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September 13, 2016
FMLA Implications of the New FLSA Overtime Rule
By Peter Susser and George Wood

HR Daily Advisor
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You have spent weeks agonizing over the Department of Labor’s (DOL) new Fair Labor Standards Act (FLSA) overtime rule, ultimately determining that you will need to move a number of employees from exempt to nonexempt status to remain complaint. Feeling good about your work, you kick back to enjoy your newfound leisure time, only to wonder: “How does the change in FLSA status for these employees affect their FMLA leave usage rights? For example, once these employees become nonexempt, how do I calculate their FMLA entitlement for intermittent leaves?”

Realizing that significant FMLA issues exist with this change, you drag yourself back to FMLA regulations to determine how this issue can be hammered out by the December 1, 2016, deadline for implementing the overtime rule.

Guiding FMLA principles

hours of work

The starting point for the analysis of how the change in exemption status affects an employee’s FMLA entitlement is with the regulations themselves. Several principles within regulations guide the analysis:

1.) FMLA bases its leave calculations on work weeks, not on hours.

Key to the FMLA analysis is the rule that “[t]he actual workweek is the basis of leave entitlement.” (29 CFR § 825.205(b)(1)). Thus, an employer may not simply take 40 hours per week and multiply that by 12 to reach an hours limit. Rather, the employer must calculate the leave entitlement based on weeks, not hours.

For example, “if an employee who would otherwise work 40 hours a week takes off eight hours, the employee would use one-fifth (1/5) of a week of FMLA leave. Similarly, if a full-time employee who would otherwise work eight hour days works four-hour days under a reduced leave schedule, the employee would use one-half (1/2) week of FMLA leave.”

Thus, employers need to focus on the use of weeks—or partial weeks—of FMLA leave, not hours. As the comments to Section 825.205(b)(1) reiterate, “FMLA leave does not accrue at any particular hourly rate, and . . . the specific number of hours contained in the workweek is dependent upon the hours the employee would have worked but for the taking of leave.”

2.) Changes in work status/schedules may necessitate changes in the calculation of the use of workweeks for FMLA purposes.

Where an employee moves from working on an exempt to a nonexempt basis, the number of hours worked in a week becomes more important for FMLA calculation purposes. See 29 CFR § 825.205(b)(2). In essence, where an employee’s schedule changes, “the hours worked under the new schedule are to be used for making [the FMLA usage calculation].” Id.

Thus, the calculation for an employee who moves from exempt to nonexempt status must be changed to reflect the new schedule. If the now nonexempt employee remains full-time (i.e., working 40 hours per week), the calculation should be the same as under his or her exempt status.

If, however, the employee becomes part-time, is required to work overtime, or has weeks that fluctuate in hours, the calculation will change. Several examples are provided below as to how to calculate these workweeks under differing arrangements.

3.) Overtime hours now matter.

Nonexempt employees who are required to work overtime are entitled to have that overtime included in the calculation of the new workweek (29 CFR § 825.205(b)(2), (3)). Thus, if an employee is required to work 8 hours of overtime per week, the calculation of the new work week would be based on 48 hours, not 40.

This means that an employee who is taking intermittent leave of 8 hours per week and working 48 hours per week would be using 1/6 of a work week, whereas the employee who uses intermittent leave of 8 hours per week under a 40-hour workweek uses 1/5 of a week. This is important in an intermittent leave situation since it tends to lengthen the amount of time an employee may use FMLA intermittently.

4.) FMLA allows the employer to determine the increments of accrual for leaves.

Under Section 825.205(a), the employer is entitled to account for the use of leave using the shortest period of time the employer permits for other forms of leave “provided that it is not greater than one hour and provided further that an employee’s FMLA leave entitlement may not be reduced by more than the amount of leave actually taken” (29 CFR§ 825.205(a)(1)).

An employer, however, “may account for FMLA leave in shorter increments than use for other forms of leave.” Id. Thus, if the employer permits personal leave to be taken hourly, it may require employees taking FMLA leave to do the same. If, however, the employer requires employees to take personal leaves in 4-hour blocks, the employer would be required, for FMLA purposes, to limit this 1-hour blocks.

The employer may, however, choose to use less than 1-hour blocks of time (such as 15-minute increments) if it so chooses. Thus, in the majority of cases, the block of time for FMLA purposes is likely to be 1 hour.

Examples of intermittent leave issues

Using these guiding principles, you may now determine how FMLA rules apply to the employees who you have decided to switch from exempt to nonexempt under the overtime rule. Here are some examples:

  • A full-time employee working 40 hours per week. This is the most basic application of the rules. Here, the employee is entitled to have his or her FMLA leave calculated on the basis of the traditional 40-hour week. If the employee requires intermittent leave of 4 hours per day, the weekly total would be 20 hours, or 1/2 of a workweek based on this employee’s schedule.
  • A part-time employee working fewer than 40 hours per week. Once again, focusing on workweeks, not hours, is the key. If the employee works 30 hours per week and takes 8 hours of FMLA per week, the employee is using just in excess of 25 percent of a workweek for FMLA purposes (the actual amount would be 26.7777 percent).
    Prudence may dictate “rounding down” this number to 25 percent, since attempting to track FMLA on the basis of small percentages is difficult. If the employee works 20 hours per week and takes off 8 hours using FMLA leave, the amount of time used would be 40 percent of a workweek.
  • An employee with fluctuating workweeks. Where the employee’s workweek fluctuates over time, the calculation of leave needs to take into account those fluctuations. Each week is considered a separate week for calculation purposes, which may lead to fractional calculations being used for weeks.
    For example, if an employee works 40 hours in 1 week, 32 hours the next, and 24 the third week, but takes 8 hours of FMLA leave each week, the calculations would be 20 percent for the first week, 25 percent for the second week, and 33.33 percent for the third week. The employer needs to track these usages for total weeks used.
  • An employee who used partial weeks as exempt and the remainder as nonexempt. This should not be a difficult calculation since the employer would be tracking leave usage on a weekly basis before the change in exemption status and would continue to do so after the change based on the employee’s work hours.

Conclusion

FMLA usage calculations based on changes in exemption status under the new overtime rule must be made carefully on the basis of the guiding principles described above and on the work hours of each employee. Focusing on workweeks versus hours helps keep the focus on the proper scope for FMLA purposes and should allow employers to easily continue tracking FMLA leave usage properly.

Peter Susser is a shareholder at Littler Mendelson, P.C.. Mr. Susser works with global employers to design and implement human resources policies and specializes in leave and disability discrimination issues, workplace-related legislative and regulatory matters and international employment law. He is the author of Thompson’s Family and Medical Leave Handbook and a member of its editorial advisory board.

George R. Wood is a shareholder in Littler’s Minneapolis office. He focuses on discrimination and other employment litigation and client counseling. Practicing nationally, he frequently handles matters involving the Uniformed Services Employment and Reemployment Rights Act, the Family and Medical Leave Act, the Americans with Disabilities Act, Title VII and unfair competition.

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