To: DDDH
From: Shari Mickey-Boggs
Date: April 29, 2024
Subject: Department of Labor (DOL) Announces Final FLSA Rule on New Salary Threshold for Overtime Pay Eligibility
Background:
On April 23, 2024, the Department of Labor announced significant changes to the Fair Labor Standards Act (FLSA) which impacts overtime eligibility. Illinois Human Resources (IHR), alongside campus partners and University System Offices, have been coordinating efforts and communicating updates to Senior Leadership and the HR community the past seven months in anticipation of this ruling to best ensure a smooth implementation process across all campuses.
FLSA rule revisions include increases to the standard salary level and a mechanism that provides for the timely and efficient updating of this earnings threshold to reflect current earnings data.
The final rule will increase the annual FLSA Salary Minimum (threshold) standard professional (a.k.a. ‘white collar’) exemption in two phases:
- Phase I FLSA Salary Threshold of $844 per week (equivalent to $43,888 per year) with an effective date of July 1, 2024, (increased from the $684 week/$35,568 annual) and
- Phase II FLSA Salary Threshold of $1,128 per week (equivalent to $58,656 per year) with an effective date of January 1, 2025.
The final rule also provides for future updates of these levels every three years to reflect current earnings data.
Based on the reduced impact of the magnitude of the increase in salary threshold and a much lower number of impacted employees, coupled with the administrative and morale costs associated with moving current overtime exempt employees to overtime eligible, salaried non-exempt employees, IHR is recommending the default action for full-time employees is to raise the salary to the new FLSA threshold of $43,888. Our recommended default action for part-time employees is to move them to salaried non-exempt and therefore eligible for overtime.
Phase I - Impacted full-time employees:
- Total university full-time employees: approximately 80 affected employees (no postdoctoral research associates).
- Total estimated cost to raise impacted employees to Phase I FLSA Threshold: $231,195.
- Action: Raise affected employees to the $43,888 FLSA Threshold effective the beginning of the pay period in which 7/1/2024 falls:
- June 16, 2024 for monthly paid (academic) employees.
- June 23, 2024 for biweekly paid (civil service) employees.
Phase I - Impacted part-time employees:
- Total university part-time employees: approximately 48 affected employees (5 postdoctoral research associates).
- Total estimated cost to raise impacted employees to Phase I FLSA Threshold: $567,068.
- Action: Do not raise -- Affected employees become Salaried Non-Exempt Employees, which means an employee is eligible to earn overtime and will be required to complete biweekly timesheets, beginning with the June 23, 2024, biweekly pay period which is the pay period that includes the 7/1/2024 effective date.
We now need each college/MAU to review their affected employees and confirm “Raise” for affected full-time employees and “Salaried Non-exempt” for part-time affected employees. FLSA Worksheets and decision guides will be provided today to each college/MAU primary HR contact for this purpose.
If a college/MAU believes there are significant reasons to change from the default entered in their spreadsheet, please contact IHR to discuss the specific situation. The deadline for colleges/MAUs to make determinations and return their Excel worksheet to Illinois Human Resources is May 3, 2024.
Note: The university is not acting on the Phase II FLSA Salary Threshold increase at this time given that it is not effective until January 1, 2025, and may face legal action which may pause or stop implementation. IHR will communicate further information on the January action at a later date.
As a reminder, no campus funds will be provided to cover the cost of raises or overtime worked.
For your reference, IHR has developed a FLSA website to provide information on relevant policy, procedures, and information supplemental to that provided by your college/MAU HR which can be accessed at https://go.illinois.edu/ihr-FLSA.