Today (June 30, 2015) the U.S. Department of Labor issued a draft of new
rules concerning the Fair Labor Standards Act (the “FLSA”). These new rules
propose to raise the minimum salary employees must make to qualify as
exempt from overtime pay requirements under the FLSA – and to
adjust that minimum salary every year.
Under current regulations, to qualify for the overtime exemption, an
employee must meet one of the specified exemptions (typically
executive, administrative, or professional) and earn a minimum salary of at
least $455 per week. Under the proposed new regulations, the minimum
salary will increase to $921 per week initially and will be adjusted annually
under two possible formulas. The Department estimates that under one of
these annual adjustment models, the minimum salary for 2016 would be
$970 per week ($50,440 per year).
The good news is that teachers have a special exemption from the
minimum salary test, so you will not have to worry about these new
regulations affecting how you pay most of your certificated staff. The bad
news is that many schools pay their head custodians, bookkeepers, and
transportation supervisors on a salary and treat them as exempt. It is
unlikely that those employees will make enough under the new regulations
to qualify, which means that those employees will have to begin tracking
their hours. It’s also means that the district will have to compensate these
employees at time-and- a-half for all hours worked over 40 per week or
implement a lawful system of using compensatory time.
What Comes Next? The Department of Labor has requested
comments on these proposed regulations. The commenting period will
remain open for 60 days. After the comment period is closed, the
regulations may be revised slightly but will likely become final at some point
after the comment period closes. Some experts predict that the Department
of Labor will try to finalize the regulations so that they become effective
beginning in 2016.
The Department has also signaled that it may tighten the “duties test”
that also must be met for employees to be exempt from the FLSA. We will
watch carefully for these additional regulations and will let schools and ESUs
know when and if they are issued.
General FLSA Compliance. The clear intent of the regulations will
be the reclassification of a significant number of employees to overtime,
non-exempt status. Due to the increased cost of overtime labor, employers
may need to reevaluate staffing levels to limit overtime, and consider
decreasing employee compensation to manage overtime costs. Employers
will also need to prepare to track employee hours and satisfy certain
The Department of Labor has not updated their regulations since 2004.
The last time the regulations were updated, public employers – and schools
in particular – saw a marked increase in the number of wage and hour
claims that were filed by the DOL and by disgruntled employees. Many
schools have employment practices that do not comply with the current
FLSA regulations but they have been reluctant to “upset the apple cart” by
changing long-standing pay practices. Yet, even if employees are happy
with the current pay structure, employers face civil and even criminal
liability if they simply ignore the law. The impending new regulations
provides schools with a perfect opportunity to conduct a full review of their
pay practices for compliance with the FLSA regulations – both new and old.
Feel free to contact Karen, Steve, or Bobby or your school district's
attorney if you have questions about the FLSA or the proposed regulations.