Fair Labor Standards Act (FLSA) - Update to Overtime Regulations

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1 Fair Labor Standards Act (FLSA) - Update to Overtime Regulations Frequently Asked Questions FLSA Basics Who is entitled to overtime pay under federal law? Most employees covered by the Fair Labor Standards Act (FLSA) must be paid at least one and a half times their regular rate of pay for any hours worked beyond 40 in a workweek. For additional information see the U.S. DOL Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act (FLSA) What is the difference between a nonexempt employee and an exempt employee? Nonexempt employees are covered by the Fair Labor Standards Act and must receive overtime pay for hours worked in excess of 40 in a workweek, at a rate not less than one and a half times their regular rate of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek. The Act does not require overtime pay for work on Saturdays, Sundays, or holidays if the overall workweek is 40 hours or less. Because of their duties and responsibilities, exempt employees are not covered by the Fair Labor Standards Act and are not entitled to receive overtime pay for hours worked in excess of 40 in a workweek. "Exempt" is not a title, but a legal classification based largely on job content. The pay rate is also a qualifier for exempt status so that employees below $47,659 will not qualify. FLSA Regulations When did the DOL last revise its overtime regulations for white-collar workers? The DOL last updated the white-collar overtime regulations in That update, which included setting the standard salary threshold test amount of $455 per week, has been in effect since August 23, How did the Department of Labor come up with the new salary threshold? The method used for setting the threshold for the administrative, professional and executive exemptions is based on figures from the Census Bureau and Bureau of Labor statistics and set it at the 40th percentile of the full-time salaried workers for the lowest-wage region in the United States (currently the South).

2 FLSA Changes - Impact to USF When is USF required to implement the changes to the overtime rules? The effective date of the final rule is December 1, At USF, the changes in status from exempt to non-exempt will be effective on November 18, 2016, the beginning of the pay period which includes December 1. Future updates to those thresholds by the DOL are said to occur every three years, beginning on January 1, How will these overtime rule changes affect USF? Financial Costs: The main financial impact at USF will be the payment of overtime to employees who become eligible. The practice of earning compensatory time in lieu of paying overtime will continue. There will also be an expense involved in salary increases for some employees to maintain exempt status. Organizational and Cultural Challenges: Exempt employees that are changed to nonexempt will have to track start times, end times, and meal breaks. This may be perceived as a step back in career growth. However, this change will in no way reflect adversely on the value of an employee s work or the importance of their contributions to USF and so it is not a demotion in any way. The change from exempt to nonexempt is necessary to comply with the Department of Labor regulations, and it provides wage and hour protection afforded by the legislation. Modification of Processes/Structures/Systems: Modifications of internal processes, structures, and/or systems may be needed to accommodate the number of employees moving from exempt to nonexempt status. These may include resource allocation, workload distribution, and timekeeping procedures. FLSA Changes Impact to Employees How do the new regulations affect someone in a position that is already nonexempt? The new regulations do not affect positions that are already nonexempt in any way. All supervisors and employees should use this opportunity to familiarize themselves with current USF overtime regulations and procedures. Why was my position changed from exempt to nonexempt? The DOL implemented a new minimum salary threshold of $913 per week ($47,659 a year with USF s 26.1 biweekly pay periods) to maintain an exempt status. Your title changed from exempt to nonexempt because you no longer meet the new minimum salary threshold. Does this mean I have to submit a weekly time sheet documenting my hours worked and leave used?

3 Yes. Currently, as an exempt employee, you only document your leave usage. After the conversion, you will complete biweekly timesheets Overtime Basics Can I still work during the evening or on weekends? Nonexempt employees must receive pay for all hours worked and must receive overtime pay for hours worked in excess of 40 in a workweek. Any work performed after regular office hours and on weekends counts toward your total hours worked. If the time worked after regular office hours and on the weekend accounts for more than 40 hours in that workweek, you must be pre-approved to work those hours What if I check my voic s or s after regular work hours? Checking voic s or s after regular working hours is considered time worked and you must be compensated for all time worked. Does overtime require preapproval? Yes. Employees must obtain the approval of their supervisor prior to working overtime. Individual departments may set procedures for pre-approval. What happens if I don t have my overtime preapproved? USF must pay an employee for all time worked and pay overtime for hours worked in excess of 40 in a workweek. However, working unauthorized overtime may subject the employee to disciplinary action. Work Time Basics Am I required to take a lunch? There is no USF policy requiring a lunch break. However, employees who work eight hours or more in the workday should have an unpaid meal break of either one hour or a half-hour. For more information on meal breaks and rest periods please refer to the attendance and leave section of the Human Resources website. Can I work less time the following week if I work more than 40 hours in the preceding week? No. USF defines the workweek as 12:01 a.m. Friday through 12:00 midnight the following Thursday. Any hours worked in excess of 40 during this time period must be paid according to FLSA requirements. If you work 43 hours in the first week of the pay period overtime work will be tracked

4 for the extra 3 hours, You cannot work 37 hours the following week as an alternative to recording overtime hours. (Note There are some pre-approved non-standard workweeks at USF which are assigned regularly to specific employee groups.) Do I have to make-up my time if I come in late or leave early? Yes. Nonexempt employees are paid for actual time worked. If you are two hours late in the morning you will need to work two additional hours during the regular workweek, or take two hours of annual or sick leave. Can I offer to work on my own time without any expectation of payment? No. Nonexempt employees must be compensated for all hours actually worked. Can an employee decide to waive payment of overtime? No. The overtime requirement may not be waived under any circumstances due to federal guidelines. Can my supervisor make adjustments in the schedule before overtime occurs? A supervisor may adjust the schedule within the same workweek (Friday - Thursday) before overtime has been worked. Example: The nonexempt employee worked nine hours Friday - Wednesday, which is 36 hours. The supervisor may allow the employee to work for four hours on Thursday so that the employee is only paid for 40 hours that workweek. Please note that the supervisor may not avoid overtime by adjusting the schedule in a different workweek. Supervisor/Manager Information As a supervisor, will my responsibilities change with regard to time approvals? Yes, non-exempt Administration employees will need to submit timesheets to supervisors in a timely manner so that their pay may be appropriately certified. Typically, the supervisor will review timesheets near the end of each biweekly pay period. I have employees that will become nonexempt due to the new threshold. I really can t afford the cost of paying overtime what should I do? Although you can t make the decision to not pay overtime for hours worked over 40, you do have other ways to address the situation. We suggest you look at work practices, schedules, and resource allocation to minimize the impact to additional overtime. We suggest you start thinking about this now and make plans before the changes go into effect on November 18, Human Resources

5 will offer training session on strategies for controlling overtime expenses. As a Manager, what should I do to prepare for my employee for becoming nonexempt? You should be prepared to have an in-person discussion with each of your employees that will become nonexempt. Supervisors can also begin by working with affected employees to track time worked. This will give supervisors a rough estimate on how the change will affect their department. What should I do if I know my employee is working unapproved overtime, for example, when I see s sent after work hours? USF is required to pay for all time worked by nonexempt employees. The supervisor should have a conversation with the nonexempt employee about working outside the normal work schedule without prior approval. If this repeatedly continues after having the discussion, contact your HR Consultant. My grant doesn t allow for overtime. Do I still have to pay it? Yes. USF is required to comply with the FLSA and must pay overtime regardless of the source of funding. Part-Time Employees How are part-time employees paid overtime? Part-time employees are paid overtime for hours worked over 40 hour per work week. I work part-time. Will my pay be calculated at 40 hours to determine if I am over the new threshold? The 40-hour equivalent salary is not used to make this determination. The actual weekly pay of $913 per week is used to determine whether an employee is over the threshold. Payroll and Benefits Deductions Is this change considered a Qualifying Change in Status event, allowing me to make a change to my benefit elections? No, the change from exempt to nonexempt status is not considered a Qualifying Change in Status event under IRS regulations, and does not allow you to change your current Benefits elections. Only if there is a change in FTE (appointment percentage) or a change in salary, would there potentially be an impact to benefits-eligibility and the cost sharing percentage for benefits, respectively.

6 Will becoming nonexempt affect my retirement contributions? No. The same contribution rules apply and these contributions are calculated off a percentage of your base pay. Will my Flexible Spending Accounts (FSA) deductions change? No. Will becoming nonexempt affect my eligibility for the Optional Retirement Program (ORP)? No. Employees who are in the Administration salary plan are eligible for the Optional Retirement Program (ORP) and this eligibility will continue if they are converted to non-exempt Administration. Leave, Holidays, and Comp Time Do holidays count as time worked? Holidays are not counted the same as work hours for overtime purposes. Rather, Administration employees who work on a holiday get a delayed holiday. See the Human Resources policy on Compensatory leave time and holidays. Do annual and sick leave count as time worked? No. The use of leave should be adjusted in a work week so that annual leave and sick leave do not cause an employee s total hours to exceed 40. At what rate does an employee earn comp time? Comp time is earned at a rate of time and a half, the same as overtime pay. Example: The nonexempt employee works 42 hours in the work week, and there is a prior written agreement in place. The employee then earns three hours of comp time. Can a supervisor force an employee to take comp time in lieu of being paid overtime? No. In order for an employee to receive comp time in lieu of overtime pay there must be a written agreement, in advance, between the supervisor and employee. If the employee does not want comp time, then the employee must be paid overtime. Will my sick and annual leave accruals be affected?

7 No. Administration employees who are converted to non-exempt will continue to earn hours of annual leave and 4 hours of sick leave biweekly. Leave accruals are prorated for appointments less than 1 FTE.