Fair Labor Standards Act Announcement to Impact Institutions of Higher Education

Fair Labor Standards Act Announcement

We anticipate that the U.S. Department of Labor will release the final rules related to the Fair Labor Standards Act (FLSA) this month (May 2016) or early summer, which can make millions more employees eligible for overtime. 

The forthcoming FLSA overtime rule changes will make compliance more challenging for campus leaders. These rules apply to all employers, including colleges and universities. 

ACE has generously provided a summary explanation that we want to share.  

Although all faculty are automatically considered exempt employees, campuses would face increased labor costs and greater administrative burden (because many salaried employees would become hourly employees with the need to keep track of their hours). 

Many jobs in higher education do not lend themselves to hourly work, such as postdoctoral positions or positions that require significant travel or irregular hours, e.g. athletic coaches and trainers, admissions recruiters, and student affairs and admissions staff. 

Many employees would lose their exempt status, resulting in diminished workplace autonomy and fewer opportunities for flexible work arrangements, career development and advancement. Employees may see this loss of exempt status as a demotion because their flexibility and opportunities would dwindle but their compensation would remain the same. 

Given that salaries are a large share of college budgets at present, sharp changes to overtime requirements may force colleges and universities to raise tuition and/or decrease services to cover higher labor costs. 

Under the proposed rules, the minimum salary threshold would increase from $23,660 per year ($455 per week) to $50,440 ($970 per week) in 2016. 

The current “highly compensated employee” exemption would increase from $100,000 to $122,148 per year. According to the DOL, as many as five million American workers who are currently exempt could become eligible for overtime protection.

For campuses, the changes will require paying close attention to the classification of employees, hours worked, assigned job duties, how time is tracked and how compensation is paid. It’s anticipated that employers will have 60 days to comply with the new regulations. Otherwise, they may be subject to fines and penalties.

Here are some ways to keep your campus ahead of the game:

Audit

One of the first steps campuses should take is to conduct an audit of their current employees’ statuses. Determine which positions are considered exempt and who may become non-exempt. Evaluate this through the lens of current compensation, as well as the duties test (e.g., employees must be in administrative, professional or executive positions). Pay special attention to employees who are currently exempt but may soon be eligible for overtime under the new rules. Build financial projections based on previous time worked to better understand the total financial impact.

Create a Schedule to Update Positions

Once your HR teams has established a baseline, it’s important to evaluate the impact of proposed changes on individual positions. For example, will you raise the compensation of a specific position to the threshold to keep it exempt, or will you reclassify the employee as non-exempt and begin paying overtime? Any new non-exempt positions will require a minimum wage test and clear policies around overtime work.

Adopt Time-Tracking Technologies and Policies

Accurate data collection and easy reporting will be an essential part of complying with the proposed FLSA overtime rule changes. Employee time and attendance software makes it easy for employees to report time and attendance, use mobile devices to log hours and set specific alerts that notify you when certain conditions (such as approaching overtime) require your attention.  HR leaders can also further support technology use with clear employee timekeeping policies. Consider including policies around after hours and weekend work for employees who are being newly classified as non-exempt.

Focus on Training and Communication

Having a clear time-related employee policy is important. Once that is firmly established, invest in training your employees about the new regulations, policies and technology. Both management and employees need to understand the changes — and the potential implications for deviating from the plan.

Your campus should also develop a communications plan. How will you communicate changes to managers or supervisors whose departments may be affected? What is your communication plan for individual employees whose jobs are impacted? What steps will you take to address potential questions or concerns from both groups?

Avoid Automatic Time Reductions

Many violations of the proposed FLSA regulations are likely to come from unintended actions. Many systems look at an employee’s schedule and note that they’re supposed to take an hour for lunch each day, so that’s automatically deducted from the employee’s compensation. However, if that employee works through lunch and doesn’t communicate that to a manager, there’s a potential risk for a future claim. Avoid this issue by requiring employees to log out and in for each break and having managers review time and attendance reporting on a weekly basis. Precision in time tracking — rather than assumptions — should help minimize overall risk.

The proposed FLSA overtime rule changes have a significant potential impact for campus managers and individual employees. 

With short timelines expected for implementation, HR leaders should have a clear strategic plan to evaluate how their campuses will be impacted and take proactive steps now to mitigate that risk. 

By auditing employee configurations, investing in the right technology and developing clear communications and training plans for affected staff, you should be able to manage the changes effectively.