Proposed FLSA Regulations Released

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

recordkeeping requirements.

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.