A Follow Up to Fair Compensation Under the Fair Labor Standards Act (FLSA)

By Linda Goldberg and Paula Singer

Last month’s Library Worklife included background information on the Fair Labor Standards Act (FLSA), a complex set of federal wage and overtime regulations, and an overview of upcoming changes to the regulations. Since then, the U.S. Department of Labor (DOL) has published revised regulations, which could, if adopted, have impact on public libraries. This article previews those changes and further clarifies some information relevant to libraries from the first article.The FLSA sets two basic requirements important for all employers, including libraries:

• Federal Minimum Wage—currently set at $5.15/hour, and
• Overtime—the requirement that employers covered by the Act must pay workers 1 ½ times the regular rate of pay (premium rate) for all hours worked over 40 in a work week.

The FLSA creates two groups of positions. “Nonexempt” positions are those for which employers must pay cash overtime at the premium rate. “Exempt” positions are those for which employers need not pay cash overtime. There are three tests for exemption:

• The Salary Level Test, setting the minimum amount of earnings at $455/week (last updated in 1975); 
  The Salary Basis Test, basing exemption on employee payment of a predetermined salary which does not change based on the quality or quantity of work (last updated in 1954); and
• The Duties Test, describing the duties which fall into executive, administrative or professional job categories (last updated in 1949).

Employers and the DOL consider these tests to determine which positions are exempt from the Act’s overtime provisions. Positions not meeting these exemption tests are presumed to be non-exempt; and overtime payment is required when these employees work more than 40 hours in a workweek. With tight budgets, employers may feel pressure to classify nonexempt employees as exempt to avoid paying overtime expenses. However, this practice clearly violates the FLSA. On the other hand, employers may voluntarily pay overtime to exempt employees. In an April 23, 2004 seminar for Society for Human Resource Management (SHRM) members, Tammy D. McCutchen, Administrator, Wage and Hour Division, U.S. DOL, explained that the proposed revisions to FLSA are intended to protect more low-wage workers by guaranteeing overtime pay to non-exempt employees. The regulations revise the Salary Level Test to increase the minimum salary level (below which overtime protection is guaranteed) from an annual rate of $8,060 to $23,660. This obviously has potential impact on many positions within libraries, from pages and library clerks to maintenance and custodial workers. For employees whose annual salaries fall between $23,660 and $100,000, the Duties Test is used to determine whether the position is deemed to be a “white collar” position and thus exempt from overtime provisions. These tests have been streamlined in the revisions, replacing old “short” and “long” tests of duties. These tests are shown below, with the proposed changes highlighted in bold:

Executive:

• Earns at least $455/week ($23,660 per year)
• Primary duty the management of the enterprise or of a customarily recognized department or subdivision
• Customarily and regularly directs the work of two or more other employees
• Has authority to hire or fire other employees or the executive’s recommendations as to the hiring, firing, promotion or any other change of status are given particular weight by the employer.
• Example: Branch Manager, Library Director

Administrative:

• Earns at least $455/week
• Primary duty is the performance of work directly related to the management or general business operations of the employer or the employer’s customers.
• Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional:

• Earns at least $455/week
• Primary duty of performing work requiring knowledge of an advanced type [work that is predominantly intellectual in character and which includes work requiring the exercise of discretion and judgment] in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or
• Primary duty is the performance of work requiring invention, imagination, originality or talent in a recognized field or artistic or creative endeavor.
• Example: (MLS prepared) Librarian

The positions listed above are for example purposes only. Individual libraries area advised to assess their own positions (with the help of human resource professionals and counsel) in light of the standards. There are other provisions in the revised regulations which should be of interest to public libraries. The proposed changes state that “neither the FLSA nor the final regulations relieves employers from their obligations under union contracts.” Libraries will continue to be bound by negotiated agreements with their represented staff. For those libraries with maintenance staff, the regulations provide for “blue collar” workers to be entitled to overtime protection without regard to any salary tests.

In addition, for public employers, an exception to the overtime provisions dealing with compensatory time resulted from a 1985 amendment and is unaffected by the rules changes. In this amendment, public employers may provide compensatory time off the job instead of overtime payment if there has been a prior agreement or understanding between the public agency and the representatives of employees. This means that providing compensatory time off to non-exempt employees is an option for public libraries: (1) that are public agencies (that is, an agency of state or local government); and (2) that have agreed on the use of compensatory time off with employee representatives (as recorded in a Collective Bargaining Agreement or Memorandum of Understanding or other agreement).

Where the employees are not represented, compensatory time off instead of cash is only allowed if the public agency has a prior agreement or understanding with the individual employee before the performance of work. Prior agreement or understanding could be in the form of a written policy distributed to all employees. For libraries that may not be public sector agencies, compensatory time off in lieu of cash payment is not allowed under FLSA. Now that the proposed changes to the regulations have been made, what’s next? As with all Federal regulatory changes, there is a very systematic process towards finalizing the regulation. The proposed rules were published in the 4/23/04 Federal Register and barring any deterrents; the rules will become effective 120 days after publication.

Two possible roadblocks may slow this process. Congressional action could block changes in the rules, using the regulatory changes as political leverage in an election year. On May 4, 2004, the Senate did just that, passing a bill which would require the new regulations to guarantee the right to overtime pay for all workers who currently qualify. House approval of this legislation could force the DOL to rewrite the rules yet again. Alternatively, under the Congressional Review Act, both houses could vote to revoke the rules and, with Presidential signature, the changes would be revoked.

Libraries should be gearing up to consider what they can do to prepare for changes to the FLSA. Violations of overtime practices are the most common type of federal employment action. Libraries should work with counsel and human resource professionals to perform a review of employees and classifications. Assuming the regulations are not revoked, less than 120 days remain before full implementation. Libraries can use this interim period to review pay practices and prepare for full compliance.

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You may contact Paula at pmsinger@singergrp.com and Linda at lindagoldberg@singergrp.com or seewww.singergrp.com for more information.

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