Q & A: Proposed Overtime Regulations

It’s no secret that many school districts — and businesses of all stripes, in fact — are keeping a close eye on the Department of Labor’s proposed updates to overtime pay regulations.

Certain workers don’t receive overtime pay because of the nature of their jobs — the Department of Labor’s “Duties” test states that they’re exempt. But employers would be required to pay overtime to many executive, administrative and professional employees who exceed 40 hours worked in a workweek** when those employees make less than $23,660 per year. At this writing, the proposed updates would raise that salary threshold to over $50,000 in 2016.

Nearly 5 million white collar employees could be newly eligible for overtime pay, and districts may be faced with tough choices of how to respond.

Following our webinar in which we discussed these proposed new regulations, many attendees sent in questions on the subject for our experts Lowell Ghosey and Cydney Miller.

Please understand these answers are given for informational purposes only. We always recommend securing specific legal advice from your district legal counsel or state school board association legal team before taking action.

Q: I’m seeing that the proposed salary threshold for the FLSA exemptions are $50,440/year or $970/week. You showed lower amounts of $47,892/year or $921/week. Which number is correct?

The $47,892/$921 amounts mentioned in the webinar were those used in the actual Department of Labor Fact Sheet about the proposed changes. The $50,440/$970 figures are the projected amounts for 2016, and therefore we chose not to speculate in the presentation.

While the actual levels may vary slightly from these projections, it is very likely that when the proposed regulations go into effect the exemption threshold will rise significantly. All such thresholds will be in the Final Regulations publication.

Q: What is the likelihood that these proposed regulations will pass?

A: It is highly likely that some change will occur. The details — as they exist right now — may change. While there is no way to know for sure, it’s worth taking the time now to prepare.

Q: Do we know when the regulations will be finalized and go into effect?

A: We don’t yet know the exact date, though recent reports have indicated it won’t be until later in 2016. Some who are more familiar with previous DOL postings have suggested that after the regulations are officially published in the Federal Register, a cushion of 30-60 days may be instituted before organizations are required to comply.

Q: How will the regulations be communicated, and to whom?

A: We haven’t heard how the Department of Labor plans to communicate the final regulations. The information will very likely continue to be posted on the DOL website and through news outlets and industry communications (SHRM, for example). You should assume that it will be HR’s (or your business’s) responsibility to pay attention to DOL resources posted, rather than to expect direct communication about this.

It’s also a good idea to prepare your own communication plan for employees, since the regulations will likely require this (as was the case with the Affordable Care Act).

Q: Do the new regulations apply to teachers?

Q: Did our national and/or state level school organizations submit comments on the potential effects of these changes on public education?

A: It’s not clear which national or state organizations have submitted comments. However, we do know that education is represented in some of the FAQ documents provided by the Department of Labor. Organizations such as the Society of Human Resources Management led a strong effort to reply and would have represented many organizations with similar concerns, even if they were not education-specific.

Q: Will contracted individuals like teachers have to clock in and out as part of the documentation?

A: This depends on whether the contracted individual is classified as “exempt” or “non-exempt.” If a contracted employee is non-exempt, he or she would be eligible for overtime and accurate time records would be necessary. If the employee is exempt from receiving overtime pay, then detailed time records would not be necessary — at least for this purpose.

Q: Will a salaried employee who works fewer than 40 hours per workweek — on average — be eligible for overtime pay?

A: The answer depends first on how the employee is categorized according to the Department of Labor. Due to the nature of their jobs, some employees are categorized as “exempt” (not eligible for overtime), and some as “non-exempt” (eligible to receive overtime). Second, it depends on what is meant by “salaried.” Sometimes, a “salaried” position is simply an annualization of an hourly position over the course of a year, in order to pay a fixed amount each pay period.

If a non-exempt employee works more than 40 hours in a particular workweek, they’ll generally be eligible to receive overtime pay at one and one-half times the regular rate of pay for any work done beyond 40 hours (unless they work in one of a very few specific types of positions, which are not generally held within school systems).** It doesn’t matter if their average time worked is still below 40 hours or not. Nor does it matter whether they’re typically paid based on hours worked week to week, or if their hourly rate has been calculated over the course of a year and paid in equal installments — overtime would still be need to be paid for that week.

Of course, for any weeks the employee works fewer than 40 hours per workweek, no overtime wages would be due.** However, in addition to the “Salary” test, the Department of Labor also uses what is called the “Duties” test, in which it examines the type of position held. If the employee holds a position that is considered “exempt” — positions that are classified as Administrative, Executive, Professional, etc. — then overtime will not be an issue. Teachers and Principals fit into this category.

For more information, we recommend looking at the Department of Labor Administrative Fact Sheet 17C, Executive Fact Sheet 17B and Professional Fact Sheet 17D.

Q: What about seasonal, part-time or school year-only employees?

A: If the seasonal or part-time employee is non-exempt according to the “Duties” test referenced above, overtime wages for work done beyond 40 hours in a workweek would need to be paid.** The exception would be if the employee makes more than $47,892/year (or $921/week).

These numbers are the proposed amounts for 2015. In 2016, the amounts would be $50,440/year or $970/week according to the proposed legislation. Additionally, these numbers have not been finalized and may still change before the legislation passes.

Whether the yearly or weekly salary amount should be used in considering overtime eligibility depends on the length of employment.  For questions about specific cases, please contact the Department of Labor directly.

Q: What happens with extra duty stipends that are paid by event, not hourly?

A: Be careful to clarify with your own district legal counsel and regional Department of Labor office whether the individuals receiving those stipends are non-exempt (eligible for overtime) employees or not. Thinking it may be “easier to ask forgiveness than permission” may be a costly decision. You may find useful the case of Purdam v. Fairfax County School Board.* Your district legal counsel or state school board association may already be familiar with that decision.

Q: What about coaches who are only paid at the end of the season; how would we track them?

A: If the employees you’re asking about are employees of your school system in other capacities, be sure to clarify with your own district legal counsel and regional Department of Labor office whether they would be categorized as exempt or non-exempt. Not doing so could be costly.

You may also want to look at the case of Purdam v. Fairfax County School Board.* Your district’s legal counsel or state school board association may already be familiar with that decision.

Q: What about non-teaching positions that are paid a stipend, like a coach? Will they now be treated as non-exempt?

Generally speaking, the employee’s primary position (aide, secretary, etc.) determines exemption status. Many locations must still use a blended-rate overtime calculation if the combined total hours worked exceeds 40 per workweek. However, please reference the Purdam v. Fairfax County School Board decision.* As always, seek advice from your district legal counsel or state school board association legal team before taking action based solely on this decision.

Q: Is the annual salary pro-rated for someone who doesn’t work a full 260 days? For instance, what about a cafeteria manager who only works 200 days for a salary of $40,000?

A: The proposed regulations simply discuss annual salary. Even if the employee’s work calendar includes breaks like summer break (thereby reducing the total days worked in a year) this is still his or her annual work schedule. The $40,000 would be considered his or her annual salary. The issue at hand is not how many days were worked, but what is the amount of the salary.

Q: If a secretary is normally scheduled to work 37.5 hours in a given workweek, should overtime pay (one and one-half times the regular rate of pay) be paid for any time worked beyond 37.5 hours? Or only for hours that exceed 40 in a workweek?

A: Hours worked up to 40 in a workweek are generally paid at the regular rate of pay.** For non-exempt employees, hours worked over 40 in a workweek would be paid at one and one-half times the regular rate of pay. So if the secretary in this instance worked 42 hours in particular workweek, the additional hours between 37.5 and 40 would be paid at the regular rate of pay, and the hours between 40 and 42 would be paid at one and one-half times the regular rate of pay.

Q: Does an employee who earns less than $23,000 qualify to receive overtime?

A: Probably. An employee earning less than $23,000 would not be considered exempt based on salary level. Unless this employee qualifies for exemption based on another component of the regulations, he or she would be eligible to receive overtime pay when working more than 40 hours per workweek.**

Q: How should employees with work-related cell phones, or making work-related phone calls after normal work hours are over, be compensated?

A: Employers universally are facing this question. With constant internet access provided by smart phones as well as actual and perceived immediate work demands, these issues will be an ongoing challenge to restricting work time. It would be extremely cumbersome to try to use phone and data service provider records or district network login times to monitor work hours in this way. We’re curious to see how expectations for situations like this develop.

Q: How should employees doing work from home — such as planning and paperwork — be compensated?

A: Regulating time worked away from the office will be a key concern for all employers. With the ability to work remotely, many employees will check emails, complete paperwork or answer calls apart from regular work time. A non-exempt employee working from home or otherwise away from the office should be compensated for that time — and that time does count toward the 40 hours per workweek limit.

Q: Our district employs some administrative assistants who currently make less than $47,892/year. The administration would like to ensure they remain exempt from overtime pay. Would the new overtime regulations make them eligible to receive overtime regardless of what the administration does?

A: Potentially, yes. However, we must wait until the Final Regulations have been published before we can be certain. Remember, exemption or non-exemption is determined by two tests: the “Salary” test, and the “Duties” test. In the proposed changes, only the “Salary” test is being updated.

In order to determine exemption status, the administration will also need to consider the “Duties” test. Based on the question, some or all of the administrative assistants mentioned would very likely be considered non-exempt based on salary (depending on what the final salary threshold is once the legislation passes). For more information, see the Department of Labor Administrative Fact Sheet 17C.

Q: Are nurses considered exempt?

A: In some cases, nurses qualify for the learned professional exemption under the current regulations. However, the answer may be different depending on whether the nurse is paid hourly or is a salaried employee. Given the differences, we recommend referencing the Department of Labor’s Fact Sheet 17N relating to nurses. Under the new regulations, see the same fact sheet for any changes.

Q: Will our computer technicians meet the “Duties” test?

A: Computer-related occupations have their own criteria for exemption, and were not discussed in the webinar since they weren’t specifically referenced by the proposed changes. However, this doesn’t mean that there won’t be changes for that group eventually. For more information on computer-related occupation qualifications from overtime exemption, see the Department of Labor’s Fact Sheet 17E.

Q: Where can we find information to classify Executive, Administrative or Professional employees?

A: An extensive library of Fact Sheets can be found on the Department of Labor’s website. Remember, the Fact Sheets provide answers based on the current regulations — not the proposed updates.

Q: Can a superintendent secretary be considered an exempt employee?

A: As always, both the “Salary” and the “Duties” test would need to be applied. The Superintendent’s secretary might be considered exempt — it depends on the position’s duties, responsibilities and corresponding salary structure. This position will need to go through the same exemption classification process as all other positions.

Q: Bus drivers and classroom assistants in our state must be licensed by the state Department of Education. Does this exempt them from overtime pay, since they are licensed?

A: It’s highly unlikely, since these credentials refer to entitlement to hold a position in your state and not the actual position you employ them to fill. The positions you mention (bus driver, classroom assistant) are not considered exempt from overtime under any of the current categories of exemption such as Administrative, Executive, Professional or any others that we’re aware of. For information about overtime pay eligibility for specific positions, please see the Department of Labor’s Fact Sheets.

Q: What is the specific court case referenced in the webinar?

A: Purdam v. Fairfax County School Board (VA), US Court of Appeals 4^th Circuit, No. 10-1048. This March 2011 decision dealt with the paying of stipends for a coach instead of an hourly amount which might have contributed to overtime.* 

* Purdam v. Fairfax County School Board, US Court of Appeals 4^th Circuit, No. 10-1048, decided in March 2011. That decision allowed a stipend to be paid to a non-exempt employee coaching golf, as long as it was a voluntary decision (not required to accept the job) and paid a nominal fee (which is open to determination, but smaller is generally better).

** For the purposes of this post, overtime wages are assumed to be required for time worked beyond 40 hours in a workweek, but note that this is the minimum requirement under the FLSA. Some state regulations may be more restrictive (California, for example, requires overtime wages to be paid for time worked beyond 8 hours in any workday, as well as any time worked during the seventh consecutive day of work, among other rules). In addition, bargaining agreements may require overtime wages to be paid before 40 hours in a workweek are reached. As always, consult your district legal counsel or state school board association legal team before taking action.