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May 20, 2016Client Alert

Final Federal Overtime Pay Regulations and Institutions of Higher Education

After receiving and reviewing more than 270,000 public comments, on May 18, 2016, the U.S. Department of Labor (DOL) released its much anticipated Final Rule regarding overtime pay eligibility for certain “white collar workers” under the Federal Fair Labor Standards Act (FLSA).

Michael Best recently published a client alert outlining the basics of the Final Rule. There are, however, special provisions that apply to institutions of higher education, and DOL has published guidance for such institutions. Notable highlights of the guidance include:

1. Teachers remain exempt absent a salary test. The Final Rule did not change the teacher exemption, which classifies teachers as exempt absent a salary test. If a teacher is employed by an institution of higher education and his or her primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, the teacher is exempt. Exempt teachers may include both professors and adjunct instructors. Faculty members who spend a considerable amount of time in other activities, such as coaching or advising, but are also engaged as teachers, are still engaged in the primary duty of teaching.

2. Athletic coaches may be exempt under the teacher exemption and need not meet the salary test. Coaches may qualify for a teacher exemption if their primary duty is instructing student-athletes in how to perform their sport. If, however, the coach’s primary duty is recruiting student-athletes, he or she is not considered a teacher. In determining whether a coach falls under the teacher exemption, a relevant, but not exclusive, factor is the time the coach spends instructing student-athletes. For example, an assistant coach who spends less than a quarter of his or her time instructing student-athletes, and the rest of his or her time recruiting or engaged in other activities, is unlikely to have the primary duty of teaching. Therefore, that assistant coach would not be exempt.

3. Academic administrative employees must either meet the salary test or be paid on a salary basis at least equal to the entrance salary for teachers. Exempt academic administrative employees must satisfy both a duty test and one of two salary tests. To be classified as an exempt academic administrative employee, the employee must have the primary duty of performing administrative functions directly related to academic instruction or training. Department heads, academic counselors and academic advisors generally have duties satisfying this exemption. As to the salary test, academic administrative employees must either be compensated at a salary of not less than $913 per week ($47,476 annualized) or on a salary basis not less than the college’s entrance salary for teachers, which may be lower than $913 per week.

It is important to note that employees who merely work in higher education, but whose work does not relate to education, do not satisfy the academic administrative exemption. For example, employees whose work relates to general business operations, human resources, building management or student/staff health, but do not perform academic administrative functions, may meet a different exemption and therefore must be compensated at a salary of not less than $913 per week ($47,476 annualized).

4. Students are unlikely to be impacted by the final rule.

  • Student Workers: Most student workers employed by their college or university are hourly workers who do not work more than 40 hours a week. Most are nonexempt employees and will not be impacted by the Final Rule.
  • Teaching Assistants: Graduate teaching assistants whose primary duty is teaching are exempt under the teaching exemption and therefore are not impacted by the Final Rule.
  • Research Assistants: Students engaged in research under a faculty member’s supervision in the course of obtaining a degree are viewed by DOL as being in an educational relationship with the institution, even if they receive a stipend or benefits. Therefore, they are not impacted by the Final Rule. 
  • Residential Assistants: Students serving as residence hall assistants/advisors who are enrolled in bona fide educational programs and who receive reduced room and board charges or tuition credits are generally not considered employees. Therefore, they are not impacted by the Final Rule.

 

5. “Learned Professionals” must meet the new salary test to be exempt. Learned professionals (not teachers or those practicing law or medicine) must receive a salary of not less than $913 per week ($47,476 annualized) in 2016 and primarily perform work requiring advanced knowledge in a field of science or learning, such as various physical, chemical, and biological sciences, theology and architecture. This knowledge is usually obtained by earning a degree. Examples include certified public accountants, researchers, librarians and psychologists, depending on the employee’s specific job duties.

6. “Creative Professionals” must meet the new salary test to be exempt. Creative professionals must receive a salary of not less than $913 per week ($47,476 annualized) in 2016, and their primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor, such as music, writing, acting and the graphic arts.

7. Most postdoctoral fellows must meet the new salary test to be exempt. Postdoctoral fellows, employees who conduct research but are not working towards a degree, often meet the “learned professionals” duty test. They must also receive a salary of not less than $913 per week ($47,476 annualized) in 2016. If these employees do not meet the salary test, the college or university must be sure their time is tracked and ensure they do not work overtime or compensate them for overtime. If a fellow’s primary duty is teaching, the institution may classify them as exempt under the teacher exemption.

8. Public institutions may offer compensatory time off in lieu of overtime payments. Many public universities and colleges qualify as “public agencies” under the FLSA. These institutions may compensate nonexempt employees with “comp time” in lieu of overtime pay. The comp time must be credited at the same rate as overtime (1.5 hours of comp time for each hour of overtime pay). In general, nonexempt employees may not accrue more than 240 hours of comp time, but if such employees are engaged in public safety, emergency response or seasonal activities, they may accrue 480 hours of comp time. If a public institution opts to compensate overtime with comp time, such an arrangement must be established pursuant to the applicable terms of a collective bargaining agreement, memorandum of understanding or an agreement with or notice to the employee before the performance of work.

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