Department of Labor’s Overtime Rules

Adoption of new regulations announced by the Department of Labor (DOL) on May 18, 2016, would mean significant cost increases for employers – including colleges and universities. However, with the U.S. District Court in Texas issuing a nationwide injunction of the rule on November 21, 2016, the regulations are now in limbo.         

About

The Wage and Hour Division of DOL proposed changes to the Fair Labor Standards Act (FLSA) in July 2015, after President Obama called for an expansion of the number of workers who qualify for overtime pay. The new rule will more than double the salary threshold (last adjusted in 2004) from the current level of $23,660 to $47,476.  The final rule was announced on May 18, 2016, with a deadline for compliance of December 1, 2016.  However, the rule is now on hold, pending the ruling of the U.S. District Court in Texas.
 

Overtime Rules and Higher Education

The FLSA generally requires that employers pay employees overtime, based on a formula, for work in excess of 40 hours per week. The FLSA exempts certain employees from the overtime pay requirements if they earn above a certain baseline salary and meet a job duties test. Most of the exemptions apply to employees who work in the executive, administrative, or professional fields (known as “white collar” exemptions). The main change in the new rule is an increase in the salary amount that would trigger the “white collar” exemption. The new rule would more than double the salary threshold (last adjusted in 2004) from the current level of $23,660 to $47,476. It would also provide for automatic adjustments to that amount every three years going forward.

Lawsuits filed by 21 states, as well as business groups, led to the nationwide injunction issued by the U.S. District Court in Texas.  The district judge agreed that the new rule will lead to increased costs for businesses, and layoffs - rather than salary increases.  The Obama Administration filed an appeal, followed by a request for an expedited decision.  There have been no developments since President Trump took office.
 

Compensatory "Comp" Time and Higher Education

For over three decades, public employers – including public colleges and universities - have had the option of offering comp time arrangements to their employees.  Employees may decide between comp time or overtime pay, under certain guidelines.  Unfortunately, private employers – including private colleges and universities – are not able to offer employees the same option.  Having the ability to offer comp time would have lessened the blow of the Obama overtime pay rule had it been implemented.

The House has passed legislation three different times, most recently in 2013, to allow private employers to offer comp time arrangements to employees.  Unfortunately, these bills were not taken up in the Senate.  Most recently, Rep. Martha Roby (R-AL) authored the "Working Families Flexibility Act," which passed in the House and awaits consideration in the Senate.

It is also possible to have comp time language built into a new overtime rule if the Trump Administration and DOL decide to proceed from scratch on a new rule.
 

Outlook

While it’s unclear what might happen next on overtime, there are three scenarios to consider:

  • First, the courts could drop their injunction of the Obama overtime rule, allowing retroactive December 1, 2016, implementation.  While that is unlikely, it is possible. 
  • Second, the Trump Administration could instruct the Department of Justice to drop its defense of the pending lawsuit and admit that the rule was improper, allowing the court’s injunction to become final. However, the AFL-CIO is prepared to step in and defend the rule should the government bow out.
  • The third and most likely scenario, is that the current DOL will start the rulemaking process from scratch, possibly with a gradual, less severe adjustment to the overtime pay rate that employers have indicated they could live with.

What You Can Do

  • Evaluate all employee positions and develop an implementation plan.
  • Keep NAICU and your elected representatives informed of your overall costs and strategies for compliance. 
  • Ask your Senator to push for consideration of the "Working Families Flexibility Act," already passed by the House.

Resources  

NAICU Contact

Karin Johns: Karin@NAICU.edu

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