Fair Labor Standards Act update

The Fair Labor Standards Act of 1938 is a federal law administered by the Department of Labor that establishes the national minimum wage, recordkeeping, overtime pay eligibility and child labor standards for public and private sector employers. Beginning on July 1, 2024, the standard salary level will change from $684 per week or $35,568 per year to $844 per week or $43,888 per year. ASU is committed to ensuring it meets federal requirements for its employees. An exempt employee whose salary is below the updated standard salary level will be classified as nonexempt beginning June 24, 2024. Employees classified as nonexempt will be eligible for overtime pay or comp time for hours worked more than 40 in a workweek. Employee pay, benefits or other terms and conditions of employment will not be affected.

On Nov. 15, 2024, a federal judge in the Eastern District Court of Texas struck down the Biden administration’s FSLA overtime final rule, invalidating the July 2024 increase and the proposed increase for January 2025. The Texas court decision reinstitutes the 2019 salary threshold to $35,568 per year or $684 per week. The decision applies to all covered employers and employees under the FLSA nationwide.

Nonexempt vs. exempt

Exempt employees are paid on a salary basis and are excluded from overtime pay. Nonexempt, hourly employees must report hours worked and are paid overtime for each hour worked over 40 hours per week. These three tests determine exemption:

Minimum salary threshold test: Employee must be paid above a specific salary threshold amount.
Duties test: Employee must qualify as an executive, administrator, professional, outside sales or computer professional.
Salary basis test: Employees must be paid on a salary basis.

The FLSA is a federal law and all employers must comply with the updated overtime rule. The requirements of this federal law determine an employee’s FLSA status. Vacation and sick leave accrual plans are not affected by an employee's classification as nonexempt or exempt.

How the FLSA update affects ASU

Teachers, lawyers and doctors as defined by FLSA and confirmed by the ASU Office of Human Resources are exempt by definition and not subject to the salary threshold test. AccordingTo be appropriately designated as a teacher, according to the DOL, an employee must have actual instructional duties to be appropriately designated as a teacher. Nonexempt employees who work over 40 hours in a workweek supporting teaching activities and not teaching are eligible for overtime pay or comp time.

An employee's primary duty is the central, main, principal or most important function an employee performs. Determination of an employee's primary responsibility must be based on all the facts in a particular case, with a significant emphasis on the overall character of the employee's job. Factors to consider include, but are not limited to the following items:

Amount of time spent performing the primary or most important duty.
An individual who spends more than 50 percent of their time performing teaching work will generally satisfy the primary duty requirement.
Employee's relative freedom from direct supervision.
The relative importance of the primary or most important duty compared with other types of responsibilities.

Generally, graduate, teaching and research assistants who have teaching as their primary duty are not subject to the salary tests. The DOL typically views graduate and undergraduate students engaged in research under a faculty member’s supervision while obtaining a degree as an educational relationship with the school and thus not an employee. If a worker is not an employee under the FLSA, the laws for minimum wage, overtime and recordkeeping provisions will not apply.

FLSA status for part-time and academic year salaries

The DOL uses the actual weekly pay to determine an FLSA status and does not consider whether an employee has a full-time or part-time status. For employees paid on an academic year basis, the DOL uses the actual weekly pay to determine FLSA status and does not consider contract pay or pay frequency.

Overtime pay and comp time

The university's work schedule policy defines a standard workweek for full-time, nonexempt employees as 40 hours worked between 12:01 a.m. Monday and midnight Sunday.

Employees who earn less than $684 per week, must receive overtime and comp time for hours worked over 40 in a workweek. The computation of 40 hours worked does not include paid time out of the workplace—e.g., sick leave, vacation time, etc.
Current employees may receive comp time instead of overtime pay under the university's overtime policy. The comp time can be preserved, used or cashed out as provided by the FLSA.

How overtime pay is calculated and approved

Nonexempt employees must be compensated at a premium rate of time and a half or comp time at 1.5 hours for all hours worked more than 40 in a workweek. Paid leave time does not count toward the total hours worked in a defined week.