August 2016, Vol. 1

Frequently asked questions about the FLSA rules changes

Overview

1. Why were the rules changed?

President Obama signed a Presidential Memorandum on March 13, 2014, directing the Department of Labor (DOL) to update and modernize the regulations defining which white collar workers are protected by the FLSA's minimum wage and overtime standards. The DOL believes that the current salary level is outdated and is no longer effective in separating salaried, white collar employees who should get overtime pay for working extra hours from those who should be exempt. 

2. What do the rules change?

There are three changes:

1) The minimum salary required for exemption was increased from $455 per week ($23,660 for 52 weeks) to $913 per week ($47,476 for 52 weeks). If a currently exempt employee earns less than $913 per week, the employee will now be eligible for overtime and subject to the same timekeeping and other requirements as other nonexempt employees.
2) The minimum salary for highly compensated employees increased from $100,000 to $134,004 per year.
3) The minimum salary threshold will be recalculated every three years without going through proposed rulemaking requirements.


3. Which employees are impacted by the change?

The rule change impacts exempt administrators and professionals who earn less than $913 per week. This includes registered nurses, physical therapists, speech-language pathologists, diagnosticians, accountants, supervisors, and other non-teaching professionals.

Educational administrators, such as academic counselors, curriculum coordinators, assistant principals, and principals may also be impacted. However, these positions are subject to a different salary threshold. They must earn $913 per week or the same as an entry-level teacher in your district, whichever is least.

The change does not impact teachers. Teachers are currently exempt from the minimum salary requirements and that did not change with the new rules.

Clerical, paraprofessional, and auxiliary workers are already nonexempt and the new rules do not impact them.
 
4. What is the effective date of the change?

The change is effective December 1, 2016.

Exemption Status

5. How do I know if an employee is exempt?

Exempt employees must be paid a salary of $913 per week and meet all the criteria of one of the duties tests (e.g., executive, administrative, professional, computer professional) as stated in the Fair Labor Standards Act (FLSA). If they do not meet either the salary threshold or the duties test, they are nonexempt and are entitled to overtime pay or compensatory time when they work more than 40 hours in a seven-consecutive-day workweek. The criteria for the duties tests are here.

6. Did the duties tests change?

No, the duties tests did not change. Only the minimum salary threshold changed.

7. Most districts calculate annual pay starting on a daily rate basis. Is there a minimum daily rate required for exemption?

No. Although districts frequently use daily rates to determine employee annual pay, the DOL will only consider the amount of pay earned per week. Weekly pay is the shortest period of payment that may be used to determine if the salary threshold is met.

8. How do we determine if 10- and 11-month employees meet the salary threshold when salaries are paid over 12 months?

The DOL considers the amount of pay earned per week, not the amount distributed in the paycheck. The annual salary should be divided by the actual weeks worked to determine if the employee meets the $913 threshold. Any week in which work is performed should be counted, even if it is only one day during the week. 

9. If an employee meets the professional exemption but earns less than $913 per week are they entitled to overtime?

Yes, they must meet both the minimum salary threshold and all the criteria of one of the duties tests (executive, administrative, professional, computer professional). If they are not paid a salary of $913 per week, they are nonexempt. Districts will be required to maintain accurate time records and pay overtime or compensatory time if they work more than 40 hours in a seven-consecutive-day workweek.

10. Will part-time professionals, such as occupational therapists, speech-language pathologists, and other licensed professionals, be eligible for overtime if they earn less than $913 per week?

Yes, the $913 per week minimum salary cannot be prorated for part-time workers. Employees must earn $913 per week in order to be exempt from FLSA requirements, regardless how many days per week they work.
 
11. If two exempt employees who are not teachers job share and their combined pay is more than $913 per week can they still be exempt?

No, each employee must earn $913 per week. For example, Luz and Ann are registered nurses and job share at the elementary school. They each earn $475 per week. Neither is paid the minimum of $913 per week, so both of them will be nonexempt and eligible for overtime if they work more than 40 hours in a seven-consecutive-day workweek.

12. Would an exempt employee who earns more than the annual salary threshold remain exempt?

Yes, however, they must also meet all the criteria of one of the duties tests (executive, administrative, professional, computer professional).

13. If the beginning teacher salary is less than $913 per week, would a Licensed Specialist in School Psychology (LSSP) have to earn $913 per week?

Yes, LSSPs do not meet the definition of an educational administrator. As such, they are subject to the $913 per week minimum salary threshold.

14. Are special education co-op or grant-funded employees impacted by the rules change?

Yes, funding source does not affect the exemption status of an employee. They must earn $913 per week and meet the duties test to be exempt. If the employee is an educational administrator, the salary must be at least the same as an entry-level teacher in your district.

15. We have a Child Nutrition Director employed by contract and her pay does not meet the minimum salary threshold. Is she still exempt?

Being employed by contract has no impact on FLSA exemption status. An employee must earn at least $913 per week and meet the criteria of one of the duties tests (executive, administrative, professional, computer professional) to be classified as exempt.

16. Are retired-rehired employees who are not classroom teachers subject to this rule change?

Yes, all exempt employees must earn at least $913 per week. Status as a retired-rehired employee does not have any impact on FLSA exemption status.

17. Does the teacher exemption still apply if the teacher is a retiree working less than half time?

Yes, it doesn’t matter if a teacher is working half time or a retiree. If they are a teacher, they are exempt.

18. If a teacher also drives a bus, is the teacher still exempt from the minimum salary threshold requirement?

Yes, if an employee’s primary duty is teaching, he or she is exempt from the salary requirement.

19. Are Band Directors subject to the rules change?

Band Directors would qualify under the teacher exemption and are not subject to the rules change.

Implementing Changes

20. The district has several exempt employees who do not earn $913 per week. What do we need to do to comply with the new rules?

The district has two choices:

1) Increase the employees’ pay to $913 per week and ensure they meet the criteria of one of the duties test.

2) Make them nonexempt and treat them like other nonexempt employees, including keeping accurate time records and paying overtime or compensatory time if they work more than 40 hours in a seven-consecutive-day workweek.

This decision may be driven by the potential additional costs to the district. If an employee’s pay is currently close to the salary threshold, the cost increase might be minimal. However, if the employees are making considerably less than $913 per week, the district may choose to make them nonexempt.

21. If we are going to change an employee from exempt to nonexempt status, should we make it effective at the beginning of the fiscal year?

This is a local decision. You can make the change any time as long as it is made by December 1, 2016.

22. How do I calculate the potential cost increase of paying overtime?

First, visit with the employee and manager to estimate the number of hours worked over 40 in the district’s seven-consecutive-day workweek as defined in Policy DEAB (LOCAL). Then, calculate the cost of paying time and one-half of their regular rate on those hours.

23. How do we know how many weeks employees work?

You will need to look at the starting and ending dates of all duty schedules and count any week where work is performed, even if it’s only one day. For example, if a 195-day duty schedule starts on a Tuesday in August and ends on a Monday in June, both the first and last week count as full workweeks, even if only a few days were worked in each week.

24. Do we have to include summer school when counting workweeks?

Yes, for each employee, any week where work is performed—including summer school—should be counted, even if it is only one day.

25. Do we need to count spring break and winter break as workweeks?

Our conservative advice is to count these weeks if there is any possibility that work might be performed. Opening and checking e-mail, responding to phone calls, or coming in to the office to “catch up” is considered work, and the week in which it occurs should be counted as a workweek.

26. We will have exempt and nonexempt employees in the same job title. Is that acceptable under the FLSA?

Yes. The nonexempt employees are subject to the timekeeping requirements and eligible for overtime if they work more than 40 hours in a seven-day workweek. The exempt employees are not required to keep track of their time and are not eligible for overtime pay.

27. Are timeclocks required for nonexempt employees?

No. The DOL requires employers to maintain accurate time records for all nonexempt employees. The DOL does not mandate the method of maintaining the records, such as timeclocks, but the records must be accurate.