- Where do the DOL’s New FLSA White-Collar Overtime Regulations Leave Non-Profits and Educational Institutions?
- June 17, 2016 | Authors: Erin Cornell Horton; Tyrone P. Thomas
- Law Firm: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. - Boston Office
Over the course of this and next week, we will discuss the final overtime rule’s impact and address related workplace issues on which employers should focus in advance of its December 1st implementation date. Today we focus on the rule’s impact on non-profits and educational institutions.
On Wednesday of this week, the Department of Labor announced its Final Rule, which is aimed at expanding overtime eligibility for millions of American workers. At its core, the final version of the rule doubled the minimum salary employers must pay “white collar” workers to maintain their exempt status. See our post here for a summary of the new regulations.
But what does this mean for non-profits, including educational institutions, which may be harder hit by these changes than private sector employers? In short, generally the same thing it means for any other employer.
No New Special Relief For Non-Profits, Including Non-Profit Educational Institutions
Despite a considerable push by major non-profit organizations and higher education institutions for a different outcome, no new carve-outs—such as the suggested exemption from the salary requirement, reduced salary requirement, phased-in salary requirement increase, delayed implementation of the new salary requirement, and elimination of automatic updating of salary requirements—are contained in these regulations.
In its Guidance on the Final Rule, the DOL acknowledges and discusses at some length the non-profit sector’s comments and concerns, including that non-profits generally pay lower salaries, are more constrained in their abilities to increase salaries, and the potential for increased costs leading to a decline in the quality or quantity of services they are able to provide. But, in the end, the DOL dismisses these concerns, explaining that the DOL “has never had special rules for non-profit organizations” and “such special treatment is not necessary or appropriate.”
The DOL cites National Compensation Survey data, which shows that the average hourly management worker at non-profits makes $1,547 per workweek, well in excess of the 2016 required standard salary for white-collar exemption and that the average hourly wages of non-profit employees are not uniformly lower than employees in other sectors. In addition, the DOL appears less concerned about the impact on non-profits and educational institutions given the fact that the Final Rule bases the standard salary level on salaries in the lowest-wage Census Region (little consolation to those non-profits and educational institutions in that Region, of course).
Post-Docs Get No Special Treatment Either
As to post-doctoral researchers, the DOL was similarly unmoved. The DOL reviewed much commentary concerning the impact of these regulations on post-docs engaged primarily in research, whose stipends are often well below the proposed minimum salary level, especially among post-docs with less than five years of experience. The DOL looked to data from the National Institutes of Health (NIH) and responded simply that no special rule for post-docs was needed because the NIH FY 2016 stipend level for post-doc researchers with just two years of experience is only $208 less than what is required under the new Final Rule. In short, those post-docs who are not primarily engaged in teaching, likely meet the job duties test for “learned professionals” and must, like all other “learned professionals,” also satisfy the minimum salary requirement in order to be exempt from overtime.
The “Good” News for Education
As painful as these new regulations may be for educational institutions, it could be worse. Historically, teachers qualify for the professional exemption under the FLSA no matter how much money they make, so long as their primary duty is teaching, tutoring, instructing or lecturing for an educational establishment. The DOL received multiple comments from teachers, university faculty, and their representatives asking that the DOL do away with this special relief offered to “teaching professionals” under the existing rules. Educational institutions may at least rest easy knowing that the DOL’s Final Rule has left this special carve-out intact.
Similarly unscathed is the special provision for academic administrative employees, setting the salary threshold for exemption at an amount equal to the entrance salary for teachers at the same institution.
Guidance for Non-Profits and Educational Institutions
In connection with its release of the Final Rule, the DOL also issued Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act, which is aimed at assisting non-profit organizations in evaluating current practices and transitioning to the new Final Rule requirement. This guidance also provides helpful discussion of which non-profit organizations and employees fall under the FLSA’s jurisdiction in the first place (i.e., enterprise and individual “coverage” under the FLSA).
The DOL also released Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act, which is aimed at assisting educational institutions in evaluating current practices and transitioning to the new Final Rule requirement.
What To Do Now?
For those non-profits and educational institutions impacted by the Final Rule, there are several options, which may be implemented on their own or in combination with one another. Among them are the following:
- Pay overtime.
- Raise salaries.
- Adjust workloads or work schedules.
- Adjust wages.
- Consider volunteers (with caution).
- Consider non-discretionary incentive bonuses (with caution).
Educational institutions using this path should be particularly careful for compliance with the Department of Education’s regulations on incentive pay. Under 34 C.F.R. 668.14(b)(22), universities are prohibited from incentive payments which directly or indirectly are predicated upon success in securing enrollments or the award of financial aid. While the DOE has recently issued a final rule clarifying that this prohibition does not extend to incentive payments based on students’ graduation from or completion of educational programs, the general prohibition in these areas remain in place.
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While the Final Rule provides no special relief for non-profits and educational institutions, the sectors’ considerable efforts to have their voices heard at the DOL have at least paid off with some additional guidance specifically geared to the unique challenges faced by non-profit and education sector employers. As employers prepare for the Final Rule’s implementation on December 1st, they should consult this new guidance and seek the assistance of legal counsel where the guidance leaves unanswered questions.