What is the Fair Labor Standards Act (FLSA)?
The FLSA is a federal wage and hour law administered by the U.S. Department of Labor (DOL) since 1938. The law provides employees with wage and hour protections. It impacts employees in the private and public workforce by establishing minimum wage, overtime pay, and other wage and hour regulations.
Under the FLSA, employees are classified as exempt or non-exempt.
- Non-Exempt Employees are paid overtime for time worked in excess of 40 hours in any work week.
- Exempt Employees are not paid overtime.
What are the current FLSA guidelines?
Under the FLSA guidelines, to qualify for an exempt status, the requirements of three tests must be met:
- Salary Basis Test: An employee must receive a predetermined, fixed salary that is not subject to reduction due to variations in quality or quantity of work performed;
- Minimum Salary Test: An employee must be paid a salary minimum as defined by the Department of Labor that is currently $23,660 per year ($455 per week); and
- Duties Test: The primary job duties performed must involve the kind of work associated with exempt executive, administrative, professional or highly compensated employees as specifically defined by the FLSA.
What is the history of the 2016 FLSA Overtime Amendment and proposed changes at UC?
May 18, 2016: The U.S. Department of Labor released new rules updating the Fair Labor Standards Act (FLSA) overtime regulations, originally anticipating an implementation date of December 1, 2016. The University took steps to implement the new standards by auditing and reclassifying some employees under the new guidelines, which were as follows:
- The minimum salary for an employee designated as exempt changed from $23,660 per year ($455 per week) to $47,476 per year ($913 per week).
- The new 2016 rules increased the minimum salary required before an employee can be classified as exempt from overtime pay under the various exemptions, from $455 per week (~$23,660 annually) to $913 per week ($47,476). They also provide for automatic updating of the minimum salary every three years.
October 1, 2016: These changes went into effect at UC anticipating a December 1, 2016 effective date.
November 22, 2016: U.S. Federal Court grants a preliminary injunction postponing the December 1st, 2016 nationwide effective date of the FLSA changes. A preliminary injunction is designed to preserve the status quo while a case is being decided by the court system. The University has been closely monitoring the case and working with leadership and departments to develop an approach that would ensure employees are treated fairly and consistently across the university. In the meantime, the recently implemented initiatives to comply with these original regulation changes at UC remained in place.
September 2019: U.S. DOL releases final Amendment with changes reflected as follows:
The new federal threshold for overtime exemption will stand at $35,568 which is a reduction of the current threshold utilized by UC which is $47,476.
The new 2019 rules increased the minimum salary required before an employee can be classified as exempt from overtime pay under the various exemptions, from $455 per week (~$23,660 annually) to $684 per week ($35,568 annually).
Broadly speaking, due to the rule change, in order to be exempt from overtime under the federal Fair Labor Standards Act (FLSA), exempt employees must be paid at least the threshold amount and meet certain duties tests, there are no changes to the duties test.
If exempt employees are paid less than $35,568 or do not meet the duties tests, the employee is then eligible for overtime for working over 40 hours per week. Due to the work completed in 2016 to raise the higher salary thresholds, staff are properly classified as non-exempt to meet the January 1, 2020 regulation date.
Will those employees who were reclassified as non-exempt in October 2016 be transitioned back to exempt status in 2020?
As a result of the lower salary threshold, some non-exempt, hourly positions will be converted to exempt status after duties are reviewed and will no longer be eligible for overtime pay. Changes will occur in March 2020 to provide ample time to adjust to the move from bi-weekly to monthly pay.
Employees impacted by this change will receive a communication from UC Central Human Resources in January with specific information about the changes to his or her position classification.
What will not change?
The DOL did not make changes to the Duties Test, (what qualifies for an exempt Executive, Administrative, Professional, or highly compensated position) nor to the Salary Basis Test (who qualifies to receive a salary instead of hourly pay).
Who will not be affected by the final rule?
Hourly workers (represented staff, student workers, various other positions, etc.) appropriately classified as non-exempt based on the Duties Test are not impacted by the new rule. Generally, hourly workers are entitled to overtime regardless of how much they make if they work more than 40 hours in a week, therefore nothing changes. Employees who do not meet the Duties Test for exemption will continue to receive overtime pay.
What it the expected date when the transition from non-exempt to exempt status will occur?
It is anticipated that those employees whose position is currently classified as non-exempt and whose salary is above the new threshold and who meet the other two requirements for exemption will transition to exempt effective with the March 31, 2020 pay.
- Last pay as a non-exempt (bi-weekly paid) employee will be March 17 (for the pay period February 23, 2020 through March 7, 2020).
- First pay as an exempt (monthly paid) employee will be March 31 (for March 8, 2020 through March 31, 2020).
Can employees opt out of this change if they want to continue to be considered a non-exempt employee?
No. The FLSA is a federal law. The determination of an employee’s exempt or non-exempt status is governed by the requirements of the federal law - it is not an option.
Who makes the final determination on an employee's exemption status?
Central Human Resources reviews each position description after working in consultation with supervisors to identify position duties and conduct the exemption test for final exemption status (exempt or non-exempt).
Does a transition from non-exempt to exempt impact eligibility for UC benefits?
No. A change in classification unaccompanied by any other change (e.g., a reduction in FTE) does NOT impact eligibility for UC benefits.
Will the cost for benefits (medical, dental, life insurance, etc.) remain the same?
The cost for medical, dental, Life Insurance will remain the same as cost for these coverages is determined by annual base pay. Deductions for coverage will be taken on a monthly basis rather than a bi-weekly basis beginning with the March 31, 2019 pay.
Will the coverage under the medical plan, dental plan, etc. remain the same?
Yes, coverages under UC benefit plans will remain the same.
I am in the Health Savings Account - will I need to make a new election?
You should review your current election and determine if a change is needed. If you do not make a new election, your current PER PAY election (bi-weekly amount) will continue to be deducted on a monthly basis. This may mean that you are contributing LESS THAN what you intended to contribute.
Because we cannot anticipate employees’ contribution preferences, UC Benefits will not change the contribution amount. In order to change your Health Savings Account contribution, please complete the HSA Election form which you can find on this website: http://www.uc.edu/hr/tools/HRforms.html.
If you want to make a change by the March 31, 2020 pay period, you must submit your form to UC Benefits no later than March 15, 2020.
Will UC's contribution to my Health Savings Account be the same and will the amount continue to be contributed each pay?
UC’s Health Savings Account contribution will continue to be the same following your reclassification to an exempt employee as long as your annual base pay remains unchanged.
Contributions will continue to be deposited on the same basis as they are today.
I am in the Flexible Spending Account - will I need to make a new election?
No, you will not need to make a new Health or Dependent Care Flexible Spending Account election as these elections are made on an ANNUAL basis rather than a PER PAY basis.
Will I be able to change my FSA enrollment/disenrollment/amount because of my change to exempt (monthly) pay status?
No, a reclassification to exempt status is not a qualifying event which would permit you to change an FSA election/enroll or de-enroll from either FSA plan.
Will a change in my pay frequency impact my retirement contributions?
Retirement plan contributions will be deducted on a per pay (monthly basis) and are dependent upon your ‘covered earnings’ each pay.
Will changes in pay frequency impact my supplemental retirement plan contributions 403(b) and/or 457?
If you currently have a 403(b) or 457 deduction coming out of your paycheck, you have the option to update that amount as you wish:
403(b)’s: Payroll will make the adjustment for you. No action is required.
457’s (Ohio Deferred Compensation): please contact ODC directly at (877) 644-6457.
- All changes to 457 amounts must be sent from ODC to UC. Changes will not be made by UC payroll at the employee’s request.
- Please communicate with ODC as soon as possible to ensure your March 31, 2020 check will be reflective of any requested changes to the amount deducted.
Will the change to exempt pay status be a qualifying event that allows me to change my benefit choices?
No, a change from non-exempt to exempt status is NOT a qualifying event which will permit you to change your pre-tax benefit elections.
When will I be paid?
- Monthly employees receive their checks on the last business day of the month (unless a bank holiday, then the banking day before).
- The pay date and holiday calendar can be found on the payroll website.
Will my paycheck look different?
As a monthly paid employee, you will see the same paystub format, but with different earnings types that breakdown your pay such as salary instead of hourly rate or overtime pay.
How many times a year will I get paid?
You will receive 12 monthly paychecks.
Do I need to take any action on my direct deposit account information?
- If you currently have a fixed amount going to a bank account, you have the option to update that amount between March 12 and March 19, 2020 to be effective on your 1st monthly paycheck. For example, an employee that had $60/bi-weekly going to a bank account might choose to change it to $120/monthly check so that the same amount per year is still being deposited into that account.
Do I need to take any action on my current Federal/State W-4 withholding election?
- If you currently have an additional amount being withheld for Federal and/or State, you have the option to update that amount as you wish between March 12 and March 19, 2020 to be effective on your 1st monthly paycheck.
- Other changes to your W-4 can also be made. If you have any questions related to what you should change it to, please contact a tax advisor. Payroll is not legally able to offer advice on changes to your W-4 election(s).
I am receiving a TWL (additional compensation for work over and above normal work responsibilities). Will I continue to be eligible for the TWL until it expires?
Assuming you have not exhausted the approved time period for payment of the TWL, it will be converted to an ADN (exempt version of the same pay type) for the remainder of the approved time period.
Clocking In & Out
When do I stop clocking in and out?
You will stop clocking in and out on March 8, 2020.
Does the change from non-exempt to exempt affect an employee's leave accrual?
How do I request time off?
You will request time off in the same manner as you do today – using UCFlex Employee Self Service (ESS).
How do I report sick time?
You will report time off using UCFlex.
Will UC holidays remain the same?
UC holidays are the same for exempt and non-exempt employees. Please refer to the current Holiday Pay Policy (21.07).
Am I eligible to participate in the Leave Donation Program - both as a donor and recipient?
Yes, as long as you meet all other program requirements.
Will the same types of Leaves of Absence be available (e.g. medical leave, educational leave, etc.)?
How do I report vacation time?
You will report time off using UCFlex. HR Policy reference: 21-19.
How is time reporting different for a non-exempt (hourly) employee than for an exempt (salary) employee?
Exempt employees do not report time worked. Exempt employees must report time away from work if in greater than a four (4) hour increment.
- Example 1: Exempt employee normal work hours are from 8 – 5, M-F. Employee leaves for a doctor appointment at 2 p.m. Employee does not report 3 hours of sick time.
- Example 2: Exempt employee normal work hours are from 8 – 5, M-F. Employee leaves for a doctor appointment at 10 a.m. and does not report back to the office or work from home. Employee must report 4 hours of sick time.