Implementing the Revised Fair Labor Standard Act Rules

Implementing the Revised Fair Labor Standard Act Rules

New U.S. Department of Labor (DOL) rules establishing the salary threshold for exemption status under the Fair Labor Standards Act (FLSA) take effect July 1, 2024. Districts need to take basic steps to ensure compliance and prepare for implementing the changes for the 2024-2025 school year. 

Exemption Criteria

To be considered exempt from overtime an employee must meet all the test criteria of one of the exemption tests. The tests include executive, administrative, professional, computer employee, and outside sales which doesn’t apply to schools. Each test includes the following criteria:

• Salary basis: employees must be paid a predetermined and fixed salary that is not subject to reduction because of variations in quality or quantity of work performed.

• Salary level: employee pay must meet a minimum specified amount.

• Primary duties test: the employee’s job duties must primarily involve executive, administrative, or professional duties as defined in FLSA regulations.

Key Provisions of the Final FLSA Rule

The revised rule only changed the second criterion — the salary level — as detailed below:

• Effective July 1, 2024, the salary threshold will increase from $684 to $844 per week, or $43,888 annually for a full-year worker.

• Effective January 1, 2025, the salary threshold will increase from $844 to $1,128 per week, or $58,656 annually for a full-year worker.

• The total annual compensation requirement for highly compensated employees (HCE) will change on July 1 to $132,964, and on January 1 to $151,164. 

• There will be an automatic update to the salary levels on July 1, 2027, and every three years thereafter.

Employers must comply with the revised rules beginning July 1, 2024. 

In general, there will be a small percentage of the education system’s workforce that will be impacted by the new regulations. Excluded from the new threshold of $844 on July 1, 2024, and $1,128 on January 1, 2025, are nonexempt employees, teachers (i.e., employees delivering instruction to students), college faculty, and substitute teachers.

Academic Administrative Employees

Academic administrative employees are subject to the FLSA threshold or an alternative threshold. This only applies to employees whose primary role is performing administrative functions directly related to academic operations and functions. This group of employees may be compared to the alternative threshold of the weekly rate of the lowest starting teacher salary in your district, which may be an advantage to the employer. 

The employer will still need to calculate weekly salaries of academic administrative employees and may find the alternative threshold is most advantageous if it is less than the FLSA standard of $844/$1,128. The FLSA regulations defines this group of employees as those who perform administrative functions directly related to academic operations and functions. Examples include:

• Superintendent

• Principals and vice principals responsible for the operation of an elementary or secondary school

• Positions responsible for the administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program 

• Academic counselors who perform work such as administering school testing programs, assisting students with academic problems, and advising students concerning degree requirements

The example below illustrates how applying the alternative threshold provides an advantage to the employer for an academic counselor who is paid $47,500 annually for a 187-day work schedule.

Beginning teacher salary in Example School District (ESD) = $46,000 / 44 weeks = $1,045 (i.e., alternative threshold)

Academic counselor salary in ESD = $47,500 / 44 weeks = $1,079

The academic counselor is paid more than a starting teacher in ESD and meets the alternative threshold. The district does not have to raise the weekly salary to $1,128 as of January 1, 2025, to stay in compliance. However, if the employer uses the standard threshold, the employee will not meet the January 1, 2025, threshold of $1,128 and the salary would need to be increased.  

Other Exempt Employees

Jobs that would not meet the requirements for administrators in an educational establishment include non-instructional administrators (e.g., transportation director), jobs that are also in other sectors, those relating to building management and maintenance, jobs relating to the health of the students (e.g., registered nurses, speech pathologists, occupational therapists, physical therapists), and staff such as social workers, psychologists, lunch room managers, or dietitians. Although such work is not considered academic administration, employees in these jobs may qualify for another exemption, such as general (non-educational) administrative, executive, or professional and the FLSA threshold will apply.

Conservative Method for Other Exempt Employees

An educational entity must decide how to calculate the weekly salary of other exempt employees. The DOL has clarified that schools can exclude from the calculation any weeks in which no work occurs. However, in many organizations exempt staff may perform work during a week in which they’re not scheduled to work. Common examples include a payroll supervisor who works over winter break to oversee payroll processing, or a maintenance director who answers an alarm call during spring break or is called into work because of frozen pipes during the winter break. Remember, any week in which any work occurs — even checking e-mail or answering a phone call — is a workweek, according to the FLSA regulations.

This conservative calculation accounts for employees who might work in a week not scheduled for work and requires an employer to count every week between the start and end of an employee’s duty calendar. When using this method, scheduled breaks such as week-long breaks for spring break, Thanksgiving, and July 4 closing, and two weeks for winter break are counted.

Below are three examples illustrating how to apply the conservative method to determine if an employee meets the salary threshold:

1. An accounting supervisor is paid $50,900 annually for a 226-day work schedule that spans 52 weeks. Weeks counted include week-long breaks for spring break, Thanksgiving, and the week of July 4, and two weeks for winter break.

• $50,900 / 52 weeks = $978

• The weekly salary meets the July 1, 2024, threshold of $844 but not the January 1, 2025, threshold of $1,128.

• By January 1, 2025, the employer must increase the weekly salary to at least $1,128 or reclassify the employee as nonexempt. The cost to keep the employee exempt would be $150 weekly or $7,800 annually.

2. A librarian is paid $47,500 annually for a 187-day work schedule that spans 44 work weeks. Weeks counted include week-long breaks for spring break and Thanksgiving, and two weeks for winter break.

• $47,500 / 44 weeks = $1,079

• The weekly salary meets the July 1, 2024, threshold of $844 but not the January 1, 2025, threshold of $1,128.

• By January 1, 2025, the employer must increase the weekly salary to at least $1,128 or reclassify the employee as nonexempt. The cost to keep the employee exempt would be $49 weekly or $2,156 annually.

3. A part-time speech-language pathologist is paid $30,000 annually to work three days a week for the entire school year that spans 44 weeks. Weeks counted include week-long breaks for spring break and Thanksgiving, and two weeks for winter break. The number of days per week worked is irrelevant. If an employee works one day in a week it counts as a week of work. 

• $30,000 / 44 weeks = $681

• The weekly salary does not meet the June 1 or January 1 threshold ($844/$1,128).

• By July 1, 2024, the employer must increase the weekly salary to $844 or reclassify the employee as nonexempt. The cost to keep the employee exempt is $163 weekly for the 26 weeks from July to January or $4,238.

• By January 1, 2025, the employer must increase the salary to $1,128 or reclassify the employee as nonexempt. The cost to keep the employee exempt would be  $447 weekly or $19,668 annually.

Less Conservative Method for Other Exempt Employees

This less conservative method may be used for employees who the employer is absolutely certain will perform no work during week-long breaks (e.g., spring, Thanksgiving, winter break, the week of July 4). To use this method, the weeks between the beginning and end of the employee’s duty calendar in which any work is performed are counted. Week-long breaks where no work is performed are not included in the count. 

Below are three examples using the less conservative method to determine if an employee meets the salary threshold:

1. An accounting supervisor is paid $50,900 annually for a 226-day work schedule that occurs over 47 workweeks. Weeks not counted include week-long breaks for spring break, Thanksgiving, and the week of July 4, and two weeks for winter break.

• $50,900 / 47 weeks = $1,082

• The weekly salary meets the July 1, 2024, threshold of $844 but not the January 1, 2025, threshold of $1,128.

• By January 1, 2025, the employer must increase the weekly salary to at least $1,128 or reclassify the employee as nonexempt. The cost to keep the employee exempt would be $46 weekly or $2,162 annually.

2. A librarian is paid $47,500 annually for a 187-day work schedule that occurs over 40 workweeks. Weeks not counted include week-long breaks for spring break and Thanksgiving, and two weeks for winter break.

• $47,500 / 40 weeks = $1,187

• The weekly salary meets the July 1, 2024, threshold of $844 and the January 1, 2025, threshold of $1,128.

• No increase to the weekly salary is needed. There is no cost to the employer. 

3. A part-time speech-language pathologist is paid $30,000 annually to work three days a week for the entire school year that occurs over 40 workweeks. Weeks not counted include week-long breaks for spring break and Thanksgiving, and two weeks for winter break. The number of days per week worked is irrelevant. If an employee works one day in a week it counts as a week of work.

• $30,000 / 40 weeks = $750

• The weekly salary does not meet the June 1 or January 1 threshold ($844/$1,128).

• By July 1, 2024, the employer must increase the weekly salary to $844 or reclassify the employee as nonexempt. The cost to keep the employee exempt is $94 weekly for the 23 workweeks from July to January, or $2,162.

• By January 1, 2025, the employer must increase the salary to $1,128 or reclassify the employee as nonexempt. This would require a weekly increase (to the current salary) of $378 or $15,120 annually.

Cost Comparison of Methods

Below is a comparison of the annual cost to keep each position exempt as of January 1, 2025: 

This type of comparison will help the employer decide which method to use for each position and whether it is best to keep the employee exempt or reclassify the position as nonexempt. Reviewing the costs for the part-time speech-language pathologist shows that it would be most cost effective to reclassify the position to nonexempt. Changes for all positions will be a local decision based on the method used and the district budget.

Part-Time and Shortened Workweek Considerations

The salaries of professional exempt employees who work less than full-time cannot be prorated to account for their part-time schedules. They must meet the FLSA salary threshold regardless of how many days they work per week. For example, a part-time occupational therapist who works two days per week must earn $844/$1,128 per week to remain exempt. Similarly, weekly pay for exempt staff working four-day workweeks cannot be prorated to account for their shorter workweeks.

Next Steps

There are two basic ways to address employees whose pay doesn’t meet the salary thresholds. First, raise the individual salary to the prescribed threshold. Issues to consider when raising salaries include resulting pay compression, cost to the district, and timing of increase.

The second option is to treat employees as nonexempt. This means identified employees:

• Are subject to FLSA timekeeping requirements and must maintain weekly time sheets that accurately reflect hours worked

• Must be paid at least minimum wage when their salary is translated to an hourly rate

• Must be paid for all hours worked

• Must receive an overtime premium for any hours worked over 40 in a given workweek

Implementation Schedule

For employees whose salaries will be increased to meet the new threshold, organizations must review and may need to adjust the compensation. Changes must be applicable in the pay period that covers the effective date of the change — either July 1 or January 1. Districts will need to consider budget implications and have two options: 

• Adjust salaries once at the beginning of the school year to meet the July and January salary thresholds.

• Plan for a two-part adjustment — one effective July 1, 2024, and the second effective January 1, 2025.

Legal Challenge

Several business groups filed a lawsuit on May 22, 2024, in the Eastern District of Texas challenging implementation of the second phase of the FLSA weekly salary threshold changes currently scheduled to become effective January 1, 2025. The lawsuit contends that the $1,128 threshold, effective in January, exceeds the level established by the court in a 2017 ruling. The lawsuit also argues that the increase in salary thresholds shifts the focus from the job duties test to salary level when determining if a position is exempt.

Education entities are advised to continue steps to comply with the new thresholds beginning on July 1, 2024, but keep abreast of the legal challenge and pivot as needed. Because of the legal challenge to the second phase of the increase, it may be best to plan for a two-part adjustment — one effective in July and the second effective in January.

Communicating the Impact of Changes

Human Resources departments should implement strategies to inform all stakeholders about the changes to the FLSA salary threshold effective July 1, 2024, and January 1, 2025. Communication strategies need to ensure the board, business and payroll office, supervisors, and employees are informed in advance of the effective dates. Communications will vary depending on the audience and should be tailored to provide each group with the information necessary to understand the new requirements and the scope of changes, including salary adjustments needed and/or reclassification of positions as nonexempt.

Employees whose salaries will be increased need to know the reason for the change, the increase amount, and when their pay will be adjusted. If an employee is being reclassified as nonexempt, it is critical for HR to have a conversation with the individual and supervisor explaining that the change is required to comply with federal law, clarifying that the change isn’t a reflection of their value to the employer, and providing reassurance that their job isn’t changing. 

Employees should be directed to begin accurately recording time worked, and employers should reiterate the importance of adhering to the established work schedule. HR should stress the requirement to get pre-approval to work outside the regular schedule and prohibitions against working off the clock, including checking email outside of work and taking work home. Overtime provisions including the earning and use of compensatory time, if applicable, should also be discussed.

Supervisors will need direction on approving timesheets each week and controlling overtime and work performed after hours.

As always, educational organizations should consult their local counsel for guidance on issues specific to their organization.