FLSA Overtime: How, When and Why to Prepare

In preparation for the pending FLSA overtime announcement, CUPA-HR will be hosting a 90-minute webinar on February 16 at 2:00 p.m. ET. Developed in partnership with Sibson Consulting and several higher ed HR practitioners from across the country, the webinar will focus on the dynamic challenges higher ed institutions face in responding to the proposed rule. During the event, the presenters will also discuss their preparations and share some of the challenges they know they will face once the announcement is made (can you say “post docs”?). Prior to the webinar, we want to share a few highlights.

As most HR leaders are aware, the Department of Labor (DOL)’s Wage and Hour Division (WHD) has proposed revisions to the executive, administrative and professional exemptions — known as the “white collar” exemptions — under the Fair Labor Standards Act. Under the current regulations, an individual must satisfy three criteria to qualify as an exempt  “white collar” employee: first, he or she must be paid on a salaried basis (the salary basis test); second, that salary must be at least $455/week, or $23,660 annually (the minimum salary requirement or salary threshold); and third, his or her “primary duties” must be consistent with executive, professional or administrative positions as defined by DOL (the primary duties test). Note that the first two criteria do not apply to teachers and many student workers.

Even though employers don’t know for sure what the final rule will look like, they do know a few things on which they can build their compliance strategies:

• The minimum salary threshold will significantly increase if the regulations as proposed are finalized and implemented. The current threshold a worker must hit to be overtime-exempt is $23,660. The proposed rule seeks an increase to $50,440. And while it may not increase to that amount, it will nonetheless increase.
• The highly compensated employee threshold will also increase. It has been proposed that the total annual compensation threshold that must be hit to exempt highly compensated employees would climb to $122,148 from $100,000. Although those numbers could change in the final rule, employers can expect a higher threshold.
• The threshold will increase automatically. For the first time ever, the salary threshold will be tied to an automatic escalator, so it can keep pace with inflation. This also means that employers will not see major legislative changes each time the threshold increases.
• DOL is considering making changes to the duties tests. No changes are proposed to the primary duties test, but WHD has asked several questions on the topic, suggesting it is considering adopting a quantification requirement similar to California’s, where employees have to perform the exempt primary duties “more than 50 percent” of the time. And although the DOL hasn’t suggested changing the executive, administrative, professional, computer or outside sales duties tests, it did ask for comments on whether the tests should be changed and whether they’re working to screen out employees who are not bona fide white collar exempt employees.

What Are Next Steps You Can Take Now?

• Identify employees who may be affected by the new rule. Identify exempt employees who make less than $50,440 per year; determine the hours they actually work per week; determine the appropriate hourly rate for affected employees; calculate a new hourly rate for those salaried employees; work with the appropriate stakeholders to develop the communications strategy for all employees; and develop a tracking system in which to track the reclassified employee hours.
• Determine which positions must be moved to the new threshold to remain exempt. You and other institution leaders may determine that some positions must be moved to the new threshold so the positions remain exempt. If this move is made, will other positions at or near the new threshold also need to be adjusted up to maintain internal equity?
• Prepare your fiscal year budget. Even though you don’t yet know the full impact of the exemptions, you need to estimate the impact a change will have on your 2016-17 budget and plan accordingly.
• Consider how to respond to effects on morale and productivity. The changes will affect everyone, and how you communicate this change to employees will be as impactful as the change itself.

Explore More

• Review the steps for evaluating positions in greater detail.

• View a snapshot of how one institution participating in the February webinar will be impacted by the proposed changes.

• Register now for the webinar FLSA Overtime: How, When and Why to Prepare.

• Read more about the proposed rule on the CUPA-HR Advocacy and Compliance site and in CUPA-HR’s Summary of Higher Education’s Comments on DOL’s Proposed Overtime Rule.