This is part 1 of 4 HRX posts related to the new federal overtime rule. A helpful FAQ also is available.
On September 24, the Department of Labor (DOL) released final regulations updating the salary threshold for exempt status. The changes to the Fair Labor Standards Act (FLSA) take effect January 1, 2020.
To be considered exempt from overtime an employee must meet all the standards of three different tests:
- Salary basis: Employees must be paid a predetermined and fixed salary that is not subject to reduction because of variations in quality or quantity of work performed
- Salary level: Employee pay must meet a minimum specified amount
- Primary duties test: The employee’s job duties must primarily involve executive, administrative, or professional duties as defined in FLSA regulations
Key provisions of the final FLSA rule
The revised rule only changes the second criteria—the salary level. The proposed changes include:
- Increases the salary threshold from $455 to $684 per week, or $35,568 annually for a full-time, full-year worker
- Allows employers to use nondiscretionary bonuses and incentive payments that are paid at least annually to satisfy up to 10 percent of the standard salary level
- Raises the total annual compensation requirement for highly compensated employees (HCE) from $100,000 to $107,432 per year
What does this mean for educational entities?
In general, there will be a small number of employees impacted by the new regulations. To determine the impact, educational entities can take the following steps:
- Exclude from review all jobs not subject to the salary threshold. These jobs include:
- Jobs that are currently nonexempt, such as clerical staff, instructional aides, bus drivers, custodians, food service workers, and maintenance workers
- Teachers, including all subject areas and grade level classroom teachers
- Other instructional personnel such as teacher/coaches, band directors, driver’s education instructors, administrators, counselors, and librarians
- Substitute teachers
- Review all other exempt positions and determine which employees may be considered administrators in an educational establishment as defined in the FLSA regulations. Identification of these employees is important because there is an alternative salary threshold against which they may be measured (described below). These employees must perform administrative functions directly related to academic operations and functions in an elementary or secondary school system, an institution of higher education or other educational institution, or career school. Examples include:
- Principals and vice principals responsible for the operation of an elementary or secondary school
- Positions responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program
- Academic counselors who perform work such as administering school testing programs, assisting student with academic problems, and advising students concerning degree requirements
Jobs that would not meet the requirements for administrators in an educational establishment include non-instructional administrators (e.g., transportation director), jobs that are also in other sectors, those relating to building management and maintenance, and jobs relating to the health of the students (e.g., registered nurses, speech pathologists, occupational therapists, physical therapists, social workers, psychologists, lunch room managers, and dietitians). Although such work is not considered administration in an educational establishment, employees in these jobs may qualify for another exemption.
- Measure the weekly pay of employees not excluded in step 1.
- For employees identified in step 2 as administrators in an educational establishment, compare the weekly rate of the employee against $684. If the weekly rate is lower than $684, compare the salary to the starting teacher salary in your educational entity. Starting teacher means the hiring rate for a teacher with no prior experience—sometimes called a 0-year teacher. If your applicable administrators are paid at least as much as a starting teacher in your educational entity, they meet the alternative salary threshold.
- For all other exempt employees, compare the weekly rate of the employee against $684.
Read more in Part 2: Calculating Weekly Salaries, and check out this FAQ from HR Services. Additionally, general guidance and an FAQ section are also available through the Department of Labor.
Erin Kolecki and Keith McLemore are Compensation and HR Consultants at TASB HR Services. Send Erin or Keith an email at email@example.com or firstname.lastname@example.org.
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