Regulatory changes to the federal Fair Labor Standards Act (FLSA) were scheduled to become effective December 1, 2016. However, the federally mandated FLSA rule change is currently on hold due to a nation-wide preliminary injunction issued by a federal district court judge on November 22, 2016. No decisions are final, and the US Department of Labor (DOL) has the right to appeal immediately. As a result, UNC General Administration has indicated that all human resources actions related to this rule change are now also on hold until a final resolution is determined.
Impact of the New Federal Regulation at UNC Asheville
Fair Labor Standards Act (FLSA)
In the spring of 2016, the Department of Labor (DOL) passed a significant change to the Fair Labor Standards Act (FSLA) resulting in more employees being subject to timekeeping and overtime compensation. These changes will take effect beginning on December 1, 2016.
FLSA regulations categorize employees as either “exempt” or “nonexempt” for purposes of being subject to timekeeping and overtime requirements (awarding comp time at time and a half for every hours worked over 40 hours in one week).
At UNC Asheville, the regulation applies to all employee categories. The terms “exempt’’ or “nonexempt” from FLSA are not the same as being classified by the UNC System as either SHRA (Subject to the State Human Resources Act) or EHRA (Exempt from the State Human Resources Act). Employees can be classified as SHRA or EHRA and be either “exempt” or “nonexempt” from FLSA based on the duties of their position and salary.
Significant Impacts of the new FLSA Regulation
In the revised regulation, to be FLSA “exempt” an employee must primarily perform “exempt” duties AND must be paid a salary of at least $913/week or $47,476/year.
Senior Staff and the Office of Human Resources have been monitoring the potential changes and have worked with UNC General Administration, national Human Resources organizations, and peer institutions to ensure UNC Asheville is prepared to react to these changes. Additional information regarding FLSA and how positions may be impacted can be found in the Frequently Asked Questions.
Frequently Asked Questions
The FLSA Regulation
What is the Fair Labor Standards Act?
The Fair Labor Standards Act (FLSA) is a federal law that establishes the federal minimum wage, overtime, equal pay, recordkeeping, and child labor standards. A major component of the FLSA is the requirement for certain employees to be compensated for hours worked in excess of 40 in a week. The State of North Carolina does not have separate wage and hour legislation.
To which types of organizations does the FLSA apply?
The FLSA applies to virtually all employers. This includes employees that work in the private sector, or in federal, state, or local governments.
What is the difference between FLSA nonexempt and exempt positions?
Most positions are covered by the federal FLSA; these positions are referred to as “nonexempt” because they are covered by (i.e., not exempted from) the FLSA’s minimum wage, overtime, record-keeping, and child labor provisions. At UNC Asheville, employees in FLSA nonexempt positions receive compensatory time for hours worked over 40 in a work week.
Some positions are “exempt” from the law because they are not covered by those aspects of the FLSA. Employees in FLSA exempt positions are not eligible for overtime compensation based on the Department of Labor criteria. For a position to be considered exempt, it must meet specific requirements (“tests”) as identified in the FLSA and by the Department of Labor. These determinations are based on the actual duties of the position – not the title, the workload, or the person in the position.
Impact of FLSA Changes for UNC Asheville Employees
What are the changes to overtime regulations that are being implemented on December 1, 2016?
In 2014, President Obama instructed the Department of Labor to update and simplify the Fair Labor Standards Act. The one new requirement is a regulatory, not a legislative, change.
Since 2004, the salary threshold for exempt positions has been $455/week or $23,660/year. Effective December 1, 2016, the required minimum base salary for FLSA exempt positions will be $913/week, or an annualized salary of $47,476/year. In other words, for a position to be considered exempt, in addition to meeting the salary basis and duties tests, the position must also pay at least the minimum amount of $47,476 which cannot be reduced due to the quantity or quality of work performed.
What position types at UNC Asheville might be impacted by these changes?
These changes only impact those positions currently designated as “exempt” from FLSA that do not meet the new standards to remain “exempt”. The regulation applies to all such FLSA exempt positions regardless of whether the positions are classified as a regular EHRA (Exempt from the State Human Resources Act) or SHRA (Subject to the State Human Resources Act) position, faculty, or temporary position.
Do these changes have anything to do with being classified as EHRA (Exempt from the State Human Resources Act) or SHRA (Subject to the State Human Resources Act)?
No. Positions that are EHRA (Exempt from the State Human Resources Act) or SHRA (Subject to the state Human Resource Act) can be either exempt or nonexempt from the Fair Labor Standards Act (FLSA).
Although the wording is similar, there is no correlation between an EHRA or SHRA position and the position’s FLSA status as an exempt or nonexempt.
What does the change mean for employees who are currently in exempt positions and paid below the new salary threshold?
The new FLSA regulation will require positions paid less than $47,476 to be converted to nonexempt regardless of the duties performed, or being paid on salary basis. Professional positions such as doctors, lawyers, and teachers are exempted from this salary requirement.
UNC Asheville, like employers across the country, is analyzing the business impact and financial implications of this new requirement and determining how to proceed. Two options for positions paid below the new minimum salary may be considered:
- Convert the position to nonexempt status, and comply with overtime/comp time requirements and recordkeeping provisions. This will result in those employees becoming eligible for compensatory time at time and half for every hour worked over 40 hours in workweek.
- Adjust the base salary of the position to an annualized rate of $47,476 per year and retain the exempt status of the position.
Note: Paying a position at least $47,476 per year does not make it exempt. The position must still meet the salary basis and duties tests to be considered exempt.
All changes will occur prior to the end of November 2016 to ensure compliance by December 1, 2016.
How and when will I know if my positions is impacted by the FLSA changes?
Employees and supervisors will be notified before the end of November. Training for supervisors and employees will be mandatory for positions that are being converted to nonexempt. Training will include understanding of what is compensable time and how to track and record time worked.
How do I know if my position is designated as FLSA exempt or nonexempt?
This information is listed on your position description. Currently, employees who complete time reporting on a monthly basis are designated as exempt. Employees who complete time reporting bi-weekly are designated as nonexempt.
Changes may occur to the time reporting process as a result of the new regulation that may impact whether employees who are converting to nonexempt will still complete monthly time records. This will be covered in the mandatory training.
Overtime/Compensatory Time and Work Schedules
What is “overtime?”
Overtime is defined under the FLSA as time worked over a “threshold.” For UNC Asheville, the threshold is 40 hours per workweek. For example an employee may work over 8 hours in one day and not receive overtime. Overtime is only accrued if the employee’s total workweek exceeds 40 hours. For individuals who work part-time schedules, overtime is not accrued until they work 40 hours per week. Hours worked up to 40 hours per week are accrued as straight time.
Can overtime be provided as compensatory (comp) time instead of pay?
Yes. Public sector employers may use compensatory time (“comp time”) to compensate employees in nonexempt positions for hours worked over 40 in a workweek. This provision is intended to contain costs for publicly-funded organizations while providing the flexibility to meet business needs.
With comp time, employees in nonexempt positions accrue one-and-a half hours of additional leave for every hour worked over 40 in a workweek. Comp time is prorated for increments of less than one hour.
The FLSA does not permit the maximum accrual of comp time to exceed 160 hours worked (240 hours of comp time). If employees accrue 240 hours of comp time, any additional hours must be paid as overtime pay. Upon separation from employment at the university, nonexempt employees with comp time accruals will be paid their entire balance at their current rate of pay.
Different rules apply to some public safety positions based on work schedule. This is approved by the division Vice Chancellor and no changes will be made to this process.
Can employees work additional hours over 40 in a workweek without asking their supervisor?
No. Employees must not work any hours beyond their required work schedule without supervisory approval. However, if an employee works without supervisor approval, compensatory time must still be provided for hours worked. Employees who work without supervisory approval may be subject to corrective action.
Can a supervisor prohibit overtime?
Yes. As supervisor can prohibit employees from working outside of their regular schedule to control compensatory time accrual and overtime payouts. According to existing policy, supervisors should approve in advance any extra hours to be worked.
Can a supervisor require overtime for a nonexempt employee?
Yes. Supervisors can require overtime work when necessary with the accrual of compensatory time for hours over 40 in the workweek. Whenever possible, supervisors should give employees advance notice if this needs to occur.
When can a supervisor change an employee’s work schedule?
Supervisors are responsible for setting work hours and schedules based on the business needs of the university and their department. Supervisors may alter schedules or consider flexible scheduling to cover work during critical times so that hours do not necessitate compensatory time.
Are supervisors liable if they do not comply with FLSA?
Yes. Non-compliance puts the university at risk for lawsuits and back pay. Supervisors will be held responsible for compliance as well as control of overtime.
How can supervisors be sure of the time employees are working?
Supervisors must review employee time records and approve them on a bi-weekly or monthly basis. Supervisors must also pay attention to what employees are doing. If a supervisor sees an employee working during a lunch period, receiving emails during “off” hours, etc., the supervisor must address this with the employee. If employees deliberately hide the fact that they are working or work without supervisory approval, corrective action may occur.
What can supervisors do to control “overtime” (compensatory time accrual and overtime payouts)?
To minimize impact, supervisors should work with the Office of Human Resources to consider the following:
- Use flexible scheduling to accommodate occasional hours outside of the typical scheduled workweek; for example, flex employees’ schedule so they arrive at 11am if they need to work an event that does not end until 7pm.
- Cross-train employees to reduce the dependency on employees who are required to work overtime due to their expertise in specific areas.
- Review position descriptions and tasks for positions.
- Review the compensatory time and leave balances for the department carefully. Consider other options for those employees who may be accruing large amounts of compensatory time.
Additional FLSA Information - Exemptions from FLSA and Duties Tests
What are the FLSA requirements for employees in nonexempt positions?
Three key requirements are described below. These are not the only regulations impacting nonexempt positions.
- The FLSA requires employees in nonexempt positions to be paid at least the federal minimum wage, currently $7.25/hour, for all hours worked.
- They must also receive overtime compensation at time and one-half the regular rate of pay for all hours worked over 40 hours a week. Although employees report their hours worked on a timesheet that is submitted on a biweekly basis, hours worked and leave taken must be recorded on a weekly basis and cannot be averaged over the two-week period. Public sector employers may provide compensatory time in lieu of overtime pay.
- Employees in nonexempt positions must also document their actual hours worked in accordance with the FLSA’s recordkeeping requirements.
How is a position determined to be exempt or nonexempt from the FLSA?
Exempt status is never determined based on a position’s title or the number of hours required to perform the job duties. The duties in a position description may be used to assess the potential exempt status if the position description accurately describes the employees’ current duties.
For a position to be considered exempt from the FLSA, it must meet all three of the following requirements.
- Salary Basis –employee receives a predetermined amount of compensation each pay period and no reduction in pay occurs due to the quantity or quality of work performed in a workweek.
- Salary Threshold –the employee must earn at least a certain weekly rate (“threshold”) established by DOL regulations. This salary threshold is not applicable to doctors, lawyers, or teachers. This amount is changing to $913/week or $47,476 annually. Note: this is the only aspect of the FLSA administrative regulations that is changing.
- Duties test –the duties performed by the position must meet specific criteria as defined by the Department of Labor (DOL). The descriptions below are very brief and do not include all the requirements for each of these tests.
- Executive – Under this exemption, the primary duty, i.e., the reason the job exists, is to supervise two or more employees. This primary duty is not based on percentage of time. Supervision includes the responsibility to hire, train, evaluate performance, determine compensation, and provide corrective action if necessary. This includes being able to make such decisions or providing recommendations to a higher-level supervisor that are given consideration when making such decisions.
- Administrative – Under this exemption, positions are directly related to the management or general business operations of the employer or the employer’s customers and involve employee’s exercising discretion and independent judgement with respect to matters of significance. The administrative exemption is primarily designed for relatively high-level employees whose main job is to “keep the business running.” Examples of positions that meet this exemption are finance, payroll, accounting, human resources, marketing and advertising, government relations, legal and regulatory compliance.
- Professional – Under this exemption, positions require "advanced knowledge" similar to that historically associated with the traditional learned professions. Meeting this duty test requires specialized education, and involves the exercise of discretion and judgment. Examples of positions that meet this exemption are lawyers, doctors, dentists, architects, clergy, registered nurses, licensed counselors, and pharmacists. Teaching falls into this category based on specific definitions of “teaching and imparting knowledge to students in an educational establishment.”
For questions about the FLSA changes, please contact Jaime Head at 828-350-4587 or at email@example.com.