DOL changes to FLSA beginning July 1, 2024

In Brief

The U.S. Department of Labor announced a change in the Fair Labor Standards Act (FLSA) beginning July 1, 2024, that will require some jobs at Duke that are currently classified as salaried (monthly paid) to move to an hourly (biweekly paid) classification so that individuals in these positions become eligible for overtime pay.

The change by DOL increases the minimum salary threshold at which a position can be considered “exempt” (salaried/monthly paid) from the requirement to pay overtime from $35,568 per year to $43,888 per year effective July 1, 2024. Employees earning under the new threshold will need to transition to an hourly (or biweekly paid) classification as the new federal requirements become effective.

Here are the highlights of the impact:

  1. The change in the eligibility for overtime pay is a result of new federal regulations that applies to all employers covered by the Fair Labor Standards Act.
  2. Approximately 100 staff members at Duke who currently fall below the threshold and will be reclassified into non-exempt positions will become eligible for overtime pay beginning July 1, 2024.
  3. The reclassification does not affect a staff member's job title, job level, or role as described in the job description. However, the department may choose to modify the work hours or participation in activities beyond a normal 40-hour workweek in consideration of potential budget impacts related to managing overtime pay.
  4. When the regulation takes effect, staff members will be required to record their time using the applicable tool to submit the hours worked or paid time off every two weeks. Any overtime must be approved in advance by the manager.
  5. Vacation and Paid Time Off (PTO) accruals for impacted team members will not be affected.
  6. While impacted employees will not continue to be eligible to receive Duke’s contribution to the Faculty and Staff Retirement Plan, they may continue to make their voluntary contributions to that plan. They will also become participants in the Employees’ Retirement Plan (ERP) once meeting the plan’s eligibility criteria.
  7. The impacted team member’s pay cycle will move from the monthly payroll to the biweekly payroll. Recall that University and Health System employees have a new resource available via DailyPay or Wisely apps, which may be of assistance to some team members due to the timing differences between pay periods in moving from the monthly payroll cycle to the biweekly payroll cycle. More information about Earned Wage Access can be found here.

Questions and Answers

General

FLSA stands for Fair Labor Standards Act, which is a federal law administered by the U.S. Department of Labor. The act establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. It also establishes threshold requirements that must be present before a position can be “exempt” from the requirement to pay overtime. One of these requirements is the position must pay above a minimum annual salary amount.

Most non-exempt employees covered by the Fair Labor Standards Act ("FLSA") must be paid at least 1.5 times their regular rate of pay for any hours beyond 40 in a workweek. Please note that time off hours, other than designated or discretionary holidays, do not contribute to overtime hours.

As a result of the Department of Labor’s announcement regarding updates to the Fair Labor Standards Act (FLSA), the following changes will be made:

  • Increasing the FLSA “salary test” threshold increases the minimum salary threshold at which a position may be considered “exempt” from overtime pay from $35,568 per year to $43,888 per year.
  • Any staff member paid below $43,888 (regardless of job duties) will transition to non-exempt status (hourly paid) and be eligible for overtime pay once the change takes effect on July 1, 2024.

Your current monthly salary will be converted to an equivalent hourly rate, and you will be paid based on the hours worked each week. Your pay may vary based on the number of hours you work each week. If you are approved to work overtime, you will be paid 1.5 times your regular rate of pay for any hours beyond 40 in a workweek.

The FLSA salary threshold was last updated and approved by the federal government in 2020.  This increase in the threshold seeks to better align wages with increases that have occurred since 2020.

No, we anticipate legal challenges to the threshold amount scheduled to take effect Jan. 1, 2025.  So this communication focuses solely on the change effective July 1, 2024.

No. This change is mandated by the U.S. Department of Labor in accordance with federal law. It applies to all employers and employees covered by the Fair Labor Standards Act.

Based on initial analysis, Duke projects the change could affect around 100 employees for the July 1, 2024, effective date.

Your responsibilities as defined by your job description will not change as a result of being classified into a non-exempt position. However, your department may choose to modify your work hours or participation in work-related activities beyond a normal 40-hour workweek in consideration of potential budget impacts related to managing overtime pay.

No. The reclassification will not affect your base rate of pay, job title, job level, or role as described in your job description. A position’s classification as exempt or non-exempt basically determines whether you are eligible for overtime pay and how you record your time worked.

  • Yes, you will need to submit a timecard every two weeks to record the hours you work and the hours you take as paid time off.
  • Depending upon your departmental business processes, you will submit this time either electronically through the Duke@Work self-service website or through the time and attendance system. Time is submitted on a biweekly basis for supervisor approval.
  • If you are approved to work overtime, you receive 1.5 times your regular rate of pay for any hours you work beyond 40 in a workweek.
  • You will need to request approval in advance to work any overtime hours.
  • The frequency of pay will change from monthly to biweekly.
  • Deductions are taken from different cycles, i.e., dental insurance is deducted from the first biweekly check of the month and health insurance is deducted from the second biweekly check of the month. A schedule of deductions is available on the Human Resources website.

There are different types of positions or job classifications that will be impacted by the change in federal regulation. The preliminary list of positions is currently being reviewed with the appropriate Management Centers and entities. After the list has been vetted, a final determination will be made for all staff members in the affected job classifications whose positions will be reclassified as non-exempt.

If the salary paid to an individual working part-time or during a 9- or 10-month period does not exceed the annual salary threshold, the position will become non-exempt, unless the function of the position excludes the job from meeting the salary threshold requirement.

Yes, the prorated salary  will be $35,000 and below the salary threshold, so the employee in the position  will be reclassified as non-exempt and eligible for overtime pay. Note: the minimum salary threshold is not prorated based on a position that is less than full-time equivalency (FTE).

All work time, regardless of exempt or non-exempt classification, should be discussed and approved in advance by your manager. Staff members in non-exempt positions and departments have an obligation to ensure all time worked is tracked and reported accurately to ensure approved overtime is compensated according to FLSA guidelines. Eligibility for remote work should be discussed with your manager. More information is available at Remote Work website.

Job titles do not determine exempt status. The fact that a manager is paid on a salary basis does not alone provide sufficient ground to exempt that employee from the FLSA's minimum wage and overtime requirements. For an exemption to apply, an employee's specific job duties and salary must meet all of the applicable requirements provided in the Department of Labor's regulations.

Benefits

Yes. Duke provides a defined benefit retirement plan to eligible non-exempt employees called the Employees’ Retirement Plan (ERP). The ERP is a traditional pension plan paid entirely by Duke and is designed to provide you with a guaranteed monthly income at your retirement. Beginning July 1, 2024, Duke’s contribution to the Faulty and Staff Plan will be discontinued for anyone moving to a nonexempt (hourly) position. However, eligible non-exempt employees can continue to make voluntary pre-tax contributions, Roth 403(b) after-tax contributions, or a combination of both to the Faculty and Staff Retirement Plan. More information may be found on the Duke Human Resources website or by calling 919-684-5600.

No. As long as you remain in your job classification, unit and work schedule, Duke will continue your current vacation or PTO accrual rate.

No, if you transfer to another job or unit at Duke your vacation time accrual will be based on the exempt or non-exempt status of the new position.

Benefit eligibility for all newly hired individuals will be consistent with the existing policies for non-exempt positions effective July 1, 2024. Retained vacation and Paid Time Off (PTO) accrual status only applies to current   employees whose positions are being reclassified from exempt to non-exempt as a result of the new regulation.

Tracking and Payment of Work Time

Yes. Staff in non-exempt positions must submit electronic time cards in the Duke@Work self-service website (see training) or badge in/out using the Time and Attendance System (see training) every two weeks. Once submitted, the timecard is available for your manager’s approval.

The time worked by a staff member in a non-exempt position could change based on a department’s needs and budgetary restrictions. For example, a staff member in an exempt position could work additional time outside normal business hours without any additional compensation. A staff member in a non-exempt position will be eligible for overtime pay if that work contributed to more than 40 hours in a workweek.

The Department of Labor does not allow for private employers to provide compensatory time in lieu of payment of overtime hours worked.

Once you move to the biweekly payroll in July, you will be paid every two weeks rather than once a month. You can find the pay schedule for biweekly-paid staff on the Duke’s Corporate Payroll Services website.

Deductions are taken from different cycles, i.e., dental insurance is deducted from the first biweekly check of the month and health insurance is deducted from the second biweekly check of the month. A schedule with this information to reflect the deductions and the corresponding pay cycles is posted on the Human Resources website.

Some deductions will be adjusted automatically, including: Parking, Medical Insurance, Dental Plan, Vision Plan, and Flexible Spending Accounts. Others will require the employee’s action, such as:

  • Contributions to the Faculty and Staff Retirement Plan
  • Contributions to the Credit Union
  • Additional Income Tax Withholdings

Employees will be provided information regarding deduction frequency and how to make changes in advance of July 1 as needed.

Any overtime must be approved in advance by your supervisor.

The Fair Labor Standards Act stipulates that staff members in non-exempt positions be paid at least 1.5 times their regular rate of pay for any hours they work beyond 40 in a workweek.

As defined by the Fair Labor Standards Act, staff must be paid at least 1.5 times their regular rate of pay for any hours they work beyond 40 in a workweek. The overtime calculations are contingent upon the overtime option designated by your department. Your manager or supervisor will be able to provide this information. For example, a staff member may work more than 8 hours in a day, but if the cumulative work time for the week does not exceed 40 hours, no overtime will be paid.

No, paid time off (hours from PTO banks, vacation, sick leave, etc.) do not constitute “work time” and do not contribute to the calculation of overtime. For example, if a staff member takes a vacation day on Monday and works four 10-hour days for the rest of the week, no overtime will be paid. Designated and Discretionary holidays do contribute to the determination of overtime.

In most cases, a staff member’s regular hourly rate will be determined by dividing current annual salary by the current annual standard hours. If the standard hours are 40 per week, that is the equivalent of 2,080 hours in a year (40 hours/week x 52 weeks). So, if a staff member’s annual salary is $37,440 and the employee has a standard of 40 hours per week, $31,200 divided by 2,080 equals an hourly rate of $18.00. If the employee works in excess of 40 hours in a week, then they will receive overtime pay of 1.5 times the regular hourly rate. The overtime rate in this example will be $27.00 per hour.

The amount of overtime allowed for any staff member is at the discretion of each individual department and the staff member’s supervisor.

According to the Department of Labor, the time could be considered compensable if the volunteer activity is during normal work hours, if the staff member is required to be on premises, or if the employee is directed to volunteer by the employer. Otherwise, time spent voluntarily in such activities outside of the employee's normal working hours is not considered hours worked.