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Department of Labor Finalizes Overtime Pay Rule

By ASBO USA posted 05-23-2016 11:46

  

Last week, the Department of Labor (DOL) officially updated an overtime pay exemption rule under the Fair Labor Standards Act (FLSA), which will take effect for all employers December 1, 2016. The Obama administration first announced its plan to update the rule in July of last year, however the final language has changed a bit from the President’s initial proposal.

If you need a refresher on the original proposal: President Barack Obama wanted DOL to raise the FLSA overtime salary threshold from its current level, $23,600 (approximately $455/week), to $50,400 (approximately $970/week). The proposal would leave current categorical exemptions and duties tests for determining overtime eligibility alone, and also continue to require highly compensated employees (HCEs) earning more than $122,000 a year to be exempt. Finally, the proposal would increase the salary threshold annually to keep up with inflation, and take effect within 60 days of DOL finalizing the rule.

 
How Does President Obama’s Overtime Proposal Differ from the Final DOL Rule?

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DOL’s final overtime pay rule would

  • Raise the FLSA overtime salary threshold to $47,476 (or $913/week).

  • Keep categorical exemptions and duties tests as they currently are.

  • Allow up to 10% of the salary threshold to be met with bonuses/commissions so long as they are provided on “a quarterly or more frequent basis and the employer is permitted to make a ‘catch-up’ payment.”

  • Raise the HCE exemption threshold to $134,004 ($913/week of that amount must be paid on a salary basis for employers to exempt those employees).

  • Automatically increase the salary threshold every three years starting in 2020 to keep up with inflation costs (January 1, 2020 would reflect the first increase, to $51,000).

  • Take effect Thursday, December 1, 2016 (which means that salary adjustments for the new rule must be made for that entire pay week/period).

  

How Will The Overtime Rule Affect School Districts?

While teachers, school business officials, superintendents, and other K–12 leaders are exempt from the rule, many support staff are not. Aides, paraprofessionals, maintenance workers, school bus drivers, cafeteria workers, custodians, some clerks and secretaries, and other professionals who don’t fit into the “professional,” “administrative,” and “executive” exemptions will be eligible for overtime pay under the new rule. This will have major financial implications for cash-strapped school districts and other organizations with fixed budgets.

Districts that are charged to “do more with less” likely will have to avert additional payroll costs by:  

  • Bumping employee salaries above the new threshold to reclassify them as non-exempt.

  • Demoting salary employees to an hourly basis while spending more time tracking hours, filling out paperwork, and ensuring compliance with the new rule.

  • Shifting extra responsibilities from exempt employees to non-exempt employees to accomplish the same amount of work with the same amount of fiscal resources.

  • Reducing or eliminating employee benefits and/or educational services and programs.

 

Is the DOL Rule Really Final? What Can Be Done at This Point?
ASBO International has been working with the Partnership to Protect Workplace Opportunity (PPWO) in opposition to the overtime rule because it will cause significant administrative burdens for school districts, and DOL provides very little time to implement the changes. The rule would take effect as school leaders are already overwhelmed with new regulations from the Affordable Care Act (ACA), the Every Student Succeeds Act, and the next child nutrition law. Even with a slightly lower salary threshold between the original overtime proposal and final rule, it is still a 100% increase from the current threshold in less than a year. While our advocacy efforts have managed to mitigate the effects of some of its provisions, the overtime rule could still be improved.

ASBO International understands the need to update an outdated salary threshold, however we believe the final rule asks for too much, too fast. We have endorsed two companion bills in the House and Senate called the “Protect Workplace Advancement and Opportunity Act,” which would require DOL to conduct an economic impact analysis for a variety of sectors and industries before being able to issue a final rule. If a final bill passes Congress and is signed into law, it would delay the overtime rule until more information can be gathered. PPWO reports that congressional support for the two bills, S. 2707 and H.R. 4773, continue to grow. The Senate bill has 40 cosponsors and the House version has 163 cosponsors. You can advocate for the legislation via PPWO’s Take Action website, which offers talking points about opposing the rule and fill-in forms to send letters to your representatives.

Meanwhile, the Congressional Review Act (CRA) provides Congress another opportunity to push back on the rule. The CRA allows Congress 60 legislative days after a rule is issued to overturn it via a “resolution of disapproval.” However, the President has the power to veto such a resolution; Congress can only override a veto if two-thirds of the officials agree to do so. Since President Obama is supports the new DOL rule, it is likely he will do what he can to prevent Congress from overturning the regulation. Nevertheless, Senator Lamar Alexander (R-TN) and other Republican officials who oppose the DOL rule are currently looking into introducing a resolution to block the rule and gain Democratic support to do so. POLITICO reports that Sen. Alexander is anticipating unintended consequences from the rule in his state, including hurting “Tennessee families paying for college, increasing annual tuition at one Tennessee independent college by an estimated $850 per student.”


More Overtime Rule Resources

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