Understanding Exempt to Non-Exempt Changes
What’s Driving this Change?
The Fair Labor Standards Act (FLSA), administered by the U.S. Department of Labor (DOL), sets rules for exempt (not eligible for overtime) and non-exempt (eligible for overtime) employees based on salary and duties. These updates ensure compliance with federal laws regarding employment protections and pay standards.
The DOL released a new rule increasing the salary threshold for overtime exemptions:
- Effective January 1, 2025: The minimum salary threshold for most exempt employees will increase to $58,656 per year.
To comply with this federal mandate, UNM must adjust job classifications and exemption statuses by January 1, 2025.
What’s Changing?
Starting January 1, 2025, the following changes will take effect:
- Exempt to Non-Exempt Status Shifts
- ALL Grade 11 and 12 positions will move from exempt to non-exempt (hourly), regardless of current salary.
- Part-time positions in grades 13+ will also move to non-exempt status if their annual salary is below $58,656 annually (or ($1,128 weekly).
- Current non-exempt (hourly) employees will remain non-exempt.
- Special Exemptions
- Certain roles will remain exempt: Teachers, Coaches, Lawyers, and Physicians.
Why is UNM Taking this Approach?
UNM’s transition plan balances compliance with federal regulations, supporting employees, and minimizing mid-year disruptions to department operations and budgets:
Transitioning Grades 11 and 12 to non-exempt
- The minimum salary of grade 12 is well below the new salary threshold. Requiring departments to raise all grade 12 salaries to $58,656 would create significant mid-year budget challenges and cause salary compression issues with higher graded positions.
- Moving all positions in grade 12 and below to non-exempt ensures consistency and prevents discrepancies with employees in similar classifications (e.g. an Accountant 2 earning more than $58,656 annually, and an Accountant 2 earning less than $58,656 annually). This also reduces the complexity of determining who qualifies for overtime and helps avoid payroll discrepancies.
Decision for Grades 13 and above to remain exempt
- Grade 13 is a natural break in UNM salary structure given the new federal salary threshold.
- The minimum salary of Grade 13 positions aligns with the new threshold, resulting in a much lower mid-year financial impact on departments.
Mid-Year Budget Impact
- Departments have not budgeted for these changes, and frequent status updates would be difficult to manage.
Note: The FLSA rule is currently facing legal challenges, and UNM’s implementation plan is subject to change based on the outcome of these challenges. Any updates will be communicated before the January 1, 2025, effective date.
Addressing Potential Concerns / What Should I Do to Prepare?
Evaluate Critical Positions
UNM recognizes that some Grade 11 and 12 roles may not fit well within non-exempt classifications. In limited cases, some roles may be reclassified (to be able to remain exempt) before January 1 if they meet all of the following criteria:
- They are unique, standalone positions (not part of a job family).
- Changes to these roles will not have a cascading impact across departments.
- Support from your area level 3 HR Agent.
Submitting a Request
Human Resources (HR) has created an Abbreviated Compensation Review Process for requesting reclassification reviews of roles that meet all the above criteria. This process is specifically designed to evaluate grade changes for positions at grades 11 and 12 impacted by the new FLSA rule. For more details and to submit a request, visit the Abbreviated Review Process Guidelines page.
Support Employees Through the Transition
Recognize this is a big shift for employees and provide support through the transition:
- Switch to Biweekly Pay: Employees moving to non-exempt will now receive biweekly pay and must track their hours worked and leave taken. Establish a process for submitting biweekly timecards, requesting time off, and approving timecards.
- Overtime/Compensatory Time: Employees will be eligible for overtime or compensatory time for hours worked beyond 40 per week (with prior supervisor approval). Ensure an approval process is in place for requesting and managing overtime.
- Adjust Work Expectations: Set clear expectations for breaks, lunch periods, and working outside scheduled hours (e.g., checking email, responding to calls).
Overtime & Time Tracking Requirements
Review UNM’s policies to understand the procedures for managing and compensating overtime for non-exempt employees in compliance with FLSA:
Contact for Questions:
Email FLSA@unm.edu
