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The FLSA is a federal law originally enacted in 1938 during a period of economic depression to address the lack of federal employment standards.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”).
- 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
- 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
Each employee is either non-exempt (covered and eligible for overtime) under FLSA or is exempt from the act based on the responsibilities of their position and their total salary. To be exempt from FLSA overtime regulations, a position’s job duties and salary amount must meet criteria specified in the regulations. These criteria are referred to as the “duties” and “salary basis” 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.
For a position to be exempt from the FLSA, it must meet one of five exemption (“duties”) tests:
Salary Basis Test
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 $684 per week ($35,568 annually), regardless of FTE or actual time worked. For example, a half-time employee who is paid $600 per week and a full-time employee who is paid $600 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.
Please note, a position must pass both the duties and salary basis tests to be considered exempt from the overtime provisions of FLSA.
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 $684/week. While this position meets the duties test, the prorated part-time rate falls below the salary threshold and is treated as Non-Exempt.
Additional Information about FLSA and Timekeeping at ISU
A Guide for FLSA and Timekeeping Responsibilities is available with additional information.