New Overtime Regulations
On April 23, 2024, the United States Department of Labor (“DOL”) published final rules that updated the Fair Labor Standards Act (“FLSA”) overtime regulations. The new regulations focus primarily on updating the salary and compensation levels required for employees to qualify for the Executive, Administrative and Professional exemptions, which are collectively known as the “white collar” exemptions. Under the FLSA, employees who fall within these exemptions are not required to be paid OT wages for work in excess of 40 hours per week.
Specifically, the new regulations raise the salary levels for these exemptions in two separate steps:
- Starting July 1, 2024, the salary level raises from $684 to $844 a week (from $35,568 to $43,888 annualized)
- Starting January 1, 2025, the salary level raises again to $1,128 a week ($58,656 annualized)
Similarly, the new regulations increase the salary levels for the Highly Compensated exemption (“HCE”), with the level increasing from $107,432 to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025.
The new regulations do not change any other aspect of the exemptions, including the job duties portion of the analysis test.
These salary thresholds will automatically update every three years beginning July 1, 2027. According to the DOL, the changes in the overtime regulations could lead to over 4 million workers being reclassified as non-exempt and therefore eligible for overtime compensation.
Q: Will the new overtime rules affect our teaching staff?
No. Teachers are generally exempt from the new overtime requirements regardless of whether they meet the minimum salary thresholds. The teaching profession exemption requires that the employee spend at least 50% of their time teaching at an educational establishment.
Q: What are the different “white collar” exemptions?
The FLSA includes several different exemptions for OT payments. The most commonly applied to school districts are the “white collar” exemptions: Executive, Administrative and Professional exemptions.
The Executive Exemption generally applies to an employee who meets the salary threshold and whose primary duty is managing the district or department of the district. Additionally, this exemption requires an employee to regularly supervise and direct the work of at least two or more other full-time employees, with the authority to hire or fire other employees (or whose recommendation as to hiring, firing, advancement, promotion, etc. is given particular weight).
The Administrative Exemption generally applies to an employee who meets the salary threshold and whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the school district, including the exercise of discretion and independent judgment with respect to matters of significance.
The Professional Exemption generally applies to an employee who meets the salary threshold and whose primary duty is the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment (typically in a field of science or learning).
Q: What kinds of school employees may be affected by the new overtime rules?
Certain “white collar” or HCE employees, such as supervisors, human resources directors, chief financial officers, business office managers, and some skilled computer employees may be reclassified as non-exempt employees under the new overtime rules unless they are (i) paid on a salary basis; (ii) paid the designated minimum weekly salaries as of July 1, 2024 and then January 1, 2025; and (iii) perform certain duties as required under the FLSA.
Q: What about employees who perform more than one role for the district?
To determine whether an employee with multiple roles should remain exempt, districts should review how much time the employee spends performing their duties and what types of duties each role requires.
For instance, if an employee’s primary duty is teaching, which means that they spend more than half their work hours as a teacher, and they spend less than half of their time assisting in the business office, then the employee may remain exempt.
Q: Didn’t the DOL try to raise the salary threshold before in 2016 but was stopped by litigation?
Yes, the DOL previously issued regulations in 2016 that similarly raised the salary threshold for the “white collar” and highly compensated exemptions. Prior to implementation of those new regulations, several business groups sued the DOL, claiming the new regulations and salary thresholds were unlawful. The federal courts enjoined the government from enforcing the regulations, which were eventually pulled back after the November 2016 elections when the Trump administration took over from the Obama administration.
Here, a similar lawsuit was filed at the end of May 2024. Business groups sued the DOL in a federal district court in Texas, claiming the DOL went beyond its legal authority under the FLSA by raising the salary thresholds. The business groups are asking the federal court to enjoin the DOL from enforcing these regulations prior to July 1, 2024.
Until and unless the federal court takes action, however, school districts are obligated to follow the new regulations and will need to determine how to address any employee who currently falls within the FLSA OT exemptions but whose compensation does not meet the new salary thresholds.
Q: What steps should my district take to comply with the new overtime rules?
Districts should review their employees’ status as exempt or non-exempt to ensure they are properly classified. For any currently exempt employee who will become non-exempt under the new rules, your district will need to decide whether to increase their compensation to maintain exempt status or be prepared to pay them overtime.
Districts will need to work with reclassified employees to notify, train, and support them as they navigate new timekeeping and overtime procedures.
Our attorneys here at Mickes O’Toole can assist with a review of your district’s positions potentially affected by these new regulations. Please contact us with any questions or concerns about next steps and considerations, especially as this issue works it way through the court system.
