Today, Missouri State employees who are affected by the latest rule of the Fair Labor Standards Act (FLSA) have been meeting with their managers to discuss resulting changes to their employment category. The following information provides a high-level perspective of FLSA and the steps Missouri State is taking to ensure the university is in compliance.
Congress originally passed the Fair Labor Standards Act (FLSA) in 1938 as a federal statute to set standards for the basic minimum wage and overtime pay. In 1938 it introduced the 40-hour work week, established a national minimum wage, guaranteed time-and-a-half for overtime in certain jobs and prohibited most employment of minors in “oppressive child labor.”
The nature of the federal statute means agencies that oversee the statute can introduce more detailed regulations to the statute through a formal rulemaking process. Throughout the years, various rules have been changed or added to FLSA (e.g., raising the federal minimum wage). The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) administers and enforces the FLSA with respect to private employment, state and local government employment and federal employment.
Exempt versus non-exempt
The FLSA differentiates between positions that are exempt and those that are non-exempt.
- Exempt classification means a position is salaried and is exempt from overtime compensation.
- Non-exempt means an employee cannot volunteer to work overtime without compensation and must be paid overtime for all work performed in excess of 40 hours per week.
The FLSA recognizes several different exemptions. For example, employees whose primary duty is teaching are exempt from overtime under the FLSA. Additionally, since 2004 employees who made at least $23,660 per year and work in a job position that meets the duties test for employees classified as administrative, executive or professional have likewise been exempt from overtime.
In May of this year, the FLSA adopted a rule change that applies only to those positions that have historically been considered exempt from payment for overtime and meets the duties tests described as administrative, executive or professional. This FLSA rule change, which goes into effect on Dec. 1, raises the minimum annual salary associated with this exemption from $23,660 to $47,476.
Missouri State implementation
As an employer, the university is required by law to institute these changes made to FLSA. With this magnitude of change in the minimum salary, many employees have been affected.
While in recent weeks a suit has been filed by 21 states to block the rule for government employees and other requests have been made to extend the date of compliance, Missouri State has made the decision to move forward with meeting the Dec. 1 compliance date.
At that time, 184+/- employees will transition from salaried to hourly and, regretfully, one employee will be separated from the university effective Jan. 1.
Changes for transitioning employees
Employees transitioning from salaried to hourly will maintain their leave benefits and their positions will be categorized as professional non-exempt. Effective Nov. 16, these employees will begin reporting all time worked during the workweek. Time worked in excess of 40 hours per week will be subject to overtime.
Training and resources
Human resources provided the following for each supervisor with affected employees:
- Memos informing impacted employees of changes to their employment.
- The opportunity for joint training with payroll for supervisors and employees who will become non-exempt that will focus on defining work time that should be reported, the distinction between overtime and comp time and a presentation on time entry. Six sessions have been scheduled between Oct. 17 and Nov. 11.
- It’s estimated over 4 million employees across the U.S. will be affected by this change. It’s not just Missouri State, it impacts all universities, businesses, government positions, etc. across the U.S.
- Rules associated with the change enable employers to address the re-classification in a variety of ways. Missouri State took steps to make the transition as seamless and positive for our employees as possible; although, as seen below, there were options that were less positive.
- Wage decrease
- Large lay-offs
Positives steps taken for Missouri State compliance
- Vacation was not reduced for affected employees.
- Salaries were not reduced for affected employees.
- A professional non-exempt category was created to distinguish the professional nature of the position and to ensure the position retains leave benefits that are appealing to future employees.
This change does not adversely reflect the value of the work of those transitioning to non-exempt classification or their importance to the university. The changes were necessary to comply with the DOL regulations, and it provides these employees with wage and hour protection that they did not have as an exempt employee.