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FLSA - new federal exemption regulations

Changes to the Fair Labor Standards Act (FLSA) regulations were announced on May 18, 2016, including new overtime provisions. These updates were slated to go into effect December 1, 2016; however, on November 22, 2016, a federal judge placed a preliminary injunction on the FLSA overtime rule, tentatively halting the legal requirement to make changes. University leadership made the decision to move forward with implementing all announced changes. Employees who transitioned from exempt to non-exempt status will remain as non-exempt, overtime-eligible employees*. If you have questions about the FLSA, please contact your campus HR office. Links to campus HR offices are available on the UM System HR homepage.

*The new FLSA status of jobs will remain as assigned in 2016 until such time as a final decision is made at the federal level regarding the new regulations, or at any time the university determines that additional review is indicated.


FAQs

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The FLSA regulation

What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act is a federal law that establishes the federal minimum wage, overtime pay, recordkeeping, and child labor standards. This law applies to employees that work in the private sector, or in federal, state, or local governments. The Wage and Hour Division of the U.S. Department of Labor administers and enforces the FLSA. 

What is overtime?

Overtime is required by the FLSA for non-exempt workers for all hours worked in excess of 40 hours in a workweek. Overtime is paid at one and one-half times the non-exempt employee’s regular rate of pay. 

 Can employees waive their right to be non-exempt (hourly)?

No, the classification is a legal designation that cannot be waived. A non-exempt employee also cannot waive their right to receive overtime pay for any hours worked over 40 in a workweek.

UM System faculty and staff affected by the regulation

How will I know what job titles at the University of Missouri System were affected by the changes?

The University of Missouri System Office of Human Resources is responsible for classifying all positions systemwide. The team has initiated a review of all job titles impacted by the updated regulations, and appropriate notifications of the outcome of this review are being made to all those who are affected.

How was the determination made for each job?

The university, in partnership with Sibson Consulting, conducted a thorough review to ensure proper classification of positions.

  1. Academic appointment titles: A survey instrument was developed and sent out to employees in certain academic appointment titles (i.e. those deemed not to be teaching) to ensure proper classification. Employees were given the opportunity to describe the nature of their positions and the primary areas of focus. This information, along with information gathered from discussions with campus leaders, was analyzed to identify proper classification under the FLSA.
  2. Staff titles: An independent, comprehensive review of job descriptions, followed by a validation process, were conducted to ensure consistency and accuracy of classification determinations.


Where can I find a list of all jobs that were affected as a result of the FLSA study?

Academic jobs (PDF)

Staff jobs (PDF)

What do the terms exempt (salaried) vs. non-exempt (hourly) mean?

These terms relate to the overtime provisions of the FLSA. If a job is FLSA exempt, that means it is exempt from the overtime provisions of the FLSA no matter how many hours are worked. If a job is non-exempt, it is eligible for overtime pay for any hours worked over 40 hours in the workweek.

How are jobs determined to be exempt?

There are three tests for determining if the work qualifies for exemption from the overtime provisions of the law or not, and unless there is a specific exception all of these tests must be met:

  1. The "salary-basis" test requires that an employee be compensated on a salary or fee basis.
  2. The "salary level" test requires that an employee be paid above a certain threshold in order for the job to be considered exempt from overtime requirements. Under the updated regulations this threshold increased from $23,660 per year ($455/week) to $47,476 per year ($913/week) for most workers. Because the proposed regulations were never fully implemented, the "salary level" remains at $23,660.
    • The threshold is $30,000 ($577/week) for workers who are classified under the academic administrator exemption.
    • Salaries for employees in teaching, medical, and outside sales jobs or those on a stipend are not required to meet a specific threshold.
    • There is no ‘pro-rating’ of the required threshold for employees that work less than 1.0 FTE.
  3. The "primary duties test" compares the actual work performed with the criteria established by various tests for exemption under the FLSA. This part of the requirement is not changing with the updated regulations, but may be reviewed by the U.S. Department of Labor at some point in the future.
     

Will all employees in the same job title have the same FLSA status?

Since FLSA status (exempt or non-exempt) is determined based on the job, all regular full-time employees within the same job title will have the same FLSA status. There is an exception for part-time employees who are in an exempt job title simply because often their part-time salary level does not meet the FLSA ‘salary level’ test which is required for the employee to be classified as exempt.

For example: Let’s assume that two full-time employees are in a job title that has been determined to be an exempt job under the FLSA. Employee A is a full-time employee with an annual salary of $50,000 and Employee B is a full-time employee with an annual salary of $47,000. When the new FLSA salary level threshold of $47,476 goes into effect, Employee A will have no change in salary. Employee B will be brought to the new minimum salary (a $476 dollar per year salary increase). Both full-time employees (A and B) will remain in exempt status in alignment with the status of the job because they meet all of the FLSA tests for exemption.  Alternatively, assume that Employee C is also in the same job title, but works part-time (a 50% appointment). This employee makes $24 per hour, which would be $49,920 per year if this employee worked full-time. However, given the part-time status, Employee C will only make $24,960 per year. At 20 hours of work per week, Employee C makes $480 per week, and the new FLSA weekly rate for exemption status is $913/week. Accordingly, Employee C will be non-exempt, and paid on an hourly basis because even though Employee C is in a job that is otherwise classified as exempt, Employee C does not meet the FLSA salary level test for exemption.

Can part-time employees be classified as exempt? 

Yes, as long as the employee is classified in a job that is exempt, and is paid at least $913/week, per the university’s practice the employee can be considered exempt under FLSA, regardless of FTE status or number of hours worked.

Can part-time employees’ salaries be prorated in order to meet the salary minimum?

No. The salary level test states that employees must make at least $913/week, per the university’s practice to meet the salary level requirement. The minimum threshold establishes a baseline that must be met, regardless of FTE status or the number of hours worked per week. 

UM Policies and Procedures

Overtime pay

When does overtime pay start?

October 23, 2016 was the effective date for employees changing from exempt to non-exempt. Overtime pay starts when a non-exempt employee works more than 40 hours in the work week. For employees who converted to hourly pay (e.g. non-exempt), eligibility for overtime pay began on the date of the conversion.

What do I have to do to get approval for overtime?

If you need to work more than 40 hours in the workweek, you need to speak with your supervisor in advance and get approval to work the extra hours. However, the regulations are very clear that if overtime is worked it must be paid according to legal requirements regardless of whether it was approved or not approved. Many departments require employees to not work overtime unless it has been approved in advance. Accordingly, even though unapproved overtime must be paid in order to comply with legal regulations, the department could also implement corresponding disciplinary action for the employee working overtime that was not authorized. (See HR-211 Overtime in the HR Policy Manual for more information.)

How do managers approve overtime?

Normally supervisors/managers follow department guidelines for approving overtime for non-exempt staff. If there are no guidelines, the department will need to develop guidelines that are appropriate for the area and type of work performed, and communicate the process and expectations to affected employees. Supervisors/managers may also verbally grant or approve overtime in the absence of formal guidelines. Contact your local Human Resources office for further guidance and support if needed.

Some university jobs require 24/7 attention (e.g. care of animals) or working odd hours (e.g. coaching sports teams, recruiting fairs). How will the university meet these needs?

This depends upon many factors including funding, etc. The department may choose to pay overtime to current employees, hire additional staff as required to get the work done, reorganize work, or rearrange schedules, or some combination of these approaches.

Will some managers or departments ‘look the other way’ and ask non-exempt employees to work overtime without logging the hours?

If employees are asked to work overtime and not record it, they should contact their campus human resources professional. It is inappropriate and a violation of the FLSA for managers or departments to ask non-exempt employees to work without recording the time. Managers and departments can require employees to not work over a certain number of hours; however, if the hours are worked they must be recorded and paid appropriately.

Can a manager offer ‘comp time’ instead of overtime pay?

Yes, departments may grant employees compensatory time off (i.e., “comp time”) in lieu of immediate overtime pay at a rate of one and one-half hours for each hour of overtime worked. (See HR-215 Compensatory Time in the HR Policy Manual for more information.)

Time reporting & pay

How does my time reporting change due to changing from exempt to non-exempt status?

The FLSA includes a recordkeeping requirement for non-exempt employees. Accordingly, non-exempt employees must maintain accurate daily records of time worked. Such records must document hours actually worked rather than hours scheduled to work. See HR-106 Reporting Hours Worked in the HR Policy Manual for more information. Hours are tracked in Time and Labor or via a timeclock, depending on the work location.

Training on the university’s recordkeeping system: https://www.umsystem.edu/ums/hr/peoplesoft-hr/payroll_training

When did the transition to the biweekly pay cycle occur?

Here are the key details for employees who changed from exempt to non-exempt status:

  • Effective October 23, 2016, new non-exempt employees began tracking hours worked, and were paid hourly on a biweekly schedule beginning that date.
  • New non-exempt employees also became eligible for overtime at 1.5 times the hourly rate for all hours worked over 40 in a workweek. Check with your manager regarding any department-specific rules related to overtime.
  • The last monthly paycheck was issued on October 31 for the period October 1 – 22.
  • The employee's salary on 10/23 remained the same, and was converted to an hourly rate of <$x.xx>. The first biweekly paycheck was distributed on November 16 for the period October 23 – November 5.
  • Vacation leave accrual was “grandfathered”, meaning it continues at the same rate unless you subsequently change jobs.

Entering & approving time

The Time and Labor training website provides resources on entering and approving time. To assist employees with entering time, direct them to Time Reporters. To learn how to approve employees' time as a manager, see Time Approvers.

Reviewed February 22, 2017.