Fair Labor Standards Act (FLSA)

Fair Labor Standards Act

Revised June 1, 2006

The Fair Labor Standards Act (FLSA), governs the process that Compensation Analysts use to determine whether a position is either eligible for over-time pay for hours worked in excess of 40 per week (non-exempt) or is paid a flat sum for hours worked, even if they exceed 40 hours within a workweek (exempt).

 

Table of Contents
  1. FLSA History
  2. Salary Basis Test
  3. Duties Test
  4. Executive, Professional and Administrative Exemption Test
  5. Compensation of Exempt Titles
  6. Compensation of Non-exempt Titles
FLSA History

The Fair Labor Standards Act, (FLSA), is a federal law dating back over half a century which establishes certain minimum requirements for employees' hours of work, wages, premium overtime and payroll records.

The FLSA, identifies two types of employees: non-exempt employees and exempt employees:

  • Non-exempt employees are employees who, based on the duties performed and the manner of compensation, are required to account for time worked and sick leave, vacation, and other leave on an hourly and fractional hourly basis. The FLSA requires that these employees be paid overtime at the premium (time-and-one-half) for actual time worked in excess of 40 hours per week.

  • Exempt employees are employees who, based on the duties performed and the manner of compensation, are exempt from the FLSA minimum wage and overtime provisions. Exempt employees are paid an established monthly or annual salary and are expected to fulfill the duties of their positions regardless of the hours worked. They do not receive premium overtime, straight overtime or compensatory time for working more than 40 hours in a work week.

  • Salary Basis Test: requirement that employees be paid at least $455 week or $1,971.66 a month "on a salary basis", which means that the employee must receive his full predetermined salary for any week in which he performs any work, without regard to the number of days or hours worked or the quality or quantity of work performed.

  • Duties Test: defines three categories of jobs which may be exempt from the overtime entitlement: executive, administrative and professional. Computer professionals may qualify as exempt under the professional exemption if they meet special duties criteria and are paid either on a salary basis or an hourly amount which is at least $45.84 per hour. In addition, certain seasonal, recreational employees can be considered exempt from certain provisions.

    The FLSA did not apply to the University until 1966; coverage lasted only a short time before a Supreme Court decision voided coverage. Another Supreme Court decision in 1985 paved the way for FLSA coverage of virtually all public employees. Congress implemented this decision, which applied to the University, in 1986.

    Salary Basis Test

  • * First "Hurdle" to pass when determining if job is EXEMPT

    * Employees compensated on a "Salary Basis"

  • Must be paid at least $455 per week or $1,971.66 a month on a "Salary Basis"

  • Must receive full predetermined salary for any week in which the employee performs any work without regard to number of days or hours worked or the quality or quantity of work performed

  • Are not paid overtime - expected to work until the job is completed without additional compensation

    * Are not allowed to have the following deductions from salary:

  • absences occasioned by the employer or by the operating requirements of the business

  • absences for jury duty, witness duty, or temporary military leave during any week in which the employee performs some work

  • absences for disciplinary suspensions of less than one full workweek, except in the case of suspension for infractions of safety rules of major significance, (which would allow suspension without pay for less than one day)

    * Deductions from salary are permitted for:

  • absences from work for a day or more for personal reasons

  • absences from work for a day or more for sickness or a disability

  • absences from work for a day or more required by the employer for infractions of safety rules relating to the prevention of serious danger to the employer's premises or other employees.

  • absences from work of one full workweek in which the employee performs no work.

    Duties Test

    The Duties Test is the second criteria that jobs and employees must pass through to be considered exempt from the FLSA requirements. There are three major categories of jobs which may be considered exempt and one Specialized professional group:

    * Executive: Supervisory or Management jobs.

    * Professional: Learned or Professionals which requires performance requiring knowledge of an advanced type, which normally means more than a high school education, in a field or science and/or learning and Artistic Professionals which requires performance of original and creative work requiring invention, imagination or talent in a recognized field of artistic endeavor.

    * Administrative: Employees who perform non-manual work directly related to management policies, such as

  • executive assistants or
  • advisory Specialists to management and generally do not perform "production work" and have the authority and power to make independent judgements and exhibit discretion

    * Computer Professional: Computer professionals may qualify as exempt under the professional exemption if they meet Special duties criteria and are paid either on a salary basis or an hourly amount which is at least $45.84 per hour. In addition, certain seasonal, recreational employees can be considered exempt from certain provisions.

    Executive Exemption Test

  • The employee's primary duty (at least 50% of the time) is the management of a recognized department or subdivision and

  • The employee's primary duty is to customarily and regularly direct the work of two (2) or more full-time employees or the equivalent (e.g. four half-time employees) and

  • Possesses the authority to hire and fire employees, or whose suggestions are given substantial weight in such decisions, including promotions and

  • The employee customarily and regularly exercises discretionary power involving the comparison and evaluation of possible courses of conduct in acting or making decisions after the various possibilities have been considered and

  • Does not devote more than 20% of hours not closely related to items listed above.

    Professional Exemption Test

  • The employee spends more than 50% of time working as a professional in either a learned or artistic profession

  • For those who work in a learned profession, the exemption requires knowledge of an advanced type in a field of science or learning which is normally acquired by a prolonged course of specialized intellectual instruction as distinguished from general academic education, apprenticeships or routine training.

  • For those who work in an artistic profession, the exemption requires original or creative work depending primarily on invention, imagination, or talent in a field of artistic endeavor. The professional exemption also includes teaching, tutoring, instructing, or lecturing for a school system or educational institution and

  • Performs work requiring the consistent exercise of discretion and judgement and

  • The work product is predominantly intellectual and varied in character and cannot be standardized in relation to a given period of time and

  • Does not devote more than 20% of hours not closely related to activities that are not an essential part of and necessarily incident to the standards.

    Administrative Exemption Test

  • Duties consist of non-manual or office work directly related to management policies or general business operations (Recent interpretations of the Administrative Exemption have placed emphasis on this aspect of the test) or the performance of administrative functions in an educational establishment in work related to academic instruction and training and

  • Customarily and regularly exercises discretion and independent judgement and

  • Regularly and directly assists a person employed in an executive and administrative capacity; or performs work under only general supervision requiring special training, experience or knowledge; or executes special assignments and tasks under general supervision and

  • Does not devote more than 20% of work time to activities not directly or closely related to performance of administrative work as defined above

    Generally, there are four types of Administratively Exempt Employees:

    1. Executive or administrative assistants who generally work for an official or manager who has duties of such scope and which require so much attention that the work of personal scrutiny, correspondence, interviews and the like must be delegated;

    2. employees who act as advisory specialists to management, such as personnel directors, consultants, statisticians, credit managers, purchasing agents and buyers;

    3. individuals engaged in the overall academic administration of an educational institution. Such persons must perform duties which are primarily concerned with the administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards and other aspects of the teaching program;

    4. "Special assignment employees" such as lease buyers, field representatives and promotion employees

     

    Compensation of Exempt Titles

     

    Employees in exempt titles are compensated as follows:

    * The normal work week for a full-time employee is considered to be a minimum of forty hours, however, greater emphasis is placed on meeting the responsibilities assigned to the position rather than on working a specified number of hours.

    * Use of vacation and sick leave will be recorded in one-day increments; absences of less than a day will not be charged against accrued leave time.

    * Exempt employees will not receive overtime compensation or compensatory time off.

    * The employee's salary may not be reduced for absences of less than a full day even if approved at the employee's request.

    * In cases of corrective action, suspensions without pay are not permitted for less than one full workweek, except in the case of suspension for infractions of safety rules of major significance.

    * Exempt employees may not be required to record their work time for the purposes of receiving their salary.

    Compensation of Non-exempt Titles

    Non-exempt titles are compensated as follows:

    * For all hours which exceed 40 hours of actual work in a workweek, premium overtime is compensated at the rate of time-and-one-half.

    * Vacation and sick leave and compensatory time use is recorded to the nearest one-quarter hour.

    * When an employee has exhausted all available accrued vacation and sick leave and compensatory time off, salary is reduced ("docked") in hourly or fractional hourly increments.

    * In cases of corrective action, suspension without pay for periods of one day or more is permitted.

    * Because the FLSA requires payment for all hours worked, there may be circumstances when overtime pay will be due even when the overtime was not authorized in advance. It is up to management to exercise control regarding performance of work. Normally, a supervisor sets performance expectations, including overtime authorization, and assists the employee in attaining and sustaining satisfactory performance by providing regular feedback to the employee through performance evaluations and coaching. If the employee fails to correct deficiencies such as working unauthorized overtime, corrective action may be appropriate. Employee and Labor Relations Consultants are available for consultation, information and advice regarding appropriate courses of action.

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