Fair Labor Standards Act (FLSA)

What is the Fair Labor Standards Act (FLSA)?

The FLSA is a federal law originally enacted in 1938 during a period of economic depression to address the lack of federal employment standards. The U.S. Department of Labor (DOL) administers the FLSA, which addresses a variety of employment areas, including:

  • Establishment of the federal minimum wage
  • Rules and exceptions for overtime pay
  • Restrictions on child labor
  • Creation of the forty-hour workweek
  • Requirements for recordkeeping

For additional information on FLSA, you can access the Digital Reference Guide to the FLSA produced by the U.S. DOL here.

 

FLSA Employment Categories

The FLSA categorizes all workers as either covered by the law and, therefore, subject to FLSA minimum wage and overtime provisions (“nonexempt”), or, exempted from the law and, therefore, not subject to the FLSA minimum wage and overtime provisions (“exempt”).

  1. Nonexempt employees share the following characteristics:
    • Are considered “not exempt” from the minimum wage and overtime provisions of the FLSA
    • For time worked over 40 hours within a workweek, nonexempt employees:
      • Are paid overtime (time and a half pay), or
      • Earn compensatory time off at a rate of time and a half
  2. Exempt employees share the following characteristics:
    • Are considered “exempt” from the minimum wage and overtime provisions of the FLSA
    • Exempt staff are not eligible for overtime compensation for hours worked in excess of 40 per week. Consequently, exempt staff have greater flexibility for scheduling work. Scheduling of exempt staff should follow the principles outlined below:
      • Full-time exempt staff are expected to average at least 40 hours of work per week and may need to work more than 40 hours per week to fulfill their position responsibilities
      • Time worked in excess of 40 hours per week will not result in overtime pay or accumulation of compensatory time off
      • During unusual situations, a unit may balance a period of heavy work with a period of reduced work, without regard to the number of hours worked in any particular week
    • Are paid an annualized amount, or salary, for performing the whole job, not for every hour worked
    • Are not required to track or record time

 

FLSA Overtime Exemption Standards

To be exempt from FLSA overtime regulations, a position’s salary amount and job duties must meet criteria specified in the regulations. These criteria are referred to as the “salary basis” and “duties” tests, respectively. Some types of  work, such as police officers and other first responders, do not qualify for exemption by definition.

Classification and Compensation in conjunction with the Office of University Counsel are responsible for applying the tests to determine which profiles are covered by the FLSA overtime regulations.

All of the following requirements must be met for a profile to be exempt from the FLSA overtime payment requirement:

  • The position must be paid on a salary (not hourly) basis, except for certain computer workers (see the Computer Professional Exemption). Being paid on a salary basis means that an employee is paid the same amount per workweek regardless of the hours the employee actually works, consistent with a position’s FTE (full-time equivalent).
  • The position must be paid at least $455 per week ($23,660 per year), regardless of FTE or actual time worked. For example, a half-time employee who is paid $454 per week and a full-time employee who is paid $454 per week are both overtime-eligible regardless of their job duties because the salary amount is below the threshold. This minimum salary requirement applies to both full-time and part-time employees regardless of how many hours they work.

 

Example

An employee is classified as a Communication Specialist, which is an "Exempt" profile. The employee's FTE pay rate is $44,200/year, which translates to $850/week.

This employee, however, works 0.5 FTE or 20 hours per workweek.  The prorated and actual amount paid is $425/week.

In this case, the actual pay rate is below the FLSA exemption minimum of $455/week.  While this position meets the duties test, the prorated part-time rate falls below the salary threshold and is treated as Non-Exempt.

 

Upcoming Changes to FLSA

The U.S. Department of Labor issued a final overtime rule on September 24, 2019 to be effective January 1, 2020. The new rule will make the following changes:

  • Raise the overtime salary threshold to $684 per week ($35,568 annually).
  • Increase the minimum for “highly compensated employees” to $107,432 per year.
  • Allow the use of nondiscretionary bonuses and incentive payments that are paid out at least annually to satisfy up to 10% of the standard salary level.

The proposed rule would not change the duties test or provide automatic adjustments.

 

Additional Information about FLSA and Timekeeping at ISU

A Guide for FLSA and Timekeeping Responsibilities is available with additional information.

FLSA Frequently Asked Questions


Questions?

UHR Classification and Compensation