KB Reference Desk: Changes to Overtime Laws

Q:      I have been hearing about some recent changes made to the federal overtime compensation laws. All of our teachers and administrators are currently exempt (not eligible for overtime). Am I going to have to start paying my teachers overtime?!

 A:     No. While the new rules may have an impact on some lower management and support staff positions, teachers and academic administrators are still considered “exempt” under federal law.

        The Fair Labor Standards Act (FLSA) sets standards for employee compensation and provides that all workers must be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 in a workweek, subject to several important “exemptions.” The FLSA regulations carve out a significant exemption for employees performing “bona fide executive, administrative, or professional” duties (EAP duties). Importantly, this includes employees “employed in the capacity of academic administrative personnel or teachers in elementary or secondary schools.” 29 C.F.R. 541.204. To qualify for the EAP exemption, an employee must be paid at a rate that meets the minimum threshold (called the salary test), and perform executive, administrative or professional duties (called the duties test). Within the EAP exemption, certain types of employees are not subject to the salary test by statute – namely, “learned professionals.” This includes employees whose work requires “advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” 29 C.F.R. 541.301. Teachers are specifically outlined in the statute as exempt professionals if they are engaged in instructing, tutoring, lecturing or imparting knowledge at an educational institution. The regulations state that the possession of a teacher’s certificate provides a “clear means of identifying the individuals contemplated as being with the scope of the exemption for teaching professionals,” and most educational policy organizations interpret this to include principals and other administrators who hold teaching certificates. This means bona fide teachers employed at an educational institution are not subject to the salary threshold requirements. 29 C.F.R. 541.303(d).

            The new rules, which became final on Monday, set a new salary threshold for purposes of determining if an employee is eligible for overtime. Because the minimum salary threshold criteria is inapplicable to teachers and academic administrative personnel, the new rules do not affect them. However, they do affect other management personnel outside the instructional arena.  Previously, an employee who was compensated by salary at $23,660.00 per year or more and performed EAP duties, was exempt (i.e., not eligible for overtime). The rules significantly raise this salary threshold to $47,476.00 per year – meaning an employee (not a teacher/principal) who performs EAP duties but is paid a salary less than $47,476 may now be eligible for overtime. This could impact many of your mid or lower management positions (e.g., Directors of Transportation, Food Services, Purchasing, Accounting/Payroll, Human Resources, etc.), as well as some more highly paid support staff.

            We advise working with your HR personnel to identify employees who may fall below the $47,476 threshold, excluding your teachers and administrators. If these employees continue to perform “executive, administrative, or professional” duties, the district may need to consider a salary increase or explore the financial impact on the district of allowing the employee to become eligible for overtime. These rules become effective December 1, 2016. We advise identifying employees who may be impacted by the new rules, and consulting with your district’s legal counsel to determine exemption eligibility before your budget discussions begin over the summer.