Fair Labor Standards Act Overview
Background
The Fair Labor Standards Act (FLSA) is a federal law requiring that "nonexempt" employees who work more than 40 hours in a workweek must receive overtime pay of one and one-half times their regular rate of pay. (As a public sector employer, the University may use equivalent compensatory time off instead of the direct dollars.) The
Act also provides that an employee may be "exempt" from the overtime provisions if certain requirements are met. It is these requirements, commonly called the white-collar exemption rules, which were significantly revised by the U.S. Department of Labor, and are effective August 23, 2004. The University of Arizona implemented changes on August 16, 2004.
The New Regulations
The revised white-collar exemption rules have three main components, the salary basis test, the duties test, and the salary level test. An employee must meet all three of these tests in order to be exempt from overtime.
The salary basis test requires that the employee regularly receive a predetermined amount of weekly compensation each pay period, an amount that is not subject to fluctuation.
The duties tests require that the employee's duties meet the standards of one of five revised duties-based exemption tests - 1) the executive exemption, 2) the administrative exemption, 3) the professional exemption, 4) the computer exemption, or 5) the highly compensated exemption.
The salary level test has undergone the most significant change. The previous salary levels were $250/$155 a week, and had not been adjusted since 1975, when the federal minimum wage was just $2.10 an hour. The new salary level test is $455 a week, or $23,660 a year for a full time employee.
Impact on the University of Arizona
The largest impact to the University of Arizona is a result of the change in the salary level test. Many employees who could be considered "exempt" by an application of one of the five revised duties tests must now become "nonexempt" because their pay rates do
not reach this mandated weekly level of $455. These employees are mostly part-time and now will be required to report every hour worked, and be compensated, either in pay or in compensatory time, for each hour worked.
There is a notable exception to the three-pronged exemption test process that affects medical doctors, lawyers and teachers. Individuals serving in these capacities are not subject to the Salary Level Test and remain "exempt" regardless of weekly pay.
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