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News & Press: General Articles

Wage and Hour Law for Independent Schools: Salary Level Update

Wednesday, October 2, 2019  
Posted by: Anna Taylor
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By Debra P. Wilson, SAIS President

 

After much consideration, the Trump Administration released final wage and hour salary level regulations on September 24.  These are regulations most independent schools will want to be aware of as they are likely to impact your school and will do so mid-budget year, on January 1, 2020. For many schools, this may cause a bit of shuffling to ensure employees are either paid the overtime they deserve under the new regulations, or they are moved into an exempt role within the school. This publication is intended to provide schools with a brief overview of the Fair Labor Standards Act and some insight into these new regulations and what they might mean.

Why do these regulations apply to my school?

Independent schools, like other employers, are subject to the Fair Labor Standards Act (FLSA). This legislation and the related regulations were designed to ensure that employees in the United States were paid a fair wage and that work performed beyond the standard hour work week for certain classes of employees were additionally compensated. The law was fairly consistent for many years, but it was updated in 2004 to simplify the classifications for workers, making it easier for employers to determine who is and is not eligible for overtime. In 2016, the Obama Administration attempted to move through a raise in salary level considerations to determine who is eligible for overtime. Those regulations were ultimately stayed by a federal judge right before they went into effect. These new regulations update that salary level, but not to the levels originally proposed by the Obama Administration.

What are the new regulations?

Under the new regulations, the salary level that an employee must generally be paid to qualify for an exemption from overtime pay is increasing from $455 per week to $684 per week. This change goes into effect on January 1, 2020. The new regulations also change the salary level of the highly compensated employee exemption from $100,000 a year to $107,432 per year.

What does that mean exactly?

The FLSA requires that employees who work more than 40 hours a week be paid overtime. In FLSA parlance, they are “overtime eligible” or “nonexempt” employees. There are some exceptions to this rule and the FLSA has tests to help determine if an employee is exempt from overtime. To determine if an employee is eligible for overtime, an employer looks at the kind of the work the individual does, how much they are being paid, and how they are being paid. For schools, it is often easiest to start with teachers.

Determining Exemptions from Overtime Eligibility

There are a number of exemptions that apply in independent schools. The sections below address many of them, but there are additional ones for unusual roles, such as sales positions, true technology jobs (e.g., jobs that require coding and creating of product with technology), as well as dorm parents and others. The exemptions provided here are the ones most commonly found in our schools.

Teachers

The FLSA has a specific exemption for teachers and others in similar learned professions. Teachers are automatically exempt from the salary requirements of other portions of the FLSA. In order to use this exemption, the staff member must be employed as a teacher whose primary job is teaching students. These can be nursery school, kindergarten, or older students, generally, as long as the teacher is following curriculum and the school is not a daycare center. The teacher must be actually teaching; that is, imparting knowledge to students of almost any age, working for an educational institution. Find more information in this fact sheet.

What about everyone else?

Once the teaching staff is considered under this exemption, schools must consider a variety of administrative, support, custodial, and other staff. For these positions, the place to start is generally salary. In order to be exempt from overtime, the individuals in these positions must be paid on a salary basis no less than $455 per week. The new regulations change this dollar amount to $684 per week as of January 1, 2020 ($35,568 if calculated by yearly salary). If an employee is paid on an hourly basis or based on how much work they accomplish, then they have met the first leg of being exempt from receiving overtime. However, the inquiry does not end with the salary level. All positions must then be considered under one of the tests for exemption.

Executive Exemption

The first exemption test is the executive exemption.[1] Under this test the employee must

  • Be compensated on a salary basis at a rate of not less than $455.00 per week, exclusive of board, lodging, or other facilities (this amount will increase to $684 per week as of January 1, 2020);
  • Have a primary (e.g., more than 50% of their job) duty managing the overall organization or a department, subdivision, or other customarily-recognized unit of the organization;
  • Customarily and regularly direct the work of two or more other full-time employees or their equivalent; and,
  • Have the authority to hire or fire, or their recommendations as to hiring, firing, or other status changes are given particular weight.

Schools should note that this individual is always the head of school and can include roles such as the school’s chief financial officer, assistant head of school, division heads and others depending on the amount of authority and oversight they truly exercise in the school. If they do not qualify here, they are likely to qualify in one of the following exemptions.

Administrative Exemption

The second exemption most schools consider is the administrative exemption[2] and its counterpart, the educational administrative exemption. The first exemption is the traditional administrative exemption; the second relates only to individuals working in schools in certain capacities. 

Under the traditional administrative exemption, the exemption applies to employees who

  • Are compensated on a salary basis at a rate of not less than $455.00 per week, exclusive of board, lodging, or other facilities ($684 per week as of January 1, 2020);
  • Has a primary duty of the performance of office or non-manual work directly related to the management or general business operations of the school; and
  • Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. This last element is the most important of this exemption test. Department of Labor auditors look closely at how much latitude employees have as well as how big of an impact their decision making has on the institution. This can include budget, program, and other high responsibility topics. Regulators and courts tend to consider how much these employees truly can decide on their own without working with a supervisor and how costly their decision-making can be to the business.

Roles ineligible for the executive exemption, usually as a result of not overseeing enough staff, are likely to be exempt.  The more complex positions deeper within the school hierarchy, such as associate directors of admissions, advancement, or similar roles, as well as controllers and others, often do not qualify for this exemption as they do not exercise sufficient discretion and independent judgment in their daily work.

The second administrative exemption for which school employees may be eligible is the “educational administrative exemption.” This exemption was added to the regulations in 2004. These employees must be:

  • Compensated on a salary basis at a rate of not less than $455.00 per week ($684 per week as of January 1, 2020), exclusive of board, lodging, or other facilities, or on a salary basis which is at least equal to the entrance salary for teachers in the same educational establishment; and
  •  Engaged primarily in administrative functions directly related to academic instruction or training in an educational establishment or one of its departments or subdivisions.

In a position that includes the exercise of discretion and independent judgment with respect to matters of significance. This last element is the most important of this exemption test. Department of Labor auditors look closely at how much latitude employees have as well as how big an impact their decision-making has on the institution. This can include budget, program, and other high responsibility areas. The term “educational establishment” is quite broad and includes elementary or secondary schools or public school systems as well as higher education, schools for students with special needs, and others. The regulations anticipate that specific roles would be included in this exemption, including counselors who administer school testing programs, learning support specialists, college counselors, and others.

Professional Exemption

As noted earlier, teachers tend to fall under the professional exemption, provided they are employed as a teacher and their primary duties include teaching in some form. There are other professions that qualify for the professional exemption.[3] Unlike teachers, they must be paid the salary minimum and meet the other elements of the exemption test.  These individuals:

  • Must be compensated on a salary basis at a rate of not less than $455.00 per week, exclusive of board, lodging, or other facilities (this amount will increase to $684 per week as of January 1, 2020); and
  • Have a primary duty involving work:

o that requires advanced knowledge in a field of science or learning customarily requiring a prolonged course of specialized intellectual instruction; or

o that requires invention, imagination, originality, or talent in a recognized artistic field or creative endeavor.

This exemption is most commonly used in schools for other traditional, often licensed, professionals within the school including nurses, counselors, athletic trainers, librarians and others. As with the other roles, these individuals must be primarily employed in this capacity.

Highly Compensated Exemption

Finally, the 2004 regulations created another new exemption called the “highly compensated employee" exemption.[4]  Under this exemption, employees who are paid at least $455.00 per week (increasing to $684 on January 1, 2020) on a salary basis and who have a total annual compensation of at least $100,000 per year (increasing to $107, 432 as of January 1, 2020) will be exempt if they are engaged in office or non-manual work, and “regularly and routinely” perform at least one of the exempt elements or responsibilities found in the executive, administrative, or professional exemptions.  For example, this exemption might apply to a highly paid associate director of admissions who oversees two full time staff members, but whose position does not include the exercise of discretion and independent judgment with respect to matters of significance because there is also a director of admissions who closely oversees all aspects of the school’s admissions program.

So what if the jobs are not exempt?

If school employees do not meet an exemption test, they are eligible for overtime when they work more than 40 hours a week. They must be paid the minimum wage (either federal or state, whichever is higher) and for the hours worked beyond 40, they may be paid “time and a half,” which generally is calculated as their hourly wage plus half again the amount (e.g., if they are paid $10 per hour, they will be paid $15 per hour on the hours they work past the 40 hour limit). There are other ways to calculate this wage as well, including paying your staff on a salary basis and still having them eligible for overtime. Schools using this approach should work with legal counsel on the best way to calculate overtime.

Frequently Asked Questions

Question: Wait a minute. I now have a bunch of employees who will no longer be considered exempt from overtime as of January 1, 2020 because they make more than the current $455 per week, but less than the $684. What do I do?

Answer: As with the original regulations proposed by the Obama Administration, these regulations go into effect in the middle of the school year, which can have an impact on school budgets. If your school has employees who meet the other elements of an exemption test, you can either increase their weekly pay to meet the new $684 per week or you can begin to pay them overtime as of January 1, 2020. If you choose the latter, you must implement a reasonable and reliable way to track their hours, including any hours spent working virtually.

Question: Our weekly salary levels for our assistant directors of advancement and admissions do not quite meet the salary levels of these exemptions, but they do if we consider the yearly discretionary bonuses they are paid. Do these count towards the salary calculation?

Answer: No, these bonuses cannot be considered when determining weekly salary. The only exemption under which such additional compensation might be considered is for the highly compensated exemption. In that case, the school can consider nondiscretionary bonuses and commission, but those bonuses and commissions may only make up  10% of the highly compensated individual’s salary.

Question:  We consider our executive roles to be the head of school, CFO, dean of students, and heads of our various divisions. Our administrative roles include anyone not involved in teaching. Can we just use the titles to determine if someone is ineligible for overtime under the executive and administrative exemptions?

Answer:  The exemptions set by the FLSA have nothing to do with the job titles that are given to staff. All staff roles must be individually reviewed for what the individuals actually do. This sometimes leads to confusion and consternation when individuals in “executive roles” actually qualify as exempt from over time under the “administrative” exemption. For these purposes, this determination is made completely based on the tests from the Department of Labor and the FLSA.

Question: Our administrative staff are all eligible for overtime. However, they prefer to receive comp time during the summer to offset their school year overtime. Is this okay?

Answer: Unfortunately, the FLSA does not allow for such arrangements. When you calculate the hours worked of an employee who is eligible for overtime, you must do it during your defined work week. The school can define its own workweek, as long as it is consistent. The week can differ for different departments. For example, if the advancement office has the school auction happening on Saturday night, and the school’s work week runs from midnight on Sunday until midnight on Saturday, the administrative assistant in the advancement office might be given off Monday of that week in anticipation of the hours he will work on that Saturday. This ensures that she does not trigger overtime.  This “comp time” must be provided within that work week. It cannot be “saved” until the summer when schools tend to operate on reduced hours. A school can still provide those reduced hours, but it must also pay an overtime due during the school year.

Question: My administrative assistant likes to come in early and get the coffee going and get settled before the school day begins. She opens her email, checks the mail, and just gets things going. Is this considered work?

Answer: It is very likely that this will be considered work under the FLSA, particularly if these activities are included in her regular work for the school. Even if you tell her not to trigger this overtime, you must pay for the work done.

Question: What about all of those after-hours emails that we have in the admissions office?

Answer: Yes, work done virtually after regular work hours is still considered work. This is an area of particular concern for many employers now as technology has facilitated after- hours work.

Question: We are a religious school and sometimes have an exemption from these kinds of regulations. Is this one of those cases?

Answer: Religious schools do sometimes find that they are exempt from some regulations but the FLSA is not one of them.

Question: We have an assistant teacher in many of our classrooms. Are they considered teachers under the FLSA?

Answer: No, paraprofessionals are not generally considered teachers as they are employed to assist the lead teacher. That being said, circumstances may warrant a second teacher being considered a “full” teacher in a classroom. Schools should work with legal counsel on these fact specific scenarios.

Additional Resources

For more information on the new regulations, see this piece or this one.

Curious about volunteer coaches under the FLSA? See this publication.

Want the FLSA deep dive? See this NAIS publication.


[1] FLSA Section 13(a)(1)

[2] FLSA Section 13(a)(1)

[3] FLSA Section 13(a)(1)

[4] FLSA Section 13(a)

 

Download a PDF version of this article here.

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