NAICU Washington Update

Higher Education Community Comments on Proposed New Rules on Overtime Pay

September 04, 2015

The higher education community has responded to proposals to amend the Fair Labor Standards Act (FLSA), including increases in the minimum salary thresholds and regulations governing the “white collar” exemption for executive, administrative, and professional employees (Washington Update, July 6, 2015).

While supportive of an increase in the minimum salary thresholds and periodic updates to the regulations to ensure the exemptions are a not abused, the higher education community expressed concern that the “proposed minimum salary threshold is simply too high,” in a 25-page letter to the U.S. Department of Labor. The letter was written by the College and University Professional Association for Human Resources (CUPA-HR) and signed by NAICU and 17 other associations. 

In the letter, the community urges the Labor Department to “lower the proposed minimum salary threshold and phase in the new level over time.”  It also urges the Labor Department not to implement an automatic annual update to the salary level tied to either the Consumer Price Index or the 40th percentile of weekly earning of full-time salaried employees.  It also calls for more than a 60-day notice for any future increases in the salary thresholds citing the impact salary changes have on university budgeting and finances.

The U.S. Department of Labor’s Wage and Hour Division (WHD) proposed changes to the Fair Labor Standards Act in July 2015 after President Obama called for expansion of the number of workers who qualify for overtime saying: “…too many Americans are working long days for less pay than they deserve.” The proposal is expected to increase overtime pay to some five million workers that are currently excluded under the law.

The FLSA generally requires employers pay employees overtime, based on a formula in excess of 40 hours per week. It exempts certain employees from the overtime pay requirements, most commonly those in the executive, administrative, or professional fields (white collar exemptions) if they earn above a certain baseline salary. 

Teaching faculty are exempt from the proposed rules.  According to the Labor Department, in determining coverage, only activities performed for business purposes are considered - and not charitable, religious, educational, or similar activities of organizations operated on a non-profit basis where such activities are not in substantial competition with other businesses. 

The new rule would increase the minimum salary necessary to trigger eligibility for the white collar exemption. Had there been an automatic inflation adjuster in previous regulations, the amount would have already been set at just under $48,000 per year in 2013. The Department of Labor is projecting that the 2016 level will increase to $50,440 per year. 

The proposal also provides for an automatic inflation adjustment based on Bureau of Labor Statistics data, so future rulemaking would be unnecessary. At the other end of the spectrum, the amount of earnings needed to reach the qualification for highly compensated employees would be raised to $122,148 and also provides an automatic adjustment for inflation. To be sure, the proposed salary level increase to $50,440 is substantial - and employers will need to consider the impact on their organization or institution.