NAICU Washington Update

Final Rule More than Doubles Overtime Pay Exemption to $47,476

May 18, 2016

President Obama, along with Department of Labor (DOL) Secretary Thomas Perez, announced the final rule on overtime pay for nonprofit and corporate employers across the country on May 18 in Columbus, OH. Prior to the announcement, the administration developed an individual fact sheet for higher education, among other sectors, and guidance for colleges and universities for paying overtime under the Fair Labor Standards Act.

The most problematic change for colleges and universities, and nonprofits in general, is an increase in the amount employees can earn and be considered for an exemption from overtime pay from 23,660 to $47,476.

While the new level is less than the $50,440 amount originally proposed by DOL, it still more than doubles the previous amount, and will be extraordinarily problematic for many colleges to implement.

The implementation date for the new rule, announced on May 18, is December 1, 2016. By this date, employees will need to be paid at least $47,476 in order to be considered for an exemption from overtime pay. In addition, this amount will be adjusted every three years, instead of every year as originally proposed.

This will be particularly difficult for college and university employees for a number of reasons. Most importantly, the rule will undermine the constant efforts of colleges and universities to hold down tuition costs. Additionally, the rule will have a significant impact on campus budgets – most of which have already been set for the next fiscal year, if not the next two fiscal years.

The original overtime proposal was announced in July 2015, and the comment period closed on September 5, 2015. After receiving approximately 260,000 comments, mainly from nonprofits and small businesses, DOL sent a final rule to the Office of Management and Budget (OMB) on March 15. OMB typically takes 45-90 days to review rules.

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