Changing Business, Over Time? The Department of Labor Issues Proposed New Regulations for Exemption Status – By: Christi Flaherty

Published by MoASBO, September 2015

One of the most confusing duties of any school business official can be properly classifying employees, and subsequently recording and maintaining all required timekeeping records under federal and state law. The federal Fair Labor Standards Act (FLSA), the statute which mandates overtime compensation for all eligible non-exempt employees, sets out narrow categories of employees who are exempt from the Act’s strenuous record-keeping and overtime requirements, based on three factors:

  • The amount of compensation earned by the employee;
  • How the employee is paid; and,
  • The type of work performed by the employee.

Under the current regulations which implement the FLSA, if an employee earns at least $23,600.00 per year (or $455.00 per week), paid to them on a salary basis, and they perform “exempt” job duties, that employee is exempt from the FLSA’s overtime provisions; in other words, that employee is not eligible for time-and-one-half pay for hours worked in excess of forty in a workweek.

The Department of Labor has proposed new regulations that, if adopted, will dramatically change the landscape of the exempt classifications. Under these proposed regulations, an employee would have to earn at least $50,000.00 per year on a salary basis – more than twice the current threshold. The employee would also have to spend at least fifty percent (50%) of his or her time performing exempt job duties. Under these proposed regulations, this salary threshold would automatically increase annually. Implementation of the new regulations is expected as soon as January 1, 2016.

So what does this mean for school districts?

While professional employees, such as teachers and certificated administrators, will remain exempt from overtime provisions of the FLSA, districts will now need to take a closer look at their non-certificated administrators, technology positions and other non-certificated positions in order to determine whether they can continue to be classified as exempt.

First, review your district’s job descriptions. As always, these documents are a key element in determining whether a position is exempt. Job descriptions should accurately reflect the work performed by an employee. In order to be classified as exempt, under the proposed regulations, the job description should reflect that at least fifty percent (50%) of the employee’s time will be spent performing traditional exempt duties, i.e. supervising, directing, formulating policy, evaluating, interviewing employees, disciplining employees, planning work, budgeting, appraising productivity.

Second, consider the feasibility of salary increases in order to move above the new $50,000.00 threshold. For example, if your district previously paid a non-certificated administrator $48,000.00, consistently required that employee to work forty-five hours per week, and he spent more than half of his time performing exempt job duties, under the new regulations, he would not be exempt from overtime for the five hours per week because he did not meet the $50,000.00 threshold. It may be more cost-effective for the district to pay the non-certificated administrator $50,000.00, and assign him additional duties commensurate with the additional salary, in order to meet each of the elements of the new test for classifying him as exempt from overtime. This $2,000.00 salary increase would be more cost effective than paying him overtime compensation for five hours of overtime each week.

Third, where it is not cost effective to raise salaries to meet the threshold, districts should consider implementation and use of compensatory time. Both the FLSA and state statutes have rules and regulations on the accumulation and use of compensatory time, and board policies should be prepared in order to effectively monitor and utilize compensatory time so as not to become cost-prohibitive or administratively cumbersome on the district.

Compliance with the FLSA should not be taken lightly. Penalties for failing to comply include steep employer fines, recovery of back wages, court costs and attorney fees to prevailing employees. For assistance in compliance with FLSA issues, including the proposed Department of Labor regulations, please contact your school attorney.

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