Many of you remember that fateful fall a few years ago when the Obama Administration’s new overtime rules would have required employers to pay at least $913 per week ($47,476 annualized) in order to treat any employee as exempt from overtime payments. You probably gave your head custodian a pay increase or converted her contract to hourly pay with overtime. You remember this, right?! We feel compelled to repeat for the millionth time that the employee also has to be paid on a salary basis and actually have exempt duties, but those proposed regulations forced many schools to consider changes to exempt staff contracts and compensation.
About now is when most FLSA articles and presentations force some to think: “Wait, hold on, we can’t just treat someone as exempt from overtime by paying them a salary?” NO, NO, NO, AND IT WILL ALWAYS BE NO! We digress...
Alas, here we are again. Late last week, the Trump Administration released long-anticipated FLSA overtime and exemption proposed regulations. They sought public input starting in July 2017, but now we actually know what they are proposing.
Here is the DOL press release.
Here are 219 pages of explanations and proposed regulations (and the actual regulations don’t start until page 211).
Here’s a quick rundown of some the important parts in the proposed regulations:
The Obama Administration’s proposed rules from 2016 (which were kiboshed by a Texas federal judge and stalled indefinitely in the 5th Circuit) would be formally withdrawn;
The big one: current minimum salary for an exempt employee, $455 per week, would be raised to $679 per week. Annualized, that’s going from $23,660 to $35,308;
The salary minimums would be updated every 4 years, but not automatically. The DOL will use notice-and-comment rulemaking so employers have notice and time to comment, and the DOL may also decide not to raise the minimum based on “economic” factors during the 4-year review;
The rule is proposed to be effective starting January 1, 2020. Yes, this means thinking about classified staff contracts again this spring and fall in anticipation of a mid-year increase for the weekly salary minimum during the 19-20 school year;
The DOL estimates that about 10% of workers between the $455 to $679 per week compensation levels are misclassified as exempt and should be getting overtime, so fair warning, they are on to those of you who still just pay a salary to all of your secretarial and administrative staff without doing the duties analysis….
Here’s what’s NOT changing under the proposed regulations:
Teachers remain exempt regardless of salary level. Under 29 C.F.R. § 541.303, teachers are specifically exempt if their primary duty is teaching, even if they do not meet the minimum salary requirements; and
You still can’t just pay a salary to avoid overtime! An employee’s “primary duty” for the employer must meet one of the “exempt duty tests” for the employee to be treated as exempt from overtime, in addition to being paid on a salary basis and earning the new weekly salary minimum of $679. The executive, administrative, professional, and computer employee duties tests are not changing, and you should be making sure all of your exempt employees meet at least one of the duties tests.
As always, we’ll follow up with any further developments. If your school or ESU has questions about FLSA exemptions or these proposed regulations, you should contact your district or ESU attorney, or call Karen, Steve, Bobby, Coady, or Mandy.