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Administrative Announcement

TO: Deans, Associate Deans for Administration, and Directors
FROM: Donald Reaves
Vice President for Administration and Chief Financial Officer
SUBJECT: Fair Labor Standards Act
DATE: August 20, 2004

I am writing to inform you of the recent changes to the Fair Labor Standards Act (FLSA) and the passage of Illinois Senate Bill 1645. These laws, effective August 23, 2004 and April 2, 2004 respectively, establish new federal standards and amend Illinois standards regarding overtime pay. I apologize for the delay in informing you of these legislative changes. We have been working with legal counsel and our peer institutions to interpret how they should apply to the University of Chicago. This memorandum will outline changes in overtime requirements for the University. Please share this information with the managers and supervisors in your area.

Under FLSA and the Illinois wage-hour law, overtime pay is owed to all employees who occupy non-exempt jobs. Overtime pay is calculated as one and one-half times the employee s regular hourly rate and is payable for all hours over 40 worked per week. At the University, all hourly jobs (biweekly paid) are considered non-exempt under FLSA. In general, positions in service, maintenance, trades, and office support are considered non-exempt. Some positions in research, information technology, and other job families may be non-exempt as well. For purposes of clarification, hourly jobs are those paid hour-for-hour and not guaranteed a specific payment amount on a salaried basis. Salaried employees (monthly paid) occupying "exempt" positions, those meeting FLSA's criteria to qualify as executive, administrative, or professional positions, are not subject to the overtime requirements of FLSA.

An employee must meet all of the tests relating to duties, responsibilities, and salary to qualify for exemption from FLSA overtime requirements. In order to qualify for consideration under the executive, administrative, or professional exemptions, employees must now be paid on a salary basis at a rate not less than $455 per week (previously $250 per week). This salary threshold is equivalent to $23,660 per year for a full-time appointment. In addition, the specific salary requirements for executive, administrative, and professional employees may not be reduced based on part-time or temporary employment. The exemption status of positions is determined on a case by case basis. More specific information regarding FLSA executive, administrative or professional exemption tests can be found in the supplemental attachment.

Based on our current analysis of the revised federal regulations and new Illinois state law, we are comfortable that the vast majority of our exempt/non-exempt classifications are appropriate. This is because state law effectively renders the revised federal regulations inapplicable in Illinois but explicitly adopts the revised federal regulations higher salary threshold ($455 per week) described above. Therefore, our analysis suggests that some designations (e.g., some employees in part-time and temporary assignments) require additional scrutiny. In this regard, in the immediate future, we will be asking for your cooperation in gathering and assessing information as it relates to these designations.

In view of these changes, we have also been engaged in rigorous internal and external discussions regarding the impact of the new federal regulations and new state law on various categories of University employees, including graduate teaching assistants and graduate research assistants. If graduate students perform research in their field of study or they act as teaching assistants, they are exempt. In addition, medical or law students who, pursuant to the practice of their professions, are engaged in an internship or resident program that helps to prepare them for their profession are exempt from FLSA overtime regulations. We have concluded that the impact to the University is minimal. However, students other than these (including undergraduates), not paid on an hourly basis, may also require additional scrutiny.

All managers and supervisors should be aware of how FLSA defines work. Included in the supplement attached are answers to frequently asked questions regarding FLSA requirements.

Please remember that the University has a legal requirement to correctly compensate employees for hours actually worked, especially if a non-exempt employee has worked overtime. The U.S. Department of Labor's (DOL) Wage and Hour Division is responsible for enforcing FLSA requirements. There is a two-year statute of limitations under FLSA, extending to three years if the actions of the employer are found to be willful (intentional or knowing). Penalties include back wages owed, liquidated damages in an amount equal to the back wage amount, attorneys fees, and, in some instances, injunctions and criminal penalties.

To ensure your area will be in compliance with the new legislation, HR will be contacting administrators in the next week or so to confirm the individuals who are affected and to review changes in the payroll process for these individuals.

Questions regarding FLSA should be directed to James Fournier, Senior Compensation Analyst (702-2061; or Judy Friedberg, (834-3773;