DOL Overtime Rules and Institutions of Higher Education – Where Are We, What’s Next, and What Can We Do?

After much nail biting and wondering when to jump the train track, on July 1, 2024, the new overtime thresholds for non-exempt employees went into effect for everyone – outside of Texas. Now the rest of us are subject to the new salary thresholds for overtime for our non-exempt employees and are looking ahead at additional (and not inconsequential) bumps to begin on January 1, 2025. In the current world of higher education, this is especially daunting, not only for minding the bottom line, but also because it can potentially make or break institutions teetering on the brink of closure.

This article addresses the current state of the overtime rules, what may happen next, and provides helpful reminders for exemptions that apply only to institutions of higher education that may be of assistance when deciding how best to move forward for your college or university.

WHERE ARE WE?

On June 28, 2024, a federal judge in the United States Court for the Eastern District of Texas (Eastern District) held the Department of Labor’s (DOL) rule increasing the annual salary threshold for the exemption provided for executive, professional and administrative employees (the “white-collar exemption”) outlined in the Fair Labor Standards Act (FLSA) is likely unlawful. The Eastern District issued a preliminary injunction, but limited the injunction to prohibit DOL enforcement just against the State of Texas as an employer (i.e., state employers (and state public colleges and universities) in Texas). 

Most court watchers expected an injunction from this lawsuit because the Eastern District had issued a nationwide federal preliminary injunction in 2016, which eventually became a permanent injunction, stopping substantially similar Obama-era rules from going into effect. However, the breadth of that anticipated injunction was unclear: in the intervening years since the 2016 injunction, much public debate, including weigh-in from several Supreme Court Justices, has indicated a disfavor for nationwide injunctions, which are ill-defined in the law. In sum, unless we are public colleges and universities in Texas, the 2024 overtime rules went into effect for us on July 1, 2024.

As of July 1, 2024, for the rest of us, the new salary threshold for exemption from overtime raised from $35,568 to $43,888.  On January 1, 2025, the threshold will rise again to $58,656.   

WHAT’S NEXT?

An important decision came down from the U.S. Supreme Court on June 28, 2024, Loper Bright Enterprises, et al. v. Raimondo, et al., that struck down Chevron doctrine – a long-held common law principal that, generally, afforded great deference to agencies for enacting rules and regulations interpreting statute. Of importance to the DOL overtime rules in effect between now and January 1, 2025, the Eastern District of Texas case above cited Loper Bright in its decision to enjoin the overtime rules from applying to the State of Texas. Many observers anticipate a bevy of lawsuits against the DOL overtime rules before the January 1, 2025 increase goes into effect, likely rubbing out any further increases. Candidly, many commentators anticipated a nationwide injunction prior to July 1, 2024, so prepare accordingly as discussed below.

WHAT CAN WE DO?

Exemption under the FLSA has two key parts: (1) salary threshold (as discussed above), and (2) job duties. In addition to identifying employees who fall under the salary threshold, some help also lies in a hard look at job duties, positions, and Fact Sheet #17S, the DOL’s 2017 guidelines on the exemptions that specifically apply to institutions of higher education and whether those apply to any of the individuals below the threshold. Now may be the time to reconfigure job descriptions and reorganize departments and/or classifications of employees.

This fact sheet provides helpful guidelines on what the DOL will consider “teachers,” “coaches,” “professional employees,” “administrative employees,” “executive employees,” and various designations for “student-employees.” As will become quickly obvious to any reviewer of the fact sheet, what our administrators or job descriptions indicate fall into these categories and what the DOL will consider fall into these categories may differ, and that matters for proper exemption status. This can be a large undertaking for a college or university, but the potential savings is worth the effort and can usually be rolled out by classification or college.

In order to determine whether a position is exempt or non-exempt, the reviewer will have to determine what the “primary duty” of each position is and whether those duties make the employee exempt. In the college and university context, it is important to note that non-exempt employees have to be paid at least minimum wage for all hours worked and overtime for hours worked over 40 hours a week, regardless of whether there is a stipend or tuition assistance (many institutions get themselves in trouble here!).

First, whether a position’s “primary duty” is teaching – and it really has to be teaching – the position is exempt. The easy positions that fall into this category are teaching assistants – their primary duty is tutoring, instructing, or imparting knowledge to students. 

Second, relatedly, is whether a coach or assistant coach is exempt. A coach whose primary duty is imparting knowledge by instructing students or student-athletes will be exempt from overtime eligibility. In contrast, a coach whose primary duty is not teaching (e.g. is instead scouting, recruiting, conditioning athletes, arranging equipment, devising game strategies, making travel plans, formulating budgets, or fundraising), is non-exempt.

In a 2018 opinion letter, the DOL indicated that coaches and assistant coaches qualify as teachers when they spend most of their time instructing student athletes in the rules and fundamentals of their respective sports – determining the fundamental philosophy, skills, and techniques for the team. The reality is that, unless coaches are primarily instructors for your college and university who pick up additional coaching responsibilities, the primary duty for your assistant coaches especially will keep them non-exempt. Of note, additionally, no minimum degree is required to be a “teacher” under this exemption (e.g., no college degree is necessary).

Third, many faculty – professionals, creative professionals, employees practicing law or medicine will be exempt as professional employees. These positions can also include teachers and must satisfy all three of the following requirements: (1) the primary duty of the position must be performance of work requiring advanced knowledge; (2) the advanced knowledge must be in a field of science or learning; and (3) the advanced knowledge must be customarily acquired through prolonged course of specialized intellectual instruction. Further, non-teaching professionals who are still exempt include certified public accountants, psychologists, certified athletic trainers, librarians, and most post-graduate researchers.

Fourth, many administrative employees will be exempt if they meet one of the two following exemptions:

Executive: (1) the compensation must satisfy the salary basis and salary level tests (paid on a salary basis, and receive a minimum rate set by the DOL – currently $844 per week); (2) the primary duty must be managing of a department or subdivision of a department (e.g., Deans); (3) the employee must customarily and regularly direct the work of at least two full time staff (or equivalent); and (4) the employee must have the authority to hire and fire other employees, or make suggestions and recommendations on the same.

In reality, in higher education institutions, many of these employees will likely qualify for exemption as teachers and/or professionals. Examples of the type of positions that could fall under this exemption include housing director, chief or head of security and safety, head of facilities, and head of dining services.

Administrative: (1) meet the same salary basis and level of Executive above; (2) the primary duty must be the performance of office or non-manual work directly related to the management or general business operations; and (3) the primary duty includes the exercise of discretion and independent judgment.

Importantly, the administrative exemption is not for any administrative position. The primary duty of the worker must be the exercise of independent discretion on matters of the management or general operations of the institution.

Fifth and finally – student employees must be considered carefully and ensure that limits on hours worked are considered (especially if international students). Student employees often serve as graduate teaching assistants, research assistants, or resident advisors (RAs). These traditional roles are often exempt or not covered by the FLSA. Graduate students, for example, usually have the primary duty of teaching and are exempt; research assistants are generally not considered employment relationships with the college or university because the fulfillment of the research is towards the completion of a degree; and student RAs are also not generally considered employees under the FLSA because of a specific carve out in the FLSA.

Of note, nearly every other employment position held by a student, who is primarily a student (as opposed to an employee who takes courses as part of an employment benefit) at a college or university is non-exempt. Specifically, unless the student otherwise meets one of the exceptions above, the position will be subject to the wage and overtime rules set by the DOL…at least for now.   

In conclusion, while reviewing and keeping position statements up-to-date is always the recommendation of employment counsel, this is especially so now for colleges and institutions looking at how best to structure and staff themselves in light of the current overtime exemption limits. Higher education does have helpful carveouts in the FLSA that may help guide colleges and universities moving forward.