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New Federal Overtime Rule Could Have Significant Impact on Higher Education

May 18, 2016

Rule Goes Into Effect Dec. 1

The Department of Labor (DOL) released its final rule on overtime pay today, establishing a new threshold of $47,476 a year for those working more than 40 hours a week to be eligible for overtime compensation, roughly double the current threshold of $23,660.

The rule goes into effect Dec. 1.

According to DOL, the higher income limit will make 4.2 million salaried workers newly eligible for overtime pay. The new level will be adjusted every three years to reflect changes in the cost of living.

DOL released its proposed rule in July 2015, after being charged by President Obama in 2014 with revising the regulations governing exemptions to the Fair Labor Standards Act’s overtime pay requirements for executive, administrative and professional employees.

ACE and a number of higher education associations submitted comments on the proposal, outlining a range of problems the higher education community had with the draft. None of these problems appear to have been addressed in the final rule.

ACE President Molly Corbett Broad expressed concern about how the rule will impact colleges and universities, which are among the primary employers in many communities.

“While in principle we support raising the wage threshold, today’s move by the Department of Labor will harm many higher education institutions, employees and students . . . requiring such a dramatic and costly change to be implemented so quickly will leave many colleges with no choice but to respond to this regulation with a combination of tuition increases, service reductions and, possibly, layoffs,” Broad said in a statement.   

“We appreciate the department’s willingness to reconsider slightly its initial proposal to raise the threshold even higher. But negatively impacted by the new regulations are a wide array of non-faculty employees—from athletics coaches and trainers to admissions recruiters and student affairs officers—whose work is not well suited to hourly wage status and who will face diminished workplace autonomy and fewer opportunities for flexible work arrangements and career development.”

The Obama administration has issued both an overview and more detailed guidance for colleges and universities on how to implement the new rule. However, these documents merely collect information about current law that was not changed by the new rule. ACE had hoped the final rule would provide some relief related to postdoctoral researchers because their salaries, set by federal grant making agencies, are often below the new threshold. Unfortunately, the new rule will treat these researchers like other employees with salaries below the new threshold.

As the guidance reiterates, many college employees are exempt from the new rule because they are considered teachers. As Inside Higher Ed (IHE) outlined this morning, the teaching exemption applies to 1. Anyone whose primary job duty is instruction; 2. Students in research jobs under the supervision of a faculty member while in the course of a degree program; 3. Coaches and assistant coaches whose primary duty is teaching; and 4. Some academic personnel involved in advising or helping students.

“Many other groups of employees—including those in admissions, student affairs and many other divisions—would be covered by the new rules,” according to IHE.

For a further discussion of the rule, the College and University Professional Association for Human Resources (CUPA-HR) has scheduled a webinar for May 25 on “FLSA Overtime Final Rule: What You Need to Know and Do Now.”

ACE also will be convening a panel of experts for a June 17 live webcast to further explore the complexities and challenges campuses will face in implementing these new regulations. More information on how to register will be provided soon.

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