On July 6, 2015, the U.S. Department of Labor (DOL) published its much-anticipated proposed changes to the Fair Labor Standards Act (FLSA). These proposed regulations are the response to President Obama’s March 2014 directive to the Secretary of Labor to “update and modernize” the overtime exemption rules under the FLSA. If adopted, the changes will have a significant impact on employers’ abilities to treat certain employees as exempt from receiving overtime compensation.
The FLSA is a federal law that sets forth minimum wage, overtime, equal pay, recordkeeping and child labor standards for employees. State and local governments, including school districts, must comply with the FLSA. Generally, the FLSA requires employers to pay non-exempt employees an hourly rate of at least one-and-a-half times their regular hourly rate for time worked in excess of 40 hours in a workweek. Certain employees are exempt from this overtime requirement.
Currently, in order to qualify for one of the employee exemptions, the employee must: 1) be compensated on a salary basis at a rate of at least $455 per week, and 2) primarily perform executive, administrative or professional duties. This second factor requires a fact-intensive assessment regarding the nature of the employee’s work and specific job responsibilities. An employee’s job title is not determinative as to whether the employee falls under the exemption.
DOL’s proposed revisions dramatically increase the FLSA’s minimum salary threshold. Specifically, under the proposal, the current $455 per week threshold – which translates to an annual salary of $23,660 – will more than double, rising to $970 per week, for a minimum annual salary of at least $50,440 for an exempt employee. Additionally, under the proposed regulations, the $970 salary threshold would automatically increase based on inflation and wage growth over time, though the DOL is soliciting comments regarding the precise methodology to be used.
It is estimated that the proposed changes would extend the overtime entitlement to nearly 5 million additional employees. However, it is important to note that this change will not impact every position within a school district (e.g., many support staff will still be nonexempt, and many administrators and teachers will still be exempt). Districts should consider starting the process of evaluating the impact that the proposed changes will have on their employees. In 2004, the Department gave employers only 120 days to come into compliance with new regulations, and it may again provide a short grace period once the proposed regulations are finalized.
With that said, these regulations are only proposed regulations at this time. You can access the proposed rules here. A public comment period is open until September 4, 2015. Following the public comment period, the DOL will issue a final rule that may revise the proposed rule or implement it as-is. The final rule is not expected before 2016.
If you have questions about the proposed changes, please contact OSBA’s division of legal services. If you have specific questions about the impact the proposed changes may have on your district, please contact your district’s board counsel.