Last year, we wrote about the U.S. Department of Labor’s (DOL) proposed changes in salary for exempt employees. To summarize: Employees are “exempt” from overtime pay and minimum wage laws if their job duties classify them as “bona fide executive, administrative, professional and outside sales employees” who make a salary of at least $445 per week ($24,500 annually). The rule proposal may bump the minimum salary requirement to $50,440 per year, or $970 weekly. Professionals who make less than that would become eligible for overtime pay.
However, groups have begun organizing against this rule change. They argue that the new regulations would place an undue financial burden on nonprofits and smaller companies that would not benefit either employees or organizations. As we look ahead to the coming debates, some breathing space for your nonprofit school may be on the horizon.
The last time the exempt salary minimum had been adjusted was in 2004, over a decade ago. The adjustment is done according to President Obama’s directive to the Secretary of Labor to update the regulations and clarify the categories of who is eligible for overtime pay and who is exempt. Therefore, the Department of Labor is proposing to set the exemption minimum salary rate to the 40th percentile of weekly earnings for full-time salaried employees, projected to be that $50,440 annual salary we mentioned earlier.
The rule will not affect teachers, who are and will remain exempt from the “salary level test.” That said, other school employees—like administrators, secretaries, nurses, and office staff—will become subject to this new rule, if it goes into effect. Consequently, if professionals’ salaries remain below the new minimum, those employees will now be eligible for overtime pay worth one and a half their hourly rate for every worked hour over 40 in a given week.
However, opponents of the law insist that the rule will take effect too soon, disrupting current funding sources and placing an undue burden on employers. The American Network of Community Options and Resources (ANCOR) has repeatedly met with the White House staff to implore the DOL to slow down its implementation of the new salary minimum. They cite the DOL’s 2013 change to home-care laborers’ status the DOL that impacted pay, for which the DOL gave organizations 15 months’ time to adjust and budget for the increased expenditures.
That’s not to say ANCOR doesn’t support raised minimum salaries. Gabrielle Sedor, ANCOR’s chief operating officer told The Hill. “We do understand the threshold needs to be updated, and we agree that our workers work really hard and deserve to be paid”—just on a time scale that allows the organization to prepare.
Others seek a temporary reprieve from the rule’s consequences in Congress with the Protecting Workplace Advancement and Opportunity Act (S. 2707/H.R.4773). This law would block the DOL’s proposed overtime rule change, and:
- Require the DOL to report on the impact of increased salaries on employers, employees, and the economy before implementing a higher salary threshold;
- Extend the public comment period to 120 days on future rule proposals;
- Require any rule update to take effect at least a year after the rule is approved; and
- Ban automatic yearly salary threshold increases.
As it stands, the rules are still subject to change. That said, it’s expected that the new minimum salary threshold—predicted to be finalized somewhere around $42,000 by senior White House staff—will be ratified later this year (2016), to take effect in 2017. Besides, these proposals could look dramatically different by this time next year, depending on which presidential candidate takes the White House in November and whether party leaders choose to push the rule ratification through before the election.
Regardless, our advice remains the same as it was last year: consult your school’s legal counsel to see which positions may be affected by the proposed rule changes, and prepare for a “worst case scenario” should the currently proposed $50,440/year salary minimum be enacted. Remember to consider morale issues, should certain employees be paid more than your teachers.
Additional ISM resources:
The Source for Business Managers Vol. 14 No. 3 Ask ISM's Health Care Reform Specialist: Salary Minimums
The Source for Private School News Vol. 14 No. 5 FLSA Proposed Overtime Changes May Have Ramifications for Private Schools
Additional ISM resources for Gold Consortium members:
I&P Vol. 37 No. 3 The Fair Labor Standards Act: Getting Overtime Right
