Classification & Compensation

Fair Labor Standards Act (FLSA)

Since August 23, 2004 the U.S. Department of Labor (DOL) implemented regulations for the administration of the Fair Labor Standards Act (FLSA). The regulations provided updated criteria for employers to use in determining which employees are subject to or exempt from the overtime provisions of the Act.

Employees who are subject to overtime and record-keeping stipulations mandated by the FLSA regulations are considered non-exempt; employees who have an exempt FLSA regulations status are not covered by the overtime and record-keeping requirements of the Act. The Department of Labor considers all employees subject to overtime and minimum wage requirements unless their positions have been specifically determined to be exempt. This exemption is based on an evaluation of the employee's duties and responsibilities, which may offer an exemption if the position is considered executive, administrative, professional, or in certain computer-related occupations.

The Department of Labor and US Courts interpret the FLSA regulations by first assuming that employees and positions are nonexempt. Therefore, the employer is required to demonstrate that exempt status can be substantiated based on the Department of Labor's narrow exemption criteria.

At ECU the Division of Human Resources' Department of Classification and Compensation makes the determination of FLSA regulations status. The determination is based on the nature and the requirements of work performed and are not directly related to job title, salary grade, or EHRA/ SHRA (Exempt from or Subject to the State Human Resources Act) status. Failure to comply with the FLSA regulations carries substantial legal risk.

The above mentioned updated criteria produced a format which is more easily understood. The primary purpose of the new regulations is to ensure that employees are properly classified in regards to being eligible or not eligible for overtime and receive proper pay for the number of hours they work. The rules have been designed to “end the confusion that has led to an explosion of class action lawsuits that failed to protect workers’ rights.” 


Some of the highlights of the regulations are as follows:

o   Employees must be paid at least $455 weekly ($23,660 annually) in order to qualify for executive, administrative, professional or computer job exemption (not subject to the provisions of FLSA and therefore not required to complete weekly time records). This change appears to render even part-time employees making less than this amount automatically subject to FLSA, but this is a specific point still to be clarified prior to implementation.

o   Exemptions will not apply to “first responders" including all law enforcement, firefighters, paramedical and related occupations.

o   Exemptions will not apply to “blue collar” workers involved in production, maintenance, construction or similar occupations.

o   A short-form exemption test for highly compensated employees whose total cash compensation is at least $100,000 annually has been established.

o   The Executive Exemption requires and defines the authority that employees must have in regards to personnel decisions regarding their subordinates; namely, that an executive must have the “authority to hire or fire,” or have their suggestions as to the “hiring, firing, advancement, promotion, or any other change of status given particular weight.”

o   The Administrative Exemption requires independent judgment and discretion in matters of significance.

o   The Learned Professional Exemption is available only for employees who have attained advanced knowledge through intellectual instruction or a combination of experience and instruction which enables them to perform the same work as degreed professionals.

o   The regulations allow employers under certain circumstances to make deductions in pay from exempt employees without affecting their exempt status.

o   The regulations do not apply to teachers (faculty), lawyers or doctors, full-time or part-time.