"Guidance for Higher Education Institutions on Paying Overtime Under the Fair Labor Standards Act"

Guidance for Higher Education Institutions on Paying Overtime Under the Fair Labor Standards Act is a 13-page legal document that was released by the U.S. Department of Labor - Wage and Hour Division on May 18, 2016 and used nation-wide.

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WAGE AND HOUR DIVISION
UNITED STATES DEPARTMENT OF LABOR
Guidance for Higher Education Institutions
on Paying Overtime under
the Fair Labor Standards Act
May 18, 2016
Introduction
Once effective, the rule will raise the salary level from
its previous amount of $455 per week (the equivalent
of $23,660 a year) to $913 per week (the equivalent of
Higher education is an important and diverse sector in
$47,476 per year) in 2016. The rule will also raise the
our economy and civil society. It includes a wide variety
compensation level for highly compensated employees
of public and private institutions: community colleges,
subject to a more minimal duties test from its previous
four-year colleges, and large research institutions—ranging
amount of $100,000 to $134,004 annually. The
from small schools to campuses that are virtual cities of
Final Rule establishes a mechanism for automatically
tens of thousands of people. The Department of Labor
updating the salary level (and compensation level for
(Department) recognizes the important contribution that
highly compensated employees) every three years, with
higher education makes to this country and society.
the first update to take place in 2020. Salaried white
collar employees paid below the updated salary level
The Department of Labor’s Final Rule on Defining and
are generally entitled to overtime pay; such employees
Delimiting the Exemptions for Executive, Administrative,
paid at or above the salary level may be exempt from
Professional, Outside Sales and Computer Employees
overtime pay if they primarily perform certain duties.
under the Fair Labor Standards Act (FLSA) (the
These changes take effect on December 1, 2016. The
“Overtime Rule” or “Final Rule”) will strengthen
Final Rule does not include any changes to the duties
overtime protections and provide greater clarity for
tests, which also affect the determination of who is
both workers and employers alike across sectors,
exempt from overtime.
including higher education. The Final Rule updates the
salary level required for the executive, administrative,
As with most employees, the minimum wage and
and professional (“white collar”) exemptions to ensure
overtime provisions of the FLSA generally apply to
that the FLSA’s intended overtime protections are
employees at higher education institutions. Regardless
fully implemented, and to simplify the identification of
of whether they are operated for profit or not for profit,
overtime-protected employees. The Department updated
institutions of higher education are subject to the
the salary level threshold above which certain “white
provisions of the FLSA. However, higher education
collar” workers may be exempt from overtime to equal the
employers, like other employers, are not required to pay
40th percentile of earnings of full-time salaried workers
minimum wages and overtime compensation to executive,
from the lowest wage Census Region.
WAGE AND HOUR DIVISION
UNITED STATES DEPARTMENT OF LABOR
Guidance for Higher Education Institutions
on Paying Overtime under
the Fair Labor Standards Act
May 18, 2016
Introduction
Once effective, the rule will raise the salary level from
its previous amount of $455 per week (the equivalent
of $23,660 a year) to $913 per week (the equivalent of
Higher education is an important and diverse sector in
$47,476 per year) in 2016. The rule will also raise the
our economy and civil society. It includes a wide variety
compensation level for highly compensated employees
of public and private institutions: community colleges,
subject to a more minimal duties test from its previous
four-year colleges, and large research institutions—ranging
amount of $100,000 to $134,004 annually. The
from small schools to campuses that are virtual cities of
Final Rule establishes a mechanism for automatically
tens of thousands of people. The Department of Labor
updating the salary level (and compensation level for
(Department) recognizes the important contribution that
highly compensated employees) every three years, with
higher education makes to this country and society.
the first update to take place in 2020. Salaried white
collar employees paid below the updated salary level
The Department of Labor’s Final Rule on Defining and
are generally entitled to overtime pay; such employees
Delimiting the Exemptions for Executive, Administrative,
paid at or above the salary level may be exempt from
Professional, Outside Sales and Computer Employees
overtime pay if they primarily perform certain duties.
under the Fair Labor Standards Act (FLSA) (the
These changes take effect on December 1, 2016. The
“Overtime Rule” or “Final Rule”) will strengthen
Final Rule does not include any changes to the duties
overtime protections and provide greater clarity for
tests, which also affect the determination of who is
both workers and employers alike across sectors,
exempt from overtime.
including higher education. The Final Rule updates the
salary level required for the executive, administrative,
As with most employees, the minimum wage and
and professional (“white collar”) exemptions to ensure
overtime provisions of the FLSA generally apply to
that the FLSA’s intended overtime protections are
employees at higher education institutions. Regardless
fully implemented, and to simplify the identification of
of whether they are operated for profit or not for profit,
overtime-protected employees. The Department updated
institutions of higher education are subject to the
the salary level threshold above which certain “white
provisions of the FLSA. However, higher education
collar” workers may be exempt from overtime to equal the
employers, like other employers, are not required to pay
40th percentile of earnings of full-time salaried workers
minimum wages and overtime compensation to executive,
from the lowest wage Census Region.
2.
Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act
administrative, and professional employees who satisfy
the salary level and other requirements for one of the
white collar exemptions. In addition, certain provisions
of the FLSA regulations apply to many white collar
employees at higher education institutions that may make
them exempt from overtime compensation, even though
they earn below the new salary level. These include
special provisions for employees whose primary duty
is teaching and special salary level rules for academic
administrative personnel. Finally, public universities or
colleges that qualify as a “public agency” under the FLSA
Higher education
may compensate overtime-eligible employees through the
use of compensatory time off (or “comp time”) in lieu of
cash overtime premiums.
employers, like other
The Department is issuing this guidance on the
application of the white collar exemptions in the higher
employers, are not required
education context at the same time as publication of
the Final Rule in order to help institutions of higher
education evaluate current practices and transition to
to pay minimum wages and
the requirements of the Final Rule. Specifically, in view
of the existing regulatory provisions specific to higher
education and the changes introduced by the Final Rule to
overtime compensation to
the salary level in particular, the Department is providing
this guidance to assist these institutions in preparing for
implementation of the Final Rule. Part I of this guidance
executive, administrative,
provides a brief background on the FLSA’s white collar
exemptions and how they apply generally. Part II of the
guidance addresses categories of job occupations in
and professional employees
the higher education sector which may fall under the
white collar exemptions, and discusses other employees
in higher education who might be affected by the Final
who satisfy the salary level
Rule. Part III details some of the options employers may
exercise in determining how best for their institution
to ensure that they comply with the Final Rule. This
and other requirements
guidance, however, is not a comprehensive guide to
coverage and compliance under the FLSA. For additional,
detailed guidance documents, please visit the Wage and
for one of the white collar
Hour Division’s website at dol.gov/whd.
I. Background on the White Collar
exemptions.
Exemptions under the FLSA
The FLSA generally requires that employees be paid at
least the federal minimum wage for all hours worked
and overtime pay at a rate of at least one and one-
half times their regular rate of pay for any hours they
work beyond 40 hours in a workweek. As a general
matter, coverage under the FLSA is broadly construed
to ensure that the law provides employees with wage
and hour protections, as Congress intended. The
FLSA exempts from minimum wage and overtime
requirements employees who are bona fide executive,
administrative, or professional employees. See 29
U.S.C. 213(a)(1); 29 CFR Part 541. These exemptions
3.
United States Department of Labor
Job titles never determine exempt status under the FLSA.
Additionally, receiving a particular salary, alone, does
not indicate that an employee is exempt from overtime
and minimum wage protections.
are sometimes referred to collectively as the white
The salary level is not a minimum wage requirement,
collar exemptions.
and no employer is required to pay an employee the
salary specified in the regulations, unless the employer
As discussed below, establishing that a white collar
is claiming an applicable white collar exemption.
employee is exempt from the FLSA’s overtime
Administrative and professional employees may also
requirements involves assessing how the employee is
be paid on a “fee basis.” See 29 CFR 541.605. For
paid, how much the employee earns, and whether the
additional information about payment on a fee basis,
WHD Fact Sheet
17G.
employee primarily performs the kind of job duties that
see
Congress meant to exclude from the law’s overtime
protections. Job titles never determine exempt status
Note that the discussion in this guidance focuses on the
under the FLSA. Additionally, receiving a particular
standard exemption. For additional information on the
salary, alone, does not indicate that an employee is
highly compensated employee exemption, which pairs a
exempt from overtime and minimum wage protections.
more relaxed duties test with a higher total earnings level
Rather, in order for a white collar exemption to apply,
($134,004 per year, beginning on December 1, 2016),
an employee’s specific job duties and earnings must
see
WHD Fact Sheet
17H.
meet all of the applicable requirements provided in the
regulations. To be clear, not all salaried white collar
B. Primary Job Duties for Exempt Executive,
employees qualify for the white collar exemptions; in
Administrative, and Professional Employees
fact, many salaried white collar employees are entitled
to minimum wage and overtime.
Under the standard duties test, an employee’s
“primary duty” must be that of an exempt executive,
A. Three Tests Must Be Met in Order to Claim
administrative, or professional employee. Primary
a White Collar Exemption
duty means the principal, main, major, or most
important duty that the employee performs. See 29
The regulations implementing the white collar
CFR 541.700. Each exemption uses a different test
exemptions generally require individuals to satisfy three
for determining primary duty under the white collar
criteria to be exempt from overtime requirements:
exemptions.
• First, they must be paid on a salary basis not subject
To qualify for the executive exemption, an employee
to reduction based on quality or quantity of work
must have the primary duty of managing the enterprise,
(“salary basis test”) rather than, for example, on an
or managing a customarily recognized department or
hourly basis;
subdivision of the enterprise. Additionally, the employee
• Second, their salary must meet a minimum salary
must customarily and regularly direct the work of at
level, which after the effective date of the Final
least two other full-time employees or their equivalent
Rule will be $913 per week, which is equivalent to
(for example, one full-time and two half-time employees
$47,476 annually for a full-year worker (“salary level
are equivalent to two full-time employees), and have
test”); and
the authority to hire or fire other employees, or the
• Third, the employee’s primary job duty must involve
employee’s suggestions and recommendations as to
the kind of work associated with exempt executive,
the hiring, firing, advancement, promotion or any other
administrative, or professional employees (the
change of status of other employees must be given
“standard duties test”).
particular weight.
4.
Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act
The salary level is not a minimum wage requirement,
and no employer is required to pay an employee the
salary specified in the regulations, unless the employer
is claiming an applicable white collar exemption.
& Outside Sales Employees under the Fair Labor
To qualify for the administrative exemption, the
employee’s primary duty must include the exercise of
Standards Act
(FLSA).
discretion and independent judgment with respect to
matters of significance directly related to management
Determining the primary duty of an employee requires
or general business operations.
assessment of multiple factors. As discussed in the
Department’s longstanding regulations, the amount of
Regarding the professional exemption, there are several
time spent performing exempt work can be a useful
different kinds of exempt “professional” employees.
guide in determining whether exempt work is the
These include “learned professionals,” “creative
primary duty of an employee, and employees who
professionals,” teachers, and employees practicing
spend more than 50 percent of their time performing
law or medicine. Learned professionals must primarily
exempt work will generally satisfy the primary duty
perform work that requires advanced knowledge in a
requirement. Of course, all relevant factors must also
field of science or learning.
be considered, with a major emphasis on the character
of the employee’s job as a whole, rather than strictly the
For additional details about the white collar exemptions
amount of time spent performing particular duties. The
generally, see
WHD Fact Sheet #17A: Exemption for
Final Rule made no changes to the standard duties test.
Executive, Administrative, Professional, Computer
Basic Requirements for Claiming a
White Collar Exemption under the Standard Duties Test
EXECUTIVE
ADMINISTRATIVE
PROFESSIONAL
Salary Basis Test
• Employee must be paid on a
• Employee must be paid on a
• Employee must be paid on a
salary basis
salary or fee basis
salary or fee basis
Standard Salary Level Test
• $913 per week
• $913 per week ($47,476 per
• $913 per week ($47,476 per
($47,476 per year for a full-year
year for a full-year worker)
year for a full-year worker)
worker)
• Special salary level for certain
• Salary level test does not apply
academic administrative
to doctors, lawyers, or teachers
personnel
Standard Duties Test
• The employee’s “primary
• The employee’s “primary duty”
• The employee’s “primary duty”
duty” must be managing
must include the exercise of
must be to primarily perform
the enterprise, or managing
discretion and independent
work that either requires
a customarily recognized
judgment with respect to
advanced knowledge in a field
department or subdivision of the
matters of significance.
of science or learning or that
enterprise (and managing 2 full-
requires invention, imagination,
time employees as well).
• Additional requirements
originality or talent in a
provided in 29 CFR 541
recognized field of artistic or
• Additional requirements provided
Subpart C
creative endeavor.
in 29 CFR 541 Subpart B
• Additional requirements
provided in 29 CFR 541
Subpart D
5.
United States Department of Labor
II. Specific Considerations for Higher
Education Institutions in Implementing
the Final Rule
Because of special regulations that apply to certain
personnel at higher education institutions, many white
collar employees at higher education institutions are
Because of special
not subject to the salary level test or are subject to
a different salary level test and therefore will not be
affected by the new salary level. This Part addresses
regulations that apply
each of the white collar provisions as they apply in
the higher education sector, helping to identify which
employees may be impacted by the Final Rule and what
to certain personnel
potential adjustments employers may make.
Existing (and unchanged) regulatory provisions
at higher education
specific to higher education mean that the Final Rule
may have limited impact on teachers and academic
administrators. The salary level and salary basis
institutions, many white
requirements for the white collar exemption do not
apply to bona fide teachers. See 29 CFR 541.303(d),
.600(e). Additionally, academic administrative
collar employees at higher
personnel that help run higher education institutions
and interact with students outside the classroom,
such as department heads, academic counselors
education institutions are
and advisors, intervention specialists, and others
with similar responsibilities, are subject to a special
alternative salary level that does not apply to white
not subject to the salary
collar employees outside of higher education. These
academic administrative personnel are exempt from the
FLSA’s minimum wage and overtime requirements if
level test or are subject
they are paid at least the entrance salary for teachers at
their institution. See 29 CFR 541.600(c).
to a different salary level
To the extent that higher education institutions employ
workers whose duties are not unique to the education
setting, like managers in food service or at the
test and therefore will
bookstore, those employees will be covered by the new
salary level, just like their counterparts at other kinds of
institutions and businesses.
not be affected by
A. Professional Exemption
the new salary level.
i.
In General
There are several different kinds of exempt
“professional” employees. These include “learned
professionals,” “creative professionals,” teachers,
and employees practicing law or medicine. In higher
education, employees eligible for the professional
exemption often are either learned professionals
(such as researchers), or teachers. The new salary
level applies to “learned professionals” and “creative
professionals,” but it does not apply to teachers (or to