to have violated the monetary provision of FLSA, it will be subject to such penalties.”
Time work was reconstructed and paid
Back wages up to 2 years
Future violations could include (funded by RC)
Back wages up to 3 years, legal fees and court costs
Criminal penalties for willful violation can result in prosecution & $10,000 fine
Civil penalties of up to $1,100 for each violation

6. FLSA Exemption Tests (from minimum wage and overtime)
Salary Requirements
Salaried
Paid for job not hours worked
Predetermined compensation/pay period not subject to deductions due to quality or quantity
Highly Compensated $100,000 or more
$455/week (or $27.63/hour – computer employees)

7. FLSA Exemption Tests (from minimum wage and overtime)
Duties Tests
Executive
Administrative or Academic Instruction
Professional – Learned & Creative
Outside Sales
Computer
Both salary and duties test must be satisfied to classify positions as Exempt (PAE)

8. FLSA Exemption – Primary Duty
Applies to position based on responsibilities
Principal or most important duties
Actual duties vs. described duties
Considerations include, but are not limited to:
Discretion and independent judgment in significant matters
Amount of time spent performing exempt work
Relative freedom from direct supervision
Positions assigned more than 50% of exempt work generally satisfy the primary duty requirement

9. Non-exempt IU Employees
Professional Staff - PAO
Primary duties do not satisfy FLSA duties test
Professional Staff – PAU
FLSA salary requirement not met
Support and Clerical Staff
Service Maintenance Staff
General Supervisors - GS
Hourly & Student Hourly Staff

10. FLSA Requirements for Non-exempt Employees
Recordkeeping
Overtime Pay
Multiple Jobs
Travel time
Training time
Volunteer Time

11. Recordkeeping Responsibilities
Non-exempt Employees
Complete timesheets daily/weekly
Record hours worked, compensatory time & time-off
Managers
Approve overtime in advance
Verify hours worked and time-off
Approve timesheet bi-weekly
Department
Retain records

12. What is Compensable Time?
All time from the start of the first principal activity of the day until the end of the last principal activity of the day.
Principal activities = the “activities an employee is employed to perform”
Includes activities that are integral and indispensable to performing the principle activities.
Time spent doing something other than principal activities is compensable if it is an integral part of principal work activities.
General test is whether it is an indispensable part of employee’s job activities.
Employee must be paid for changing time if he or she is required to change in and out of his or her uniform at work.

13. Compensable Time Suffer or Permit to Work
Work is being performed in order to “permit” its performance.
Employer requires or allows employees to work.
Time spent doing something other than principal activities is compensable if it is an integral part of principal work activities.
General test is whether it is an indispensable part of employee’s job activities.
Employee must be paid for changing time if he or she is required to change in and out of his or her uniform at work.

14. Compensable Time Time spent preparing and finishing up
Putting on safety gear, cleaning equipment
Filing reports, letters, documents
Waiting time
Employee is unable to use the time effectively for his or her own purposes; and
Time is controlled by the employer
Time spent doing something other than principal activities is compensable if it is an integral part of principal work activities.
General test is whether it is an indispensable part of employee’s job activities.
Employee must be paid for changing time if he or she is required to change in and out of his or her uniform at work.

15. Example – Compensable Time
Charlie is a non-exempt employee. Due to a upcoming project deadline he decides to work on items related to the project over the weekend. His Supervisor did not request or approve Charlie’s weekend work.
Would this be considered compensable time?
Yes, even though the work was not requested or approved by the supervisor it was suffered or permitted to be performed and is considered work time.

16. Overtime Pay
Paid overtime for hours worked over 40 in the work week including:
Unauthorized hours when work was performed
Employee cannot waive or volunteer to work extra hours with no pay
Employees may be subject to disciplinary action if supervisor does not approve overtime work in advance

17. Calculating Overtime Rate
Hours worked > 40 in a work week
IU work week begins and ends at midnight on Saturday
Paid at 1.5 times “regular rate” or equivalent compensatory time (comp time)
Payroll system automatically calculates overtime based on a weighted average of all pay rates if employee has multiple jobs
Departments can determine method of payment whether comp time or paid, but it should be consistent.
Communicated to employee before time is worked.

18. Compensatory Time Definition of Comp time
Supervisor must communicate to employee how overtime will be compensated prior to any overtime hours worked
Maximum Accumulation per IU policy
Support and Service Staff – 80 hours
Professional (PAO) – 160 hours
Departments can determine method of payment whether comp time or paid, but it should be consistent.
Communicated to employee before time is worked.

19. Example – Overtime Pay
Samantha works 40 hour per week. Last pay period, Samantha worked 43 hours in Week 1 and 39 hours in Week 2 (82 hours in the pay period and an average of 41 hours per week).
Is Samantha eligible for overtime? If yes, how many hours?
Yes – 3 hours. FLSA law requires overtime to be paid when an employee works over 40 hours in a set work week.

20. Example – Overtime Pay
Randy’s work schedule is from 8:00 AM - 4:30 PM with a 30 minute unpaid lunch break. However, he worked through his lunch every day this week without his supervisor’s authorization. Randy’s supervisor is upset.
Which of the following are options for Randy’s supervisor ?
Alter Randy’s time records to deduct 30 minutes of time each day.
Disapprove over-time pay and have Randy take off 2.5 hours next week.
Pay the over-time and make sure Randy doesn’t work during lunch in the future by following correct disciplinary steps.
1 – NO 2 – NO YES

21. Employees with Multiple Jobs
IU is one employer
Paid for all hours
Bona-fide rate for each job
Overtime pay for total hours worked over 40
Weighted average of all pay rates
Common misconception: individuals working for IU are employees of their respective units or departments.
For example; If an employee is hired to work for two departments those hours will be combined as total hours worked.
The rate of pay for dual employment OT must be 1.5 times the employee’s regular rate. A supervisor cannot back into an overtime rate. For example, a supervisor wants to pay an employee $15 an hour, so they determine the hourly rate to be $10/hour.

22. Valid Multiple Job Combinations
Hourly, Service and Support Staff
Non-exempt Professional Staff (PAO & PAU)
Exempt Professional Staff (PAE )
Hours worked in Hourly position should not exceed hours per week
Academic
Multiple job chart:
Common misconception: individuals working for IU are employees of their respective units or departments.
For example; If an employee is hired to work for two departments those hours will be combined as total hours worked.
The rate of pay for dual employment OT must be 1.5 times the employee’s regular rate. A supervisor can not back into an overtime rate. For example, a supervisor wants to pay an employee $15 an hour, so they determine the hourly rate to be $10/hour.

23. Example – Multiple Jobs
Adam has two Hourly jobs. He is employed with two different departments. He updates web pages for one department at $10/hour and works as a cashier for the other at $8/hour.
If Adam works 25 hours updating web pages and then puts in an additional 18 hours in the same work week as a cashier, is he entitled to over-time? If yes, how much?
Yes – 3 hours at 1.5 times his weighted average rate of pay for all positions he works.
Which department is liable to pay the over-time?
The department where the employee is clocked into when OT occurs is liable to pay for the over-time worked. If the employee works OT in both departments, then both are liable to pay for only the time worked in their respective departments.

24. Example – Multiple Jobs
An employee in a Support Staff position was hired to teach a class outside of normal working hours. The employee signed a contract that promised payment of a flat dollar amount for teaching the course.
What are the potential issues?
Primary position is non-exempt
Flat dollar amount vs. bona-fide hourly rate
All hours worked must be included in the overtime calculation
Back wages for all hours worked possibly due

25. Meals and Rest Periods
Meal periods are not hours worked when the employee is relieved of duties for the purpose of eating a meal
Rest periods of short duration (5 to 20 minutes) are counted as hours worked
IU policy provides:
Paid Rest period - 15 min./half day for Support and Service Staff
Unpaid Meal period -1 hour/day
Department may establish a different schedule

26. Example – Meals & Rest Periods
Erin, employed in a PAO position, typically sits at her desk during her lunch break and often answers work related s and phone calls.
Should Erin be compensated for her lunch break?
Yes –FLSA law states that an employee must be completely relieved from duty for the purpose of eating regular meals. The employee is not relieved if he/she is required to perform any duties, whether active or inactive, while eating.

27. Travel Time Home To Work (Normal Commute)
Before and end of regular workday not compensable
One Day Assignment
Traveling to and from another city or job locations is work time

28. Example – Travel Time
Tom, an IUPUI employee, drove to Bloomington for training.
Normal work schedule is 8 AM – 5 PM
Left home at 6:30 AM arrived at 7:45 AM
Training was from 8:00 AM to 3:30 PM
One hour break for lunch
He drove home and arrived at 5:00 PM
How many compensable hours did Tom work?
1.5 hours (morning drive & waiting time)
+ 6.5 hours (training time)
+ 1.5 hours (evening driving time)
9.5 hours compensable time

29. Overnight Travel Paid Work Time Union covered staff
All travel time except breaks for meals and time at destination when free to come and go
PAO, PAU and Non Union Covered staff
Time driving
Time performing work while traveling
Travel time during normal work hours
Travel time on a day off during regularly scheduled work hours
Exceptions: time traveling as a passenger, breaks for meals and time at destination when free to come and go
Ex: Employee is attending a conference that is located in another city. After the conference is over, the employee goes back to their hotel room and works on a presentation that he/she will be delivering the next day.
Should they be compensated for the hours worked? Yes, they are performing duties related to their position.

30. Training Time for Non-exempt
Conference, meeting, or seminar
Attendance is during normal work hours
Attendance is required by the university
Event is directly job-related
University work is performed
Meal breaks, sleeping, and voluntary social events are not work time
Ex: An employee who is a lab technician decides that they want to take a class offered by UITS that will help them learn how to merge letters. It is offered 2 days a week from 3pm to 4pm.
Should the employee be paid for the time spent attending this workshop? No, because it is not required by the university and university work is not performed.

31. Volunteer Time Criteria for a “Volunteer”
Services must be totally unrelated to employee’s position.
Services must be offered freely without pressure or coercion.
There should be no promise or expectation to be compensated for volunteer services.
Volunteerism – okay of services are totally unrelated to their work, offered freely without pressure or coercion, there has been no promise, and is no expectation, of compensation. Give example.
Ex; Department x is currently experiencing a lot of activity because it is August and the semester is about to begin. The employee in the non-exempt position decides that he/she loves their job and insists on working extra hours to help them out without receiving any overtime pay. He/she knows that the department doesn’t have a lot of money and feels like he/she will make a good impression on the supervisor by putting in the extra hours without expecting compensation.
As the employee’s supervisor, what would you do? Inform the employee that the department cannot afford to pay them for working extra hours. If the employee does work over 40 hours he/she must be paid for hours worked, but instructed not to do it again in the future.

32. Example - Volunteering
Julie, an Office Services Assistant, performs a variety of administrative duties for her department. One weekend she offers to help with a fundraiser sponsored by the department.
If she performs the same or similar type of work, such as developing & copying flyers for the event, should she be paid?
Yes – The volunteer work is similar to her normal work duties.
If she performs work outside of her normal duties, such as parking cars, should she be paid?
No – The work is not related to her normal duties.

33. Summary - Common FLSA Violations
Employees in Non-exempt positions not recording and receiving pay for all hours worked
Managers are responsible for approving time records and ensuring employees are paid for all time worked
Non-exempt positions misclassified as Exempt
Position descriptions and classifications need to be current
Employees working side-by-side doing the same work and their positions are classified differently
Position descriptions need to be updated and classifications reviewed
Employees in Non-exempt positions paid a flat dollar amount for work in another IU job
All work for the university must be paid hourly
Total hours worked over 40 are eligible for overtime pay

34. Additional Resources HR Representatives/Campus HR Office
Online resources
University HR Services (
University HR Services –Compliance Resources (
Office of Financial Management Services – Payroll Website (
U.S. DOL – Wage and Hour Division (
The web address where you can find IU policy manuals and payroll policies is provided here, as well as, the URL for the Wage & Hour Division of the Department of Labor (responsible for enforcement of the FLSA).