November 2016 update
Following a Nov. 22, 2016, ruling by a U.S. District Court Judge in Texas, the University will continue its plan to comply with the federal Fair Labor Standards Act.
A federal judge in Texas issued an injunction to temporarily halt new rules regarding how employees are classified as eligible for overtime. The rules, issued by the U.S. Department of Labor, were scheduled to take effect Dec. 1.
Business groups and other organizations have challenged these new rules in federal court, and the legal process will continue. The temporary injunction is the first step in what is likely to be a lengthy appeals process. Therefore, the University will continue to implement its plan to comply with the Fair Labor Standards Act until a final decision occurs.
In May 2016, the U.S. Department of Labor announced a change to the way employers may classify positions that are eligible for overtime pay under the Fair Labor Standards Act.
The change, which aims to support workers through either improved work-life balance or additional income via overtime pay, raises the minimum salary for a position classified as "exempt" from overtime pay from $23,660 to $47,476 per year. This change means that, regardless of the duties performed, positions paying less than $47,476 per year will be required to be paid on an hourly basis and be eligible for overtime pay beginning Dec. 1, 2016.
The intent of this change is to provide more than 4 million U.S. workers making less than $47,476 per year with either additional time away from work or overtime pay for hours worked over 40 in a week.
The U.S. Department of Labor has provided a video outlining the changes:
The Department of Labor also set out a few exceptions for higher education, explained in this brief video:
Overtime Pay Requirement
“Exempt” means a position is exempt from overtime pay requirements, regardless of the number of hours worked in a week. At UK, "exempt" positions are also referred to as "salary" or "monthly" positions.
“Non-exempt” positions are eligible for overtime pay (at a rate of one and one-half times the employee’s normal hourly rate) for any hours worked over 40 in a seven-day work week. At UK, "non-exempt" positions are also referred to as "hourly" or "biweekly."
The University of Kentucky work week runs from 12:01 a.m. Sunday through midnight Saturday.
While the Department of Labor did grant a few specific exemptions for higher education, this change will require the University to reclassify positions being paid less than the salary threshold of $47,476 per year to “non-exempt” positions. This means employees in these positions will:
- Become eligible for overtime pay.
- Be paid on an hourly basis.
- Enter hours of work in accordance with our biweekly payroll process.
- Transition to the new biweekly payroll schedule.
Employees currently in exempt positions with pay that exceeds the new threshold $47,476 per year will generally not see any changes. However, if other positions in the same job title pay less than the threshold, all positions within the job title will be reclassified to “non-exempt" and experience the changes outlined above. Final decisions are still being made; however, all employees who will be affected will receive direct communications from UK Human Resources in October.
Employees currently in non-exempt positions (hourly paid and currently eligible for overtime pay) will not see any changes.
Key points for those employees affected by the change
- Individuals in positions reclassified to “non-exempt” will see their salaries converted to an hourly pay rate. For example, an employee paid $40,000 per year on a salaried basis will be paid a rate of $19.24 per hour. ($40,000 divided by 2080 hours per year.)
- These individuals will be paid on the biweekly payroll cycle rather than the monthly payroll cycle.
- These individuals and their supervisors will be responsible for submitting and approving hourly timesheets in accordance with the payroll cycle to ensure the employee is paid in a timely and correct manner.
- These individuals and their supervisors must communicate about workload and potential overtime pay needs. All overtime must be approved by the individual’s supervisor in advance.
While the intended outcome of the FLSA changes are positive (providing employee with more time away from work or more take-home pay), this transition can be challenging. The University is developing plans to minimize the impact on employees, including:
- Individuals in positions reclassified to “non-exempt” will be paid for all hours worked, including overtime for hours beyond 40 in a work week.
- Training will be available for employees in reclassified positions and their supervisors to better understand the systems and processes associated with the hourly pay cycle.
- Vacation and sick leave accruals will remain the same for individuals whose positions are reclassified.
- Your eligibility for benefits will not change.
- Employees will have access to planning resources to assist with the transition from monthly to biweekly pay.