Frequently Asked Questions (and Answers) about Exempt and Nonexempt Status Under the Fair Labor Standards Act (FLSA)

The U.S. Department of Labor made changes to the Fair Labor Standards Act (FLSA)regulations that change which employees may be considered as non-exempt (eligible for overtime pay) or exempt (not eligible for overtime pay) effective December 1, 2016. Like employers all around the country, Averett is evaluating each position in light of the requirements and clarifications under the rule to correctly categorize positions to comply with the federal rules.

  1. Under the revised rule, what standards apply?
  2. That sounds complicated, how will I know if my position is exempt or nonexempt and therefore whether or not I am entitled to overtime pay if I work more than 40 hours in a week?
  3. If I’ve been exempt, and if I do not meet the new salary level, it sounds like I will become nonexempt. Is that a demotion or downgrade?
  4. If my position is going to change to nonexempt status, will my job responsibilities and position description change?
  5. How will my work be different then if my position becomes nonexempt??
  6. If my position has been and will remain exempt, will this change have any effect on me at all?
  7. So once it is announced who is exempt and who is nonexempt, my coworkers will have an idea of how much money I earn based on my category, that doesn’t seem fair; is that right?

EQ1: Under the revised rule, what standards apply?

EA1: Under the FLSA, employees are entitled to be paid at least the federal minimum wage and if they work more than 40 hours in a week are entitled to receive overtime pay for the hours in excess of 40. Overtime must be paid at 1.5 times the regular hourly rate of pay for that week; UNLESS, the position is an ‘exempt’ position.

Some types of positions are exempt based on the nature of the position. The U.S. Department of Labor (DOL) has defined several categories of employees who may be designated ‘exempt’ based on certain duties but without complying with the minimum salary test (explained below). These special exemptions include positions with a primary duty of teaching (includes faculty members, many coaches, and often librarians) and positions whose purpose is to provide academic support and counseling to students (such as professional advisors and tutors).

For other positions, there is a two part ‘test’ used to determine if a position is exempt or nonexempt. The first part is whether or not the position meets the compensation standards. To be exempt from the minimum wage and related requirements, the position must be paid on a salary or fee basis (not hourly). And, that salary must meet or exceed a minimum threshold which is $913 per week as of December 1, 2016. The second part is whether or not the position’s essential and primary duties meet one of the three duty tests under the rule:

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise and managing at least two full-time employees. Or
  • The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. There is a special salary level for certain academic administrative personnel that may apply. Or
  • The employee’s primary duty must be to primarily perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Within this category, doctors, lawyers, and teachers qualify to be ‘exempt’ even if they do not meet the salary test above.

EQ2: That sounds complicated, how will I know if my position is exempt or nonexempt and therefore whether or not I am entitled to overtime pay if I work more than 40 hours in a week?

EA2: Human Resources has been meeting with each manager and supervisor to review positions and position descriptions to determine which ones are exempt and which ones are nonexempt. Your supervisor will notify you of your status.

EQ3: If I’ve been exempt, and if I do not meet the new salary level, it sounds like I will become nonexempt. Is that a demotion or downgrade?

EA3: If a position is subject to the two-part test and does not meet the salary threshold, that position will be nonexempt; however that change is definitely NOT a demotion or downgrade! Exempt or nonexempt categories are not reflective of a position’s value to the organization, nor do they reflect the status of a person or that person’s contribution to the University’s success. They simply are categories created by federal law for the sole purpose of determining what positions must be paid overtime when earned. At Averett, every employee is important to our team.

EQ4: If my position is going to change to nonexempt status, will my job responsibilities and position description change?

EA4: No. As part of the preparation for the rule changes, position descriptions have been reviewed and some have been updated to reflect actual work being performed and to clarify primary or essential duties. But, no work will be added or taken away from positions that are defined as nonexempt under the revised federal standards. Your responsibilities will remain the same.

EQ5: How will my work be different then if my position becomes nonexempt?

EA5: While your annual pay and your job responsibilities will be the same, how and when you do your work may be different.   For example, if you normally check your work email from home in the evenings and weekends and your position becomes nonexempt, you will no longer be able to do that unless your supervisor approves it in advance since that time will count as work time.

Another example of how doing your work might be different would be if you are needed to work on a weekend or evening, say for a student orientation weekend, your supervisor may ask you to take some time off during the week so that you can work the event and not exceed the 40 work hours. Averett operates on a pretty tight budget each year, so there is no room in this year’s budget to accommodate much overtime pay. Supervisors will be trained in overtime management techniques to help assure that nonexempt employees do not work excessively and that they do get their personal time to spend with families and in other activities.

Finally, because DOL says that for overtime purposes, all positions and the hours worked with them are counted (in aggregate) to reach the 40-hour threshold for overtime, nonexempt personnel will no longer be able to teach for Averett since all the time associated with that extra role would have to be paid at the overtime rate and documented as such. Some other roles may be permitted, but with a limitation on hours based on available budget.

EQ6: If my position has been and will remain exempt, will this change have any effect on me at all?

EA6: Maybe. In some cases, employees who become nonexempt will have limits placed on how many hours a week they may work. For example, if there is a big project underway in the department, exempt employees may be asked to help work on the project in order to prevent overtime by the nonexempt workers. But remember, the scheduled work week at Averett is 35 hours with a pay scale that compensates for 40 hours. So, exempt employees may be needed to work more than the minimum 35 hours in a week in order to meet the work goals.

EQ7: So once it is announced who is exempt and who is nonexempt, my coworkers will have an idea of how much money I earn based on my category, that doesn’t seem fair; is that right?

EA7: No, there are several things to keep in mind.

First: No one is going to ‘announce’ who is exempt and nonexempt. Area VPs, direct supervisors, and payroll personnel will know because they must approve and process overtime. Most of your coworkers will know your status only if you discuss it with them.

Second: There is no ability to tell someone’s salary level based on exempt or nonexempt status because of the complex nature of the rules set up by DOL. For example, a faculty member is likely to be exempt based on the teaching exemption regardless of whether they earn $25,000 or $125,000 a year. Someone who does not qualify for one of the special exemptions cannot be exempt unless they meet one of the three specific duties tests, so a person could have a salary of $70,000 and still be nonexempt.

So if people think they know something about your status or pay, they are guessing and quite probably guessing wrong. We are a team here, so let’s keep our focus on performing our responsibilities well and providing a positive, valuable learning experience for our students.