How Will the Proposed Overtime Regulations Impact Your District?

In the scramble to fill open vacancies for fall, onboard new hires and “ramp up” for the start of school – not to mention taking a few days of summer vacation – it would be easy to look past any headlines for federal overtime regulations.

Don’t make that mistake! This is not just about manufacturing, construction or corporate business affairs; it also applies to the approximately 40-50% or more of the non-licensed/certified professionals you currently employ, both hourly and in some cases salaried.

On July 6, the Department of Labor (DOL) Wage & Hour Division provided their proposed updated overtime regulations, which they announced June 30. These regulations could have a significant impact on both school district staff time and finances going forward.

Here’s the “skinny” on what should be of interest, and why reclassification for some employees could be needed.

There are two critical tests regarding who is either exempt from, or else eligible for, overtime pay – Duties (what they do most), and Salary (above or below an established weekly/annual threshold).

The “Duties” Test

The “Duties test” is not being edited in the immediate proposed update. However, it is certainly coming under scrutiny, with one model in particular being lifted up for consideration by California. That model requires that to be exempt from paying them overtime, an employee’s duties must be at least 50% or greater than what an exempt-from-overtime employee would perform. 

In particular, this update could apply to school districts’ cafeteria managers, custodial supervisors, maintenance foreman roles, transportation supervisors, HR or business office managers or other mid-management positions – some or all of whom you now might consider “white collar” employees exempt from receiving overtime pay under the Administrative Exemption.

Examples of current exemption responsibilities are available on the DOL Wage & Hour Division website as “fact sheets.”  A short summary of all categories is Fact Sheet 17A, describing both the required duties to qualify, and current minimum compensation. Fact Sheet 17C, details the current duties for those positions mentioned above, which you may be exempting under the Administrative Exemption.

Again, no proposed changes in exemption qualification are in place . . . so far.  But please, stay tuned.

The “Salary” Test

The proposed changes to the “Salary test” are really what all the current media buzz is about.

Currently, as noted on the DOL Fact Sheets above, the salary threshold to be exempt from receiving overtime pay is only a minimum of $23,660 annually/$455 weekly. This threshold is below the poverty level for a family of 4, and only an estimated 8% of all full-time workers fall below that level. The expectation is that an approximate “40% level” might be proposed as the cutoff – meaning the minimum pay for considering an employee to be exempt from receiving overtime could be 40% of the annual amount salaried workers are paid nationally.

If adopted, that minimum level to be considered exempt from receiving overtime pay would rise to approximately $50,440 annually/$970 weekly for 2016 according to an announcement on the DOL website.  In other words, employees paid less than that level would become overtime eligible under the “Salary Test,” even though you might classify them as not eligible for overtime now.

Questions to Consider

The implementation of the proposed regulations could significantly affect both staff morale and compensation budgets. Here are a few questions to think about:

Should you raise annual pay significantly for those affected to avoid paying overtime?

Or, should you instead choose to just pay overtime to more people to get done what needs to be done under current job responsibilities?

Or, would you cut out some services, since your district won’t be able to maintain those services at current levels if compensation must increase?

Will you begin to lose staff to other local/regional employers if you decide to “tighten your belt and hold the line,” putting more work on already loaded employees?

Would you put “curfews” on use of district email, network data access, or phone use, as it must be restricted to each employee’s “scheduled hours” to not generate overtime eligibility?

Do you have accurate, defensible time and attendance tracking systems in place now for monitoring all employee time worked in the event you are audited under these new regulations?

These are all options to start pondering while the regulation reform plays itself out, possibly very soon.

The Good News

Although the proposed rule changes have been published by the DOL and the Office of Management & Budget in the Federal Register, there is still time remaining in the 60-day comment period (ending September 4) before a final rule will be drafted. This period allows employers to weigh in on the impacts of the proposed updates, if they so choose, and there will likely be a few additional months before any effective date is established.

If they are not already occurring, we recommend initiating conversations with your district’s governing Board to surface the potential need for reevaluating employee classifications (as exempt or non-exempt from receiving overtime), especially in the Administrative and Computer-Related Occupations exemptions categories.

Remember, being eligible for overtime is not about how someone is paid (salary or hourly). Neither is it about job titles, like coordinator, manager, director or supervisor.  It is about whether the employee meets the salary test and duties tests to be exempt. If not, the default by law in any doubt is always to receive overtime.