Policies and Procedures Manual

Chapter 5: Personnel

05:04:04   Fair Labor Standards Act

Introduction: In 1938 the Fair Labor Standards Act (Wage and Hour Law) was enacted by Congress. It mandated minimum hourly wages, overtime payments, record keeping standards, and child labor restrictions for specified covered employees. Today, its provisions apply to more than 50 million full and part-time workers.

At the time of the original enactment, FLSA did not apply to state governments, but in 1974 Congress amended the Act to extend it to those workers. Because of actions of the United States Supreme Court, the amended law was never implemented; and in 1976 the Court decided the National League of Cities V. Usery case, thus exempting state governments from FLSA.

In League of Cities the Court ruled that state sovereignty and the Tenth Amendment of the Constitution precluded Congress from enacting laws which interfere with employee-employer relations in the area of traditional government functions. However, in 1979 the U.S. Department of Labor promulgated regulations designating certain government functions as non-traditional and therefore subject to FLSA. Several lawsuits ensued, one of which was Garcia v. San Antonio Mass Transit Authority.

The Supreme Court agreed to hear Garcia. On February 19, 1985, the Court decided for Garcia and overruled the League of Cities decision. This ruling reinstated the provisions of FLSA with respect to State employees whether or not they are engaged in traditional government functions.

Covered Employees: The FLSA defines covered employees in terms of the enterprises for which they work. Institutions of higher education, whether or not they are public or private are expressly included. The FLSA also provides for exemptions of various employees based upon the duties and responsibilities of the position, not the position classification. Employees in these positions are excluded from minimum wage and overtime provisions and are classified as exempt. Those covered by the minimum wage and overtime provisions are non-exempt. Within the TBR, employees included in the TBR Classification/Compensation Plan and carrying an object code of 013 are non-exempt. The provisions of FSLA apply to all regular and temporary, full and part-time non-exempt employees. Employees who are faculty or administrators and have an object code of 011, 012, or 016 are exempt as further defined below:

  1. Executive Employees: Generally, in order to qualify as an executive“ employee, an employee must:
    1. Earn a minimum weekly salary of $155;
    2. Have as a primary duty the management of a recognized department of an agency;
    3. Customarily and regularly supervise two or more employees;
    4. Customarily and regularly exercise discretionary powers;
    5. Have the authority to hire or fire other employees or make recommendations as to the hiring and firing of employees; and
    6. Devote less than 20% of their time to work which is not directly and closely related to the performance of the work described above.

      There is a shorter test for exemption, called an upset test, which provides an employee will be exempt as an executive if that employee:
       
    7. Earns a minimum weekly salary of $250;
    8. Has as a primary duty the management of a recognized department of an agency; and
    9. Customarily and regularly supervises two or more employees. (29 C.F.R. 541.1)
       
  2. Administrative Employees: Generally, in order to qualify as an “administrative“ employee, an employee must:
    1. Earn a minimum weekly salary of $155;
    2. Have as a primary duty the performance of non-manual or office work directly related to management policies or business operations or the performance of functions in the administration of a school (includes teaching);
    3. Customarily and regularly exercise discretion and independent judgment;
    4. (1) regularly and directly assist an executive or other administrative employee or; (2) perform under only general supervision along specialized guidelines; or (3) execute specialized assignments under only general supervision; and
    5. Devote less than 20% of their time to work which is not directly and closely related to the performance of the work described above.

      The upset test for an “administrative“ employee provides for exemption if an employee:
       
    6. Earns a minimum weekly salary of $250;
    7. Has as a primary duty the performance of non-manual or office work directly related to management policies or business operations or the performance of functions in the administration of a school (includes teaching); and
    8. Exercises discretion and independent judgment in the work. (29 C.F.R. 541.2)
       
  3. Professional Employees: In order to qualify for an exemption as a “professional“ employee, an employee must:
    1. Earn a minimum weekly salary of $170;
    2. Have as a primary duty the performance of
      1. Work requiring advanced knowledge of the type acquired by specialized study (e.g., law, medicine); or
      2. Work that is original and creative in an “artistic“ field; or (3) teaching;
    3. Consistently exercise discretion and judgment in the work;
    4. Perform work that is predominantly intellectual and varied in nature and is such that the output or result produced cannot be measured on the basis of standardized units of time; and
    5. Devote less than 20% of time to work which is not an essential part and necessarily incident to the work described above.
      The upset test for a “professional“ employee provides an employee will be exempt if that employee:
      1. Earns a minimum weekly salary of $250;
      2. Has a primary duty the performance of:
        1. Work requiring advanced knowledge of the type acquired by specialized study; or
        2. Work that is original and creative in an “artistic“ field; or
        3. Teaching; and
      3. Consistently exercises discretion and judgment, or invention, imagination and talent in an “artistic“ field. (29 C.F.R. 5411.3)

Basic Wage Standards

Minimum Wage: Section 6(a) of the FLSA requires that all covered workers receive an hourly wage not less than $3.35 beginning January 1,1981. It does not require that the employee be paid on an hourly basis. Fixed monthly or semimonthly salaries must be converted to weekly wage equivalents to determine compliance. The conversion is achieved by multiplying the monthly salary by 12 months (semimonthly by 24) and then dividing by 52 weeks. This will produce the wages earned on a weekly basis. Dividing the weekly earnings by the number of hours worked determines the hourly wage.

Deductions made from wages for such items as cash shortages are not legal to the extent that they reduce the employee's earnings to below minimum wage or reduce the amount of overtime due.

The reasonable cost of board, lodging, and other facilities customarily furnished by the employer may be considered part of wages.

Non-exempt employees may be contracted with to perform additional duties beyond the normal workweek; however such work shall be compensated on the basis of their regular hourly wage subject to overtime provisions of FLSA. This work may not be contracted on a job-based wage scale: i.e. payment of a flat fee for typing a paper to be presented to a professional society.

Overtime: Section 7 of the FLSA requires that employer's pay non-exempt employees one-and-one-half times their regular rate of pay for any hours worked in excess of a state maximum during a given workweek. The stated maximum is 40 hours. Therefore, hours worked in excess of 37.5 and equal to or less than 40 in a workweek would be compensated at straight time and those in excess of 40 at time-and-a-half. The employer has the authority to require employees to work additional hours; and therefore, employees do not have the right to waive or decline overtime work. Within the Tennessee Board of Regents, only clerical and support employees (non-exempt) are eligible for overtime payments.

Computation of Overtime: Overtime must be paid at a rate at least one-and-one-half times the regular hourly rate for hours worked in excess of 40 in a single workweek. The regular hourly rate is calculated by dividing the gross annual salary by 1950 hours.

Example: An employee paid $3.82 an hour works 44 hours in one week. This employee would be paid $152.80 (straight time) for the first 40 hours worked and $22.92 (time-and-a-half) for the 4 hours worked above 40:

$152.80 40 hrs X $3.82/hr
x  22.92 4 hrs. X $5.73/hr
$175.72 total weekly wages

Example: If the same employee took 7 1/2 hours of annual leave on Monday, worked a full 7 1/2 hours on each of Tuesday and Wednesday, and then worked 10 hours each day on Thursday and Friday for a weekly total of 42.5 compensable hours, the employee would be paid $162.35. This is 42.5 hours at straight time ($3.82/hr.). Although the employee had greater than 40 compensable hours, only 35 hours were actually worked. Therefore, no overtime at time-and-a-half is due.

Compensatory Time Off: Compensatory time off may be granted in lieu of hourly wage payments for any hours worked in excess of 37.5 per week. All hours worked in excess of 37.5 up to 40 in a given workweek may be taken as comp time at a straight-time rate at any time during the pay period in which they were earned.

All hours worked in excess of 40 in a given workweek may be taken as compensatory time off at time-and-a-half during any subsequent workweek in the pay period in which they were earned. Refer to policy 05:03:00, Compensatory Time.

Workweek: A workweek is defined as 168 hours during seven consecutive 24-hour periods. The workweek may begin on any day of the week and any hour of the day as defined by the employer. A single employer may define more than one workweek each for a different employee group. For purposes of calculating hourly wage rates and overtime payments, every workweek stands alone; there can be no averaging of two or more workweeks.

The Tennessee Board of Regents and its institutions and area schools subscribe to a 37.5-hour workweek as described in TBR Guideline P-020. While most TBR employees adhere to this schedule, it is recognized that in some instances the nature of the work requires that a 40-hour workweek be followed. Examples are security and boiler operator positions where round-the-clock duty requirements necessitate three 8-hour shifts. Where these exceptions must occur, the institution or area school must obtain approval from the chancellor. Furthermore, any employee working a 40-hour workweek must accrue 8 hours of sick leave each month, an appropriate amount of annual leave based upon an 8-hour day and length of service, and 8 hours of pay for holidays.

Hours Worked: This includes all hours for which an employee must be on duty, on the employer's premises, or at any other designated place of work. Also included is any additional time the employee is permitted or tolerated to work. Compensated time for annual leave, sick leave, holiday pay, and days of administrative closing does not count toward time worked for overtime purposes.

Longevity Pay: The value of longevity pay is not included in the week-to-week calculation of regular hourly rate for overtime payment purposes. But, when longevity pay is given, ½-the hourly equivalent rate of the longevity payment is due for all premium overtime hours earned during the prior year of service for which the longevity payment is made. For example, a non-exempt employee worked 2150 hours during the year including 100 hours of premium overtime and received $750 longevity payment. The overtime due on the payment would be $750 divided by 2150 hours $.348 hourly equivalent times ½ = $1.74 per hour times 100 premium hours = $17.40 additional overtime payment.

Note: This method of paying overtime on longevity began effective with the coverage of non-exempt State employees by the FLSA (workweek of April 15,1985) and applies only to that portion of the employee's longevity work year after that date. This longevity provision does not apply to exempt employees.

Record keeping: With respect to an employee subject to both minimum wage and overtime pay provisions, the following records must be kept:

  1. Personal information, including employee's name, home address, occupation, sex, and birth date (if under 19 years of age);
  2. Hour and day when workweek begins;
  3. Total hours worked each workday and each workweek;
  4. Total daily or weekly straight-time earnings;
  5. Regular hourly pay rate for any week when overtime is worked;
  6. Total overtime pay for the workweek;
  7. Deductions from or additions to wages;
  8. Total wages paid each pay period; and
  9. Date of payment and pay period covered.

This information may be maintained in a variety of files, personnel, and payroll documents and does not have to be collected in a single document.

Enforcement: The Wage and Hour Division of the Department of Labor (DOL) administers and enforces the law as it applies to State governments. Enforcement is carried out by compliance offices stationed across the United States. The D.O.L. has the right to enter and inspect places of employment to determine if FLSA has been violated. There is a two-year statute of limitations for suits to enforce the provisions of the Act; for willful violations this period is three years.

Employees may enforce the FLSA against their employer by instituting a court action or by filing a complaint with the D.O.L. It is a violation of FLSA to fire or in any way discriminate against an employee for filing a complaint or participating in a legal action under the law.



Back to Top

Divisional Review Responsibilities Checklist: Human Resources