Issue Briefs

Overview

The federal overtime rules are contained in the Fair Labor Standards Act (FLSA). Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. The DOL updates and revises the regulations issued under section 13(a)(1) of the FLSA, including setting a minimum standard for the threshold under which employers who work more than 40 hours per week must be paid overtime.

The timing of proposing and implementing adjustments differs from administration to administration.  In addition, states may set higher levels if they choose, and currently five states do so. Importantly, teachers are considered exempt no matter their pay level. Other aspects of the regulations affect the types of positions that are also exempt and those that are not.

The current salary threshold for exemption from overtime is $43,888.  The Biden Administration raised it to this level on July 1, 2024. While the current threshold amount does not reflect the $82,000 figure backed by organized labor groups, it represents a 21% increase just four years after the last increase went into effect.  In addition, the increase to $58,656 on January 1, 2025, represents an additional 29% increase just six months later. 

The DOL rule does not include a repeal of the exclusion for teaching, also championed by several labor unions.  This means that campus employees who provide instruction, and who have previously not been subject to the overtime salary threshold, will remain excluded.  
 

Previously Proposed Increases

During the Obama Administration, the White House, for the first time in ten years, called for an expansion of the number of workers who qualify for overtime pay. That rule would have more than doubled the salary threshold from $23,660 to $47,476. That rule, and all guidance on implementing it, was never implemented having been struck down by a U.S. District Court in Texas near the end of President Obama's term in office.

The DOL under the Trump Administration also proposed to raise the salary threshold.  The College and University Professional Association for Human Resources (CUPA-HR) submitted comments, which NAICU signed on to, on behalf of the higher education community in 2017.  
 

Compensatory "Comp" Time and Higher Education

For over three decades, public employers – including public colleges and universities - have had the option of offering comp time arrangements to their employees.  Employees may decide between comp time or overtime pay, under certain guidelines.  Unfortunately, private employers – including private colleges and universities – are not able to offer employees the same option.  Having the ability to offer comp time would have lessened the blow of the recent increases had they been implemented.

The House has passed legislation four different times, most recently in 2017, to allow private employers to offer comp time arrangements to employees.  Unfortunately, these bills were not taken up in the Senate.  

The DOL cannot allow private employers to offer comp time arrangements until both chambers of Congress pass legislation that is signed into law by the President. 
 

Outlook

The additional salary increase that goes into effect on on January 1, 2025, will be extremely problematic for many private, nonprofit colleges and universities, particularly smaller institutions and those in regions with lower costs of living.  While a few states have state salary thresholds at or above the federal proposed level, the 2027 increase and the three-year automatic adjustments could also become problematic for those states in the not-too-distant future. 

While there are several pending lawsuits that could lead to a federal court striking down the January 1, 2025 increase and the additional automatic increases, colleges and universities need to prepare for the next phase to go into effect.