August 2015

Proposed FLSA rule changes and the impact on schools

On June 30, 2015, the U.S. Department of Labor (DOL) issued its long-awaited proposed Fair Labor Standards Act (FLSA) regulations. The rule changes were prompted by a presidential memorandum dated March 13, 2014, to “update, modernize, and simplify” the “white collar” (i.e., executive, administrative, or professional (EAP)) exemptions.

Salary test provisions updated

Currently, the FLSA requires that to be exempt, employees must earn at least $455 per week, an amount that has been in place since 2004. The DOL has proposed increasing this to $921 initially and adjusting the amount annually using a fixed percentile of wages from data provided by the Bureau of Labor Statistics (BLS) or based on the Consumer Price Index (CPI). It is estimated that the minimum salary for 2016 would be $970 per week, or $50,440 per year for year-round workers.
 
The good news is that classroom teachers and academic administrative employees* (e.g., counselors, assistant principals, principals, curriculum specialists, and instructional coaches) are exempted from the salary level test (29 C.F.R. §541.303), so the change in regulations will have no impact on them. For other employees, including part-time professionals, the proposed salary level may result in their positions being reclassified as nonexempt because they no longer meet the salary level test. If this occurs, the affected employees would be required to track their hours and be subject to record keeping and overtime pay rules.

Same duties tests. The duties tests for the EAP exemptions did not change. However, the DOL is seeking comments to determine if these tests are sufficient. DOL is particularly looking for better ways to identify jobs currently deemed exempt where a disproportionate amount of nonexempt work is being performed. Based on the comments received, DOL may change the duties test when the final rules are published.

Potential impact on districts

Some administrators and professionals who are currently exempt, including part-time employees, may no longer meet the minimum salary test. For example, non-teaching professionals such as librarians, nurses, and speech pathologists who are paid at or near the minimum salary on the state minimum salary schedule may fall below the new salary requirement. Counselors who do not administer school testing programs, assist students with academic problems, and advise students concerning degree requirements may also be at risk.** For part-time positions, the same salary requirement applies.
 
Districts will need to review exempt employee pay, paying particular attention to part-time professionals to determine if they meet the new salary level test. If not, pay will need to be adjusted or those jobs will be nonexempt and provisions for tracking hours and paying overtime will need to be put in place.

Preparing for the new rules

The DOL is taking comments on the proposed rules until Sept. 4, 2015, and is expected to issue final rules sometime in 2016. There is usually a window of time provided for employers to reach compliance once the final rules are published, so it is possible these rules will go into effect during or before the 2016‒17 school year. This time frame will give school districts a chance to plan for any required salary adjustments during the regular budget development period and implement timekeeping requirements as needed.

HR Services is developing more guidance that will help districts evaluate current salaries according to the weekly measures required by the proposed rules. We will continue to monitor information provided by the DOL and provide additional information when the final regulations are released. Please continue to watch HR Exchange and the HR Services Web page for more information. Follow us on Twitter (@TASBHRS) to receive notice of updates.

*Mid-May update: Academic administrative employees are not technically exempted from the salary threshold test. However, the FLSA only requires they be paid at least the standard salary threshold, or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment in which they work. So, as long as an academic administrative employee earns at least as much as a starting teacher in your district, they meet this salary threshold.)

**Information was updated to clarify that the impact of the new rules on counselors is dependent upon actual job duties and exemption test used.