The New Overtime Regulations: How Will They Affect The Higher Education Workplace?

The New Overtime Regulations: How Will They Affect The Higher Education Workplace?

Summary
As described in “Sent from My Smartphone,” an article in Saul Ewing’s Spring 2016 Highlights, the Department of Labor (“DOL”) unveiled the final version of its highly anticipated overtime regulations on May 18, 2016.  In its first increase since 2004, the standard minimum salary level for exemption from overtime under the Fair Labor Standards Act (“FLSA”) has been increased by just over 100 percent, from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  The salary level for highly compensated employees (“HCE”s) has also been increased, from $100,000 to $134,004 annually.  The changes take effect December 1, 2016 and will have a significant impact on colleges and universities.  

Special Issues in Higher Education
Now that the final salary levels have been confirmed, colleges and universities must face the realities and costs of achieving compliance by December 1, 2016.  Although the DOL issued its Guidance for Higher Education Institutions on Paying Overtime Under the Fair Labor Standards Act (http://tinyurl.com/jbn29x3) as part of the May 18 rollout, the Guidance provides no useful solutions for the financial issues created by the new regulations.  Numerous positions will have to be reviewed and decisions made about compensation and reclassification of exempt employees to non-exempt status; current time-keeping and compensation practices will have to be reviewed and revised and new practices implemented; and other financial and non-financial costs, such as fundraising, budgeting, service delivery and morale, will have to be addressed. 

The higher education workplace includes numerous positions that have, to date, been covered by the executive, professional, administrative, and academic exemptions from the overtime rules. Some specific positions will remain exempt; others will not.  The following list and comments, while not comprehensive, is a sampling of the impact the new regulations will have on higher education institutions:

  • Positions that will remain exempt under the new overtime rules despite the position’s salary:
    • Teachers whose primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who are employed and engaged in this activity as a teacher in an educational establishment. This typically includes:
      • Faculty members
      • Adjunct instructors
      • Coaches who are primarily engaged in instructing students in how to perform their sport
      • Postdoctoral fellows who are primarily engaged in teaching
      • Students who work under a professor as a teaching or research assistant 
    • Medical and veterinary interns and residents (medical professionals)
    • Academic administrators who are primarily engaged in performing administrative functions directly related to academic instruction or training in an educational establishment.  This category is a bit unique.  Such employees must either be paid on a salary or fee basis of not less than the new salary level, or be paid on a salary basis at least equal to the entrance salary of teachers in the same educational establishment.  (So, even if the entrance salary is below the new salary level, academic administrative employees will be exempt if their salary equals or exceeds the establishment’s entrance salary for teachers.)  
      This typically includes:

      • Department heads
      • Academic counselors and advisors
      • Intervention specialists
      • Administrators with other similar academic duties
  • Positons that may be exempt from the new overtime rules if they meet the salary and duties tests:
    • Coaches whose primary duties are recruiting students (i.e., are not considered “teachers”).
    • Athletic trainers who are not primarily engaged in instruction.  Even if the athletic trainer qualifies as a “learned professional,” he or she must still meet the salary and duties tests for exemption.
    • Postdoctoral fellows primarily engaged in research (i.e., are not considered “teachers.”)  Even if the postdoctoral fellow qualifies as a “learned professional,” he or she must still meet the salary and duties tests for exemption.
    • Administrative employees who are not covered by the special provisions for academic administrative employees because their work does not cover academic administrative functions; these employees may still meet exemption standards based on salary and duties tests.  This typically includes employees who work in the areas of:
      • General business
      • Operations
      • Building management and maintenance
      • Human resources
      • Health of students and staff
      • Resident directors
  • Positions that are not exempt from the new overtime rules:
    • Employees who do not meet both the salary level and duties tests for exemption.  Examples include:
      • Part-time employees who perform exempt duties but who do not receive $913 per week
      • Hourly employees

Decisions and Recommended Actions for Higher Education Employers
In preparation for December 1 compliance, higher education employers should consider the following actions: 

  • Audit current job titles, pay and recordkeeping practices to identify and resolve compliance issues.  This should include a comprehensive review of: worker classifications (including exempt/non-exempt and employee/independent contractor status); timekeeping, payroll, and recordkeeping practices; compensation components, plans, policies and practices; employee benefits and leave; and current employment policies and practices relating to all of these items.
  • Assess whether to maintain exempt status or reclassify positions as non-exempt.  Start by first identifying all exempt executive, administrative, and professional employees who currently earn less than $913/week.  Once identified, higher education employers should determine whether it makes sense, both financially and from an operational perspective, to reclassify employees as non-exempt or increase their salaries in accordance with the new regulations. 
  • Revise job descriptions and job titles. These revisions should be in accordance with decisions to maintain exemptions or reclassify as non-exempt and to ensure compliance with the “duties test.”
  • Implement time-keeping procedures for all employees, including exempt employees. This should be done to comply with recordkeeping guidelines in the event exempt employees are deemed non-exempt and entitled to overtime.  
  • Implement electronic device use policies to avoid unapproved compensable time.  Employees who are converted from exempt to non-exempt status are now entitled to compensation (both straight time and overtime) for time spent on work-related matters away from the office, e.g., checking emails.  Left unregulated, such additional “work time” quickly can become extremely expensive and result in FLSA violations.  
  • Train supervisors.  With so many changes impacting the workplace, higher education employers should train supervisors about the various decisions made and anticipated changes in the workplace, with a focus on emphasizing employer policies and practices, compensable time issues, and recordkeeping.  

A Word about Compensatory Time
Although the new regulations did not include provisions enabling private employers to provide compensatory time in lieu of paying overtime, public universities or colleges that qualify as “public agencies” under the FLSA may compensate overtime-eligible employees through the use of compensatory time off (or “comp time”) in lieu of cash overtime premiums. A college or university is a public agency under the FLSA if it is a political subdivision of a state.  Private higher education institutions must, however, pay their overtime-eligible employees a cash premium for all overtime hours at a rate not less than one and one-half times the regular rate at which the employee is actually employed. 

In general, overtime-eligible employees may accrue up to 240 hours of comp time; however, employees engaged to work in a public safety activity, an emergency response activity, or a seasonal activity may accrue as much as 480 hours of comp time.  If an overtime-eligible public employee receives comp time instead of overtime pay, the comp time must be credited at the same rate as cash overtime, that is, at a rate of no less than 1.5 hours of comp time for each hour of overtime worked.  Additionally, any comp time arrangement, agreement, or understanding must be arrived at between the employer and employee (or employee representatives) prior to performance of the work and should be evidenced in writing. 

This article appears in the Summer 2016 edition of Saul Ewing’s Higher Education Highlights newsletter. Click here to see the complete newsletter.

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