Overtime final rule and the impact on local governments

By Tina Stevens


The Fair Labor Standards Act (FLSA) has long applied to local governments. The FLSA and the U.S. Department of Labor’s (DOL) regulations, however, contain some unique provisions applicable only to public sector workers. Most notably, this includes the permitted use of compensatory time off, under certain conditions.

 

These provisions can help local governments adapt to the overtime final rule.

 



The DOL’s final overtime rule updates the salary level required for the executive, administrative, and professional, i.e. “white collar,” exemptions to ensure that the FLSA’s intended overtime protections are fully implemented. The rule also will lead to better work-life balance for many employees, and it can benefit employers by increasing productivity and reducing turnover.

 

The final rule updates the salary threshold, under which most white-collar workers are entitled to overtime, to equal the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage census region, which is currently the South. The final rule raises the salary threshold from $455 a week ($23,660 for a full-year worker) to $913 a week ($47,476 for a full-year worker) effective December 1, 2016.

 

The FLSA and local governments

Neither the FLSA nor the DOL’s regulations provide a blanket exemption from overtime requirements for local governments, nor for public sector workers. However, the FLSA contains several provisions unique to local governments, including compensatory time (“comp time.”)

 

Comp Time

Pursuant to an agreement with its employees, local government entities may arrange for their employees to earn comp time instead of cash payment for overtime hours. Any comp time arrangement must be established pursuant to an agreement or understanding arrived at between the employer and employee before the performance of the work. This agreement may be evidenced by a notice to the employee that compensatory time off will be given in lieu of overtime pay, providing the employee a copy of the applicable personnel regulations.

 

The comp time must be provided at a rate of one-and-one-half hours for each overtime hour worked. For example, for most local government employees, if they work 44 hours in a single workweek (4 hours of overtime), they would be entitled to 6 hours (1.5 times 4 hours) of compensatory time off. When used, the comp time is paid at the regular rate of pay.



 

Most local government employees may accrue up to 240 hours of comp time. Law enforcement, fire protection, and emergency response personnel may accrue up to 480 hours of comp time. An employee must be permitted to use comp time on the date requested, unless doing so would “unduly disrupt” the operations of the agency.

 

Fire and police small-agency exemption

The FLSA also provides an exemption from overtime protection for fire protection or law enforcement employees, if they are employed by an agency that employs fewer than five individuals in those roles, respectively. Fire protection or law enforcement employees in public agencies with fewer than five individuals in those roles, respectively, will continue to be exempt from overtime.

 

By agreement, public sector employers can satisfy their overtime obligation by providing comp time rather than paying a cash overtime premium. Local government employers may continue to use comp time to satisfy their overtime obligations to employees who have not accrued the maximum number of comp time hours.

 

Local government employers have discretion to choose between several options for complying with the final rule

The DOL does not dictate what option employers should use to comply with the revised regulations. In fact, many options are available to employers for complying with the new salary threshold.

 

These options include:

  • Raise salaries: For workers whose salaries are close to the new threshold, and who pass the duties test, employers may choose to raise these workers’ salaries to meet the new threshold and maintain their exempt status.
  • Pay overtime above a salary: State and local government employers also can continue to pay newly eligible employees a salary and pay overtime, or provide comp time for overtime hours in excess of 40 per week. The law does not require that newly overtime-eligible workers be converted to hourly pay status. This approach works for employees who usually do not work overtime, but have occasional “spikes” or periods that require overtime hours. State and local government employers can either plan and budget the extra pay during those periods, or provide comp time.

 

Wage and hour training is essential, particularly for newly nonexempt employees who have never had to clock in and out before.

 

Employers have to make sure employees who are not used to the rules for nonexempt workers aren’t working during their meal and rest breaks or using their laptops at home without tracking their time.

Employers also have to consider their existing travel policies, benefits and other programs, and how they will apply to newly nonexempt employees.

 

It should be explained to employees that this rule was mandated by the federal government and that any reclassification is not a demotion. Inform employees that these are simply new rules and that they are still valued members of the organization.