On April 23, 2024, the US Department of Labor issued the final rule revising pay regulations under the Fair Labor Standards Act. These revisions are currently scheduled to become effective in two stages, July 1, 2024, and January 1, 2025. UA’s Department of Human Resources is evaluating our policies and procedures to reflect the updated regulations.
A list of federal FAQs regarding the rule can also be found on the DOL website.
Q1. What does this updated rule do?
The updated rule would raise the salary threshold for determining who can be exempt from required overtime pay. In 2016 a similar rule was issued but was halted by an injunction, which may occur again this year. If courts halt it, UA will reassess its approach to these changes and update the campus community. The rule would take effect in two stages and does the following:
- Establishes $43,888 as the salary threshold required to be exempt from overtime pay requirements, effective July 1, 2024.
- Increases the salary threshold to $58,656, effective January 1, 2025.
- Requires salary threshold increases every three years based on the latest earnings data.
Q2. How will it affect UA?
The overtime rule could require some staff whose annual base salary is below the new threshold to transition to hourly (non-exempt status) while other employees may see a pay adjustment to maintain their exempt status. Though experts say the rule will likely face court challenges before implementation, Human Resources is reviewing data and working with leadership to finalize which positions may be affected by the new regulations. If it is blocked by the courts, UA will reassess its approach to these changes and update the campus community.
Q3. How will I know if this updated regulation applies to me?
You will be notified personally by your supervisor. The rule does not apply to faculty. In 2016 a similar rule was issued but was halted by an injunction, which may occur again this year. If courts halt it, UA will reassess its approach to these changes and update the campus community.
Q4. Has this happened before?
In 2016 a similar rule was issued but was halted by an injunction, which may occur again this year. Though experts say the recently announced rule will likely face court challenges before implementation, Human Resources is actively reviewing campus data and working with leadership to finalize which positions could be affected. If it is blocked by the courts, UA will reassess its approach to these changes.
Q5. What is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act establishes minimum wage, overtime pay, recordkeeping, and youth employment standards. The University’s compensation policies and processes comply with the FLSA.
Q6. What does the term “non-exempt” mean?
Non-exempt employees are covered by the overtime and recordkeeping provisions of the FLSA and are entitled to overtime pay if work exceeds 40 hours in one workweek. Overtime is paid at a premium of time and one-half of the employee’s regular hourly rate and compensated either in pay or in accrual of compensatory time. Human Resources is responsible for determining the exemption status for positions at UA, consistent with FLSA regulations.
Q7. What does the term “exempt” mean?
Exempt employees are not covered by the overtime provisions of the FLSA and are paid an agreed upon amount for the whole job, regardless of the amount of time or effort required to complete the work. Exempt employees receive a set monthly salary regardless of the number of hours worked. Exempt employees do not record hours of work.
Q8. What criteria enable employees to be exempt from the FLSA overtime provisions?
To be exempt, an employee must meet ALL standards in the following “tests”:
- be paid not less than the minimum salary established by the FLSA – the “salary level test;”
- AND be paid on a salary basis as opposed to an hourly basis – the “salary basis test;”
- AND perform certain duties as outlined in one of the “duties tests.”
Q9. What is the salary level test?
The first stage of the FLSA salary level test revised effective July 1, 2024, requires that an employee’s salary must be at least $43,888 annually to be considered exempt from the overtime provisions. An employee with a salary less than $43,888 annually must be classified as non-exempt. Stage two, effective January 1, 2025, requires that an employee’s salary must be at least $58,656 annually to be considered exempt from the overtime provisions. Salary is one of three standards that must be met for a position to be considered exempt.
Q10. What duties tests are applicable to UA employees?
To be exempt, an employee must qualify under one or more of the following tests:
- Executive exemption test
- Administrative exemption test
- Professional exemption test
- Computer exemption test
- Highly compensated employee exemption test
Each duties test has specific requirements that must be met for an employee to be exempt. For example, the Executive Exemption requires that an employee a) supervise two or more full time employees (or their FTE equivalent), b) have authority to hire and fire, or meaningfully recommend hiring and firing, and c) manage a recognized department or subdivision. More information on the exemption tests is available on the Department of Labor website.
Q11. How is the duties test applied?
Human Resources is responsible for determining which of the FLSA exemptions would be appropriate for all staff jobs employed by the University. This determination is based on an assessment of the job as described/performed compared with the criteria for each exemption test.
Q12. What constitutes time worked under the FLSA?
Time worked under the FLSA includes all time spent performing job-related activities that (a) genuinely benefit the employer, (b) which the employer “knows or has reason to believe” are being performed by an employee, and (c) which the employer does not prohibit the employee from performing. These can include activities performed during “off-the-clock” time, at the job site or elsewhere, whether “voluntary” or not. Examples of work time include a) time worked before the scheduled start time; b) eating lunch at the desk, while answering the phone, serving clients, or performing any work; and c) time worked after the scheduled ending time. Examples of non-work time include a) eating lunch at desk, but not answering phone nor working, and b) meal periods of 30 minutes or longer.
Q13. Who is responsible for knowing when work is performed?
The employee’s supervisor is responsible for monitoring when work is performed. Overtime should be pre-approved by the supervisor and recorded on the time record. The supervisor is responsible for verifying and approving time records. All hours worked must be paid even in instances where pre-approval has not been granted.
Q14. Is lunch time or dinner time “work time” or “rest time”?
Bona fide mealtime is not work time. The meal period generally should be at least 30 minutes. The employee must be completely relieved of all duties, and the employee must be free to leave the duty post.
Q15. Is a non-exempt employee paid for time to travel between one work location and another work location?
Travel from one work site to another during the workday is work time. Special rules exist for out-of-town overnight travel. For specific details, please contact Human Resources.
Q16. What is the definition of overtime?
Overtime is time worked by a non-exempt employee that exceeds 40 hours in one workweek.
Q17. Must overtime be approved in advance?
In support of the supervisor’s continued awareness of unit work volume, individual productivity, and available funds to pay overtime compensation, the supervisor must provide prior approval for a non-exempt employee to work overtime. While overtime must be approved in advance, all worked time, whether approved or not, must still be compensated. Supervisors facing scenarios in which an employee works unapproved time, should speak to their assigned HR Business Partner for guidance.
Q18. What is compensatory or “comp” time?
Under the FLSA, comp time is paid time off the job earned and accrued by an employee in lieu of cash payment for work performed over in excess of 40 hours per workweek. The FLSA requires that comp time be earned at a rate of one-and-one half hours for each hour worked over 40 in one workweek. Accrual of comp time in lieu of pay must be agreed upon by the employee and supervisor prior to the work being performed.
Q19. One of my non-exempt employees has earned compensatory time off. Now that the employee is becoming exempt, can they retain the compensatory time balance?
In accordance with the Fair Labor Standards Act, exempt employees are ineligible to earn or retain a compensatory time off balance, and the balance must be paid off in full, effective with the change to exempt status.
Q20. May a non-exempt employee volunteer to work unpaid hours in their regular job in addition to their regular schedule?
All non-exempt employees must be compensated for all hours worked in their regular job.
Q21. May an employee volunteer hours outside of their department at The University of Alabama?
Under certain circumstances, exempt and non-exempt employees may volunteer time. Specifically, non-exempt employees may volunteer for work outside their regular duties and regular hours, and exempt employees may volunteer for work outside their regular duties. Volunteer services must be both (a) offered freely and without pressure or coercion, direct or implied, from the employer, and (b) performed for civic, charitable or humanitarian reasons. If you have any questions about the appropriateness of volunteering time, contact Human Resources.
Q22. May a non-exempt employee waive their rights to overtime compensation?
All non-exempt employees must be compensated for all hours worked at the appropriate pay rate.
Q23. Can the supervisor make a non-exempt employee leave early on Friday so the employee’s total hours will not exceed 40 in the workweek?
This is one method to effectively manage work time and the department budget.
Q24. Can exempt employees maintain separate overtime records and receive overtime?
Exempt employees are ineligible to receive overtime payment or compensatory time off. There are instances, however, when a supervisor might permit flexible work hours to accommodate, for example, an exempt employee who worked an excessive number of hours in a prior workweek or who routinely works more than 40 hours in one workweek.
Q25. Who must complete a time record?
Non-exempt employees must record all time worked and all paid and unpaid leave used. Exempt employees’ time is reported on an “exception time reporting” basis. However, some FLSA exempt employees may be required to complete detailed records of hours worked, based on the business needs of the work unit.
Q26. What is the maximum number of comp time hours that can be earned before the overtime must be paid in cash?
An employee cannot accrue more than 240 hours of compensatory time. However, departments may limit the number of hours accrued as long as it does not exceed 240. When an employee has reached the maximum accrual of 240 hours of compensatory time or maximum accrual set by the department, all additional overtime hours worked must be paid at the overtime rate of one and one-half times the employee’s regular rate of pay.