FLSA Rule Updates and Changes to Overtime Eligibility
News from November 1, 2016
The United States Department of Labor (DOL) recently issued new regulations regarding overtime eligibility under the Fair Labor Standards Act (FLSA), which is the federal law that establishes minimum wage, overtime pay, recordkeeping and child labor standards.
Under these new regulations, which take effect on December 1, 2016, all employees who earn less than $913 per week/ $47,476 per year must be paid overtime if they work more than 40 hours in a workweek, regardless of the type of work that they do. In other words, by December 1, 2016, employees earning less than this amount who are classified as exempt by the University (i.e., paid on a salary basis and not eligible for overtime) will need to be converted to non-exempt (i.e., paid on an hourly basis and eligible for overtime) strictly because they do not meet the minimum salary requirement for exempt status under the DOL’s new regulations.
In light of this change, and in order to ensure the University’s continued compliance with the FLSA, the Division of Human Resources has been working closely with the Schools and Centers across the University to review currently exempt job titles in which there are staff members earning below $47,476 annually. The determination of exempt status was based on input and consensus from all Schools and Centers. Consistency was a driving factor in this review process, so that job titles will either remain exempt (monthly-paid) across the University or be converted to non-exempt (weekly-paid) across the University.
For job titles that remain exempt, any staff members in those job titles with a salary that is currently less than $913 per week / $47,476 per year will receive a salary increase; these changes will take effect on December 1, 2016.
For job titles that are converted to non-exempt, all staff members in that job title will be converted, including those who currently earn more than the new minimum salary threshold as well as those whose salary is currently below this threshold; these changes will take effect on November 28, 2016.
Staff in job titles that are becoming non-exempt will be required to submit weekly timesheets to their managers/supervisors for review and approval; they also will need to have prior supervisory approval for any hours they work beyond their regular schedules.
Despite the fact that they will become weekly-paid employees, staff in job titles that are becoming non-exempt should not experience a decrease in their base pay as a result of this change. Rather, their annual salaries will be converted into hourly rates, and they will be paid based on the number of hours they work in each workweek. In turn, these hourly rates will be the basis on which overtime pay will be calculated for any hours they work over 40 in a workweek.
Because Penn’s benefits design and programs are the same for exempt and non-exempt staff, there will be no changes to benefits eligibility or benefit programs for staff whose job titles are converting to non-exempt status. This change in exemption status also will not affect Paid Time Off (PTO) or sick time eligibility or accrual rates.
It is important to understand that the conversion of certain job titles from exempt to non-exempt by the University is being done strictly in response to the new DOL regulations; it is not an indication of a staff member’s value to his/her department, School/Center or the University.
Should you have any questions, please contact Compensation.