Summary of Federal Laws

Employment

Miscellaneous Employment Laws

Fair Labor Standards Act of 1938 (FLSA)

29 U.S.C. § 201 et seq.; 29 CFR Part 500 et seq.

Establishes minimum hourly wage. ($5.85 effective July 24, 2007; $6.55 July 24, 2008, $7.25 July 24, 2009) (Note that higher rates may apply in certain states, including the District of Columbia. The law also establishes overtime pay requirements for non-supervisory employees.  Employees may not be required to work more than forty hours per seven-day week without overtime compensation at a rate of not less than one and one-half times their regular pay. Exemptions from the overtime compensation provision are provided for workers who are employed in bona fide executive, administrative or professional capacity. (See 29 U.S.C. § 213(a) (1)).  Faculty and lecturers are covered under the category of "bona fide professionals". Under the FLSA regulations (29 CFR Part 541) to be considered an exempt executive, professional, or administrative employee, three tests must be satisfied:

• Duties test

• Salary level test and

• Salary basis test.

Under the salary basis test, pay deductions for disciplinary violations are impermissible unless imposed "in good faith for infractions of safety rules of major significance" (29 CFR 541.118).

A work rule that allows for across the board (for both professional and non-supervisory employees) suspensions or deductions in pay may end up reclassifying professional employees as non-exempt workers, and subject the employer to liability for overtime. See Hahn Automotive case below. The Secretary of Labor is of the view that employees whose pay is adjusted for disciplinary reasons do not deserve exempt status because as a general matter true "executive, administrative, or professional" employees are not "disciplined" by piecemeal deductions from their pay, but are terminated, demoted, or given restricted assignments.

The FLSA also contains established recordkeeping and child labor standards.  Posting and recordkeeping required.  See the Dept. of Labor Poster Page for electronic copies of the required employment posters as well as an employer poster advisor (interactive).   Certain executive, administrative and professional employees are exempt for the minimum wage and overtime requirements.  Under the FLSA regulations (at 29 C.F.R. § 541.314), lawyers, doctors, and teachers are exempt without regard to whether they pass the salary test.

Employment of student workers is dealt with in 29 C.F.R. Parts 519 and 527.  The hours worked provisions are contained in 29 C.F.R. Part 785.  For general information see http://www.dol.gov.

Recordkeeping:  University as an employer must keep payroll records for all employed, with employee’s name, address, sex, date of birth, occupation, hours worked each day, total hours worked each week, hourly rate of pay for any work week in which overtime is due, and total wages paid and deductions taken.  The records which must be kept for bona fide executive, administrative, or professional capacity employees are set forth at 29 C.F.R. § 516.3.  The employer must also keep certificates, collective bargaining agreements, and individual contracts, as well as sales and purchase records. Records above must be kept for three years.  See 29 C.F.R. § 516.5.  Records which must be kept for at lease two years include the basic employment and earnings records, wage rate tables, order, shipping and billing records, and records of additions to or deductions from wages paid.  See 29 C.F.R. § 516.6. See also Fact Sheet # 21: Recordkeeping requirements under the Fair Labor Standards Act.

FLSA:  Professional Exemption for Computer Employees Dec. 14, 2006 Department of Labor Field Assistance Bulletin No. 2006-3. The gist of the bulletin  is that the exemptions under Section 13(a)(1) of the FLSA and 13(a)(17) for computer employees are not meant to be mutually exclusive, but rather 13(a)(17) (added in 1996) was meant to be an additional express statutory basis for the computer employee exemption.  See 29 CFR 541.400 et seq. for the general rules for computer employees.

Volunteer or Employee?

This summary of requirements for a volunteer relationship came from Gerard St. Ours, Associate General Counsel, Johns Hopkins University.

The principles that govern a volunteer relationship (and as applied by the U.S. Department of Labor) are as follows:

1.  A person who intends his services to be voluntary and to be rendered without compensation from the entity is not an employee of the entity.

2.  Bona fide efforts of individuals to volunteer and donate their services for activities of a humanitarian, public service, or religious nature where there is no expectation of payment do not create an employment relationship.[1]

3.  The fact that the volunteer is an employee elsewhere in the organization does not mean he cannot volunteer in a capacity that differs from his employment.  However, where an employment relationship does exist, that relationship may not be waived; so, for example, a hospital's bookkeeper could not be treated as an unpaid volunteer bookkeeper for the hospital in the same week in which he is also an employee.[2]

4.  People who donate their time for civic or personal motives, without promise or expectation of compensation, at hours that suit their own convenience, are not employees for purpose of wage and hour laws. [3]

5.  Volunteers should not be utilized in ways that displace or replace regular employees in the performance of their normal duties.[4]

Final FLSA Overtime Regulations

69 Fed. Reg. 22121 (April 23, 2004)

On Friday April 23, 2004, the Department of Labor's new overtime regulations were published in final form. The new rules will be effective Aug. 23, 2004. The rules implement the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales and computer employees. These exemptions are often referred to as the "white collar" exemptions. Revisions to both the salaries and duties test were made by these regulations. Numerous changes were made after comments were collected on the proposed rule. Highlights of the new rules include the following:

• An employee must make at least $445 per week (based on a calculation of 40 hours) to be considered exempt;

• Employees with "total compensation" of at least $100,000 per year will be considered exempt if they:

Make at least $23,660 per year week paid on a salary or fee basis. Total annual compensation may also include commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during a 52-week period.

 

Perform office or non-manual work; and

 

Customarily and regularly perform any one or more of the exempt duties of an executive, administrative or professional employee.

A safe harbor exists that allow an employee to claim the employee is exempt even when improper deductions are made if the employer has a written policy prohibiting improper pay deductions as provided in § 541.602, notifies employees of that policy and reimburses employees for any improper deductions, and the employer does not repeatedly and willfully violate that policy or continue to make improper deductions after receiving employee complaints.

The new rules will apply automatically on Aug. 23, 2004 in states where overtime laws automatically incorporate exempt status definitions from the FLSA, or the states do not have their own generally applicable overtime laws. DC is included in this group of states.

For a full summary of the new rules see the Jackson Lewis article of April 20, 2004 entitled Department of Labor Issues Final FLSA Overtime "White Collar" Exemption Regulations. Jackson Lewis also has the following articles available: What Employers Need to Know and Do about the Labor Department's Final Regulations on Overtime Exemptions and Answers to Frequently Asked Questions about the DOL Regulations on White Collar Exemptions, as well as the legal update, Is Your Company Ready for the August 23, 2004 Compliance Deadline for New FLSA Overtime Regulations?

A training video on the new rules is available on the Department of Labor "Fair Pay" Web Page. NACUBO reports that the final rules adopted a provision recommended by the higher education community specifying that academic counselors are considered exempt from FLSA overtime provisions under the  administrative employees' exemption for workers at educational establishments. See also DOL chart showing side by side comparisons under the old and new rules.

Unanswered Questions under the New Regulations

On July 28, 2004 CUPA HR sent a letter to DOL asking for clarification on graduate research assistants. The letter and attachments  highlight the July 13, 2004 NLRB ruling that held that graduate student assistants who perform services at a university in connection with their studies have a predominantly academic, rather than economic, relationship with their school.

Graduate Research Assistants and FLSA

Letter from Attorney Lawrence Lorber of Proskauer Rose, LLP on Validity of the Wage-Hour Administrator's 1994 Opinion Letter on the FLSA Status of Graduate Research Assistants,  (Aug. 9, 2004) This letter was provided by Attorney Sheldon Steinbach, Vice President and General Counsel of ACE, and stands for the proposition that schools may continue to rely on the 1994 DOL opinion letter that research assistants performing research under the supervision of a faculty member in a research environment will be considered students rather than employees for purposes of the FLSA.

Selected Recent Case Law:

In Takacs v. Hahn Automotive Corporation, 246 F.3d 776, (6th Cir. 2001) twenty-seven former managers and senior assistant managers brought suit under the Fair Labor Standards Act against the employer to recover overtime compensation. The Court held the managers were not salaried employees exempt under the FLSA from overtime pay requirements, due to the existence of a disciplinary policy that provided that employees, including members of management, were subject to suspension without pay for misconduct on the job, and in fact seven members of management were actually suspended without pay for disciplinary infractions. Key to the Court's finding was that not only did the policy specifically say management could also be suspended, but the employer had actually imposed suspensions on managers. The "window of correction " defense, which allows an employer to reimburse the exempt employee for the loss and promise to comply in the future, could not be utilized in this case as the Court found that the employer's policy was to make pay deductions from salaried employees, and thus there did not exist an objective intention to pay the employees in question on a salaried basis.

The Court also quoted the case of Auer v. Robbins, 519 U.S. 452 (1997), and distinguished the two cases. In the Auer case the window of correction defense was available. In Auer there was one instance of a deduction in pay against an officer who was paid on a salaried basis. The Court upheld the Secretary of Labor's interpretation of the regulation, which is that the standard is violated, if there is either an actual practice of making deductions or an employment policy that creates a "significant likelihood" of making deductions. In that case the Court noted: "A primary issue in the litigation unleashed by application of the salary basis test to public sector employees has been whether, under that test, an employee's pay is "subject to" disciplinary or other deductions whenever there exists a theoretical possibility of such deductions, or rather only when there is something more to suggest that the employee is actually vulnerable to having his pay reduced."

In finding against the employees seeking overtime pay in Auer, the Court adopted the interpretation of the regulation proposed by the Secretary of Labor, and stated as follows:

"The Secretary's approach rejects a wooden requirement of actual deductions, but in their absence it requires a clear and particularized policy--one which 'effectively communicates' that deductions will be made in specified circumstances. This avoids the imposition of massive and unanticipated overtime liability (including the possibility of substantial liquidated damages, see, e.g., Kinney v. District of Columbia, supra, at 12) in situations in which a vague or broadly worded policy is nominally applicable to a whole range of personnel but is not "significantly likely" to be invoked against salaried employees."

Resources

FLSA Employee Rights Poster (udpated June 2007)

Fair Labor Standards Act Summary Memo (Sept. 24, 2004) Heimbach, Spitko and Heckman, authored by David Spitko. An excellent 34 page memo, which, while not specific to higher education,  offers a detailed overview of the law.

This August 2005 letter addresses the situation where an employee of an IHE is mainly non-exempt, but also teaches one or two classes on a part time basis. In the opinion the employee worked full time as a welder but also taught a welding course at night. The US Dept. of Labor concluded that the primary duty was the non-exempt position, and thus that the employee must be paid on an hourly basis for the teaching and preparation time for the class. The 13(a)(1) exemption for teachers does not apply.

FLSA: Payment of Assistant Coaches: Memo by the law firm of Gibson, Dunn & Crutcher addressing the payment of Assistant Coaches under the new rules.

DOL FLSA Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA)

updated 9/14/04 to add volunteer test

9/20/04 added Assistant Coaches memo by Gibson Dunn and Crutcher
updated 11/6/05 to add FLSA 2005-29

links updated 1/31/06 pth

5/23/06 Added Spitko memo, removed NACUBO memo (no longer available online)
updated 7/29/07 FLSA change in minimum wage