Fair Labor Standards Act (FLSA):
New Developments & Managing
Overtime Eligible Employees
Jeffrey N. Jensen
Senior Associate General Counsel
Legal Symposium
October 15, 2015
Office of Legal Affairs
HISTORY OF THE FLSA
President Franklin D. Roosevelt signed the Fair Labor
Standards Act into law in 1938.
The FLSA banned oppressive child labor,
set the minimum hourly wage at 25 cents,
and the maximum workweek at 44 hours.
TODAY’S FAIR LABOR STANDARDS ACT
• Establishes minimum wage, overtime pay & recordkeeping
standards for full-time and part-time workers in the private
and public sectors.
• The U.S. Department of Labor’s Wage and Hour Division
administers and enforces the FLSA.
THE WAGE & HOUR LAW’S
BASIC TENETS
1. Minimum wage must be paid
2. Overtime pay - must pay one and one-half times
regular hourly rate of pay for all hours worked over 40
MINIMUM WAGE
• Since July 24, 2009, overtime eligible workers are
entitled to a minimum wage of not less than $7.25 per
hour.
• Since January 2015 federal contractors must pay a
minimum wage of at least $10.10 per hour.
COMPENSEATION TIME IN LIEU OF OVERTIME PAY
• Tool available to public sector employers
• Employee must have a reasonable opportunity to
use their comp time
• Maximum accrual limit under law/policy, after which
employer must pay out
COMPENSATION TIME
1. Overtime eligible public sector employees in North Carolina
may accrue up to 240 hours of comp time (160 hours
straight time).
1. Any overtime hours worked above the 240 hour maximum
accrual limit shall be paid in the employee’s next regular
paycheck at their overtime rate (time and a half).
COMPENSATION TIME
3. An employer must honor requests to use comp time within
a reasonable period of time, as long as the time off does
not unduly disrupt operations.
4. Pursuant to North Carolina policy, the University should
allow overtime compensation to be taken as soon as
possible.
COMPENSATION TIME
5. Pursuant to North Carolina policy, overtime eligible
employees shall use accrued compensatory leave within
twelve months from the date the work was performed.
6. Moreover, if comp time is not taken within 365 days, the
time shall be paid out in the employee’s next paycheck.
EXEMPT or NONEXEMPT
Employees whose jobs are governed by the FLSA are either
“exempt” or “nonexempt.”
• Nonexempt employees are entitled to overtime pay.
• Exempt employees are not.
Which employees are exempt?
With few exceptions, to be exempt an employee must the
following tests:
(a) be paid at least $455 per week ($23,660 per year), and
(b) be paid on a salary basis, and also
(c) perform exempt job duties.
* Most employees must meet all three “tests” to be exempt.
The “White Collar” Exemptions
The most well-known and commonly used of the
dozens of FLSA exemptions are the so-called “white
collar” exemptions for three categories of employees:
• Executive
• Administrative, and
• Professional.
Test #1
Salary Level Test
• must be paid a minimum of $455 per week
($23,660 per year)
• employees paid less are nonexempt and eligible for
overtime
Test #2
Salary Basis Test
An exempt employee is paid on a salary basis …
• For any week in which work is performed
• Employee receives a fixed, guaranteed amount of
pay
• Pay not subject to reduction regardless of the quality
or quantity of work, or of the hours worked
Test #3
Duties Tests by Job Category
• Executive
• Administrative
• Professional: Learned and Creative
There are typical job duties for each of these white
collar categories.
EXECUTIVE EXEMPTION
• Primary duty of managing the enterprise, department or
division
• Regularly directs two or more employees
• Must possess the authority to hire, fire, or otherwise
affect the status of other employees or to recommend
such action
ADMINISTRATIVE EXEMPTION
• Primary duty of non-manual or office work
• Directly related to the management or general business
operations of the employer or the employer’s customers
(i.e., the University’s students)
• Primary duty includes the exercise of discretion and
independent judgment with respect to matters of
significance
PROFESSIONAL EXEMPTION
“Learned Professional”
• Primary duty is performing work that requires advanced knowledge
in a field of science or learning, customarily acquired by a
prolonged course of specialized intellectual instruction
• Work requires consistent exercise of discretion and judgment
• Fields of science or learning from which degreed professionals
qualify for this exemption: accounting, engineering, medicine, law
architecture, teaching, etc.
PROFESSIONAL EXEMPTION
“Creative Professional”
• Primary duty requires invention, imagination, originality, or talent in
a recognized field of artistic or creative endeavor
• Work requires consistent exercise of discretion and judgment
To review …
Most “White Collar” employees must meet all three “tests” to be
exempt.
With few exceptions, to be exempt these employees must:
(a) be paid at least $23,660/year, and
(b) be paid on a salary basis, and also
(c) perform exempt job duties.
Regulatory Development
On July 6, 2015 DOL proposed a regulatory change to the
“White Collar” Exemption’s Minimum Salary Rule
• Current minimum annual salary threshold of $23,660 will
increase to $50,440 in 2016
• Moreover, in future years the Minimum Salary Threshold
will automatically escalate
Regulatory Development
• Exempt “White Collar” employees in the Executive,
Administrative or Professional Categories currently
making between $23,660 and $50,440 annually would
no longer qualify as exempt, and would become
eligible for overtime
• The “White Collar” Minimum Salary Rule would not
affect learned professional workers who are not subject
to the Salary Level Test, including teachers
Regulatory Development
Bottom Line – The new FLSA “White Collar” Exemption
regulations will likely require the University to reclassify
dozens of employees as nonexempt, making them eligible
to earn comp time for all overtime hours they work.
NEXT STEPS?
1. Review the exempt status of employees based on
proposed salary increase to $50,440
2. Prepare to pay overtime, or to extend comp time, for all
overtime hours worked
1. Alternatively, prepare to limit or prohibit overtime work
to avoid overtime or comp time payouts
NEXT STEPS?
4. Consider raising the salary of affected employees
above the new $50,440 threshold to maintain their
exempt status
5. Consider eliminating select positions
6. Alter jobs by shifting duties and responsibilities
4. Use a combination of the above strategies to manage
Are there other emerging
FLSA challenges for
University management?
Timekeeping Records
• The FLSA requires employers to keep accurate time records for all
nonexempt employees.
• Federal law does not require any particular method for recording
time worked.
Best Practice - A method which requires nonexempt employees to
clock in or write in their own time, or at least sign off on their time is
strongly preferred, as this limits their ability to later say their time
recorded is not accurate.
How to record “hours worked”?
As the FLSA does not prescribe a method, an employer
can use:
• a time clock
• manual time sheets, or
• a computerized timekeeping tool
Timekeeping Records
• Many employers utilize time clocks and computerized timekeeping
systems, in an effort to increase efficiency, decrease cost, and
eliminate some of the human error that goes along with manual
time keeping.
• No system is foolproof!
Beware: U.S. Department of Labor can factor in work time not
reflected on an employee’s official time records, if there is evidence
work is being performed but not recorded.
Email, Texting & Twitter as working time?
Q. If nonexempt employees are using electronic devices to receive
and reply to work-related messages during nonworking hours, is
that time compensable under the FLSA?
A. It depends.
Best Practice #1 - Supervisor should establish a clear expectation,
preferably advising all nonexempt employees to not use their home
computer, laptop, smartphone, PDA or tablet to perform work outside
of working hours or during their unpaid meal breaks.
Email, Texting & Twitter as working time?
Best Practice #2 - Supervisors should be careful not to encourage nonexempt
employees to check or respond to work-related emails during nonworking
hours.
Best Practice #3 - If such work is permitted or expected, however, supervisors
should carefully manage and record all such work by requiring nonexempt
employees to record all time spent checking, sending, or receiving workrelated emails, and then compensate the employee for that time.
• In the spring of 2011, the U.S. Department of Labor launched “DOL –
Timesheet,” a free application for smart phone with an easy-to-use
electronic timesheet.
De Minimus Doctrine
• FLSA’s general rule is that all work is compensable.
• The de minimus doctrine permits employers to treat very
small increments of time as non-compensable (e.g., 10
minutes or less).
• This means that if an nonexempt employee occasionally
works for a few minutes “off the clock” either at home or
before clocking in at work, the employer does not need
to track this time.
Email, Texting & Twitter - Recommendations
1. Use 10-minute (de minimus) rule as guideline
2. Factor in the regularity and aggregate amount of time spent
3. Establish clear expectations regarding use of electronic devices
outside of normal work hours
4. When possible, prohibit nonexempt employees from using
electronic devices to work outside of their normal business hours
5. Finally, be prepared to record and pay for all compensable working
time
Another Management Challenge:
Maintaining Accountability While
Providing Flexibility
Mobile Communication Device (MCD) Allowances
University Policy 317
Laura Williams
University Controller
Office of Legal Affairs
Flexible Work and Telework Arrangements
for SPA and EPA Non-Faculty Employees
University Policy 101.22
Jeanne Madorin
Executive Director of Human Resources for EPA Non-Faculty
Administration, Employee Relations, and Compliance
Office of Legal Affairs