On Aug. 23, 2004, the U.S. Department of Labor (DOL) released the Fair Pay Overtime Security for the 21st Century Workforce revised regulations. The updated rules replaced ones that were 50 years old. The final rules clarify the definitions of bona fide exempt employees under the executive, administrative, professional, outside sales, and computer employee exemptions (29 C.F.R. Sec. 541) ["What Employers Need to Know and Do About the Labor Department's Final Regulations on Overtime Exemptions," April 22, 2004, www.jacksonlewis.com/legalupdates/article.cfm?aid=569].
"As the workforce has changed over time, from industrial to office, old definitions really didn't address a lot of the issues in the contemporary workplace, including nonprofits like universities," explains Charles H. Kaplan, an attorney in the Labor and Employment Department of Thelen Reid Priest in New York. "The new regulations made a lot of changes in rules, to make it easier for employers to determine who is and who is not exempt from overtime pay."
The DOL revised the tests to determine whether white-collar employees are exempt from the Fair Labor Standards Act (FLSA) minimum wage and overtime requirements. The duties tests have been made more efficient. The computer employee exemption was given its own section in the regulations.
At the University of Missouri, about 1,200 employees--less than 5 percent of its workforce--were made nonexempt following the new regulations. The changes occurred across all operating departments, including admissions, employee benefits, information technology, and first-line supervisors in facilities and academic labs, according to Bill Edwards, director of compensation at the university.
Of Syracuse University's (N.Y.) 4,600 staff members, about 50 were affected by the changes, mainly because they worked part-time. Thirty-five were given a raise, or their work schedule was increased in order to make their hours commensurate to the $455/weekly salary level. Fifteen employees were reclassified as nonexempt since the departments did not need them to work additional hours, or didn't have the money budgeted to pay them more.
The new rules' greatest impact at Syracuse has been on the school's graduate assistants. The new salary level is a "substantial" increase over the previous one, notes Roger Casanova, director of Compensation Administration at Syracuse. The salary level for exempt employees has been raised to $455, compared to $155 under the old rules. Syracuse had decided that all graduate administrative assistants would be nonexempt. Graduate research assistants were surveyed last fall to determine their actual duties and hours, then Casanova and his department determined which ones would become nonexempt and which would remain exempt.
"Thirteen-hundred graduate student assistants were on a paid salary basis as exempt. When the new pay level came in at $455/week, relatively few met that criteria," explains Casanova. "The graduate administrative assistants were all reclassified to nonexempt, and some of the graduate research assistants were treated as nonexempt. About 700 graduate teaching assistants were exempt from the salary level test. Very few of the graduate students were affected, including the graduate administrative assistants, who continued to receive a regular monthly salary. They are restricted to working 20 hours a week, and we put procedures in place to assure that they are paid minimum wage plus a premium wage if they work more than 40 hours a week."
The employees who were directly affected by the new pay rules at the University of Missouri were given a nine-month window to make the change to their new status. The university allowed them to remain on the monthly payroll, although it required manual processing of overtime hours.
"The effects of the FLSA changes on our support operations are just now being realized in areas such as recruiting, conference support and IT user services. We are reviewing policy limits on Compensatory Time Off to better accommodate seasonal peaks and valleys in work schedules," says Edwards. "Additional part-time staff is being considered to minimize the financial impact of having to pay for extended coverage previously provided by exempted employees. Due to the University's tight budget, we have not felt the full impact of these changes in such areas as off-site training and conference attendance."
The University of Missouri committee that was convened to review the review of employees and job titles incurred about 500 staff hours, but many more hours were actually spent studying job documentation and making individual determinations. The appeal process has just begun, according to Edwards.
Many dire predictions were made when the DOL announced its intentions to overhaul the overtime pay rules, but they have not come to pass, says Kaplan.
"Contrary to some concerns from organized labor that changes would result from employees being exempt from overtime pay, it looks like the actual impact of the rule may have been to enlarge the number of people who are eligible for overtime," he explains. "The new regulations actually make it more clear who is and is not eligible for overtime pay. The bottom line is that the new regulations are probably easier to apply."
One benefit of overhauling the rules was that job descriptions had to be reviewed, and many errors may have been found in job classifications and descriptions, notes Kaplan.
James A. Prozzi, a partner in Jackson Lewis, which specializes in workplace law, says a few additional changes were made to the new federal overtime pay rules. These changes had to do with disciplining employees for infractions of workplace rules. Under the old rules, an employee could not be suspended from work without pay. Now an employee can be disciplined by having his or her pay suspended for one or more full days. These rules do not apply to issues of job performance or attitude, but for harassment, and drug and alcohol policy violations, and so on.
The DOL's website is very user-friendly, and HR managers can download a lot of useful information about these and other regulations.
Laura Gater (email@example.com) is a freelance writer based in Indiana. She often writes on human resource issues for a variety of business and medical trade magazines.