Changes to Overtime Rules

On May 18, 2016, the U.S. Department of Labor (“DOL”) published its final rule updating overtime regulations. The rules, which go into effect on December 1, 2016, raise the salary threshold for overtime eligibility from $455/week to $913/week (or $47,476/year).  The rules also sets the salary for an exempted “highly compensated employee” at $134,004.  These thresholds will be automatically updated every three years beginning January 1, 2020.  Certain professional employees, including doctors, lawyers, and teachers, are not eligible for overtime under these salary level tests.

The most pertinent changes to overtime rules for school districts as employers are:

  1. The U.S. Department of Labor’s new overtime rule does not take effect until December 1, 2016. That means that all employers, including school districts, must be in compliance with the salary threshold requirements by that date, irrespective of their fiscal year start dates.
  2. The proposed annual update to the minimum salary threshold has been changed from every year to every three years, setting the date for the increase to January 1st, beginning January 1, 2020. This update will occur irrespective of a school district’s fiscal year start date.

The final rule doesn’t change the job duty requirements for a position to qualify for exemption from overtime regulations. Under the “Professional Exemption,” learned professionals, or an employee whose primary duty includes work requiring advanced knowledge acquired through specialized intellectual instruction, are exempt from overtime regulations.  Important to school districts, this includes teachers.  Moreover, many school administrators likely qualify for exemption from overtime regulations under this same exemption or under the “Highly Compensated Employee” exemptions (i.e. an employee performing non-manual work and paid an annual salary more than $134,004).

In Pennsylvania, many school district employees who earn less than $913/week are represented by unions, such as bus drivers, cafeteria employees, custodial and maintenance employees, paraprofessional employees, and secretarial employees. Therefore, these employees are already paid hourly, not salary, and their collective bargaining agreements contemplate overtime pay.

However, school administrators should review the different types of staff members they employ. Some employees may not fall within the “professional exemption,” may not be represented by a union, and may earn a salary less than $47,476/year, including but not limited to:

  • Confidential Secretaries,
  • Directors or Managers of Information Technology, and
  • Directors or Managers of Public Relations.

The Administration should review the job descriptions of those identified employees and determine if any overtime regulations apply. The DOL provides detailed information on each exemption to help guide employers.  If no exemptions apply, the Administration should determine how it will minimize overtime expenses associated with the identified employees.

Once the non-exempt employees are identified, the Administration and Board should determine how any possible overtime expenses will affect the 2016-2017 school year budget. Because there will likely be relatively few non-exempt employees who now qualify for overtime under the new DOL regulations, such non-exempt employees should have little impact.  But proper review is necessary to assess any budgetary impact.  School districts should also assess any impact on budget looking forward to January 1, 2020, when the next minimum salary threshold for non-exempt employees will go into effect.

Please contact the school law team at education@mbm-law.net or 412.242.4400, if you any questions and/or need further assistance with this matter.

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