Higher education institutions are among the businesses facing big changes to their payroll structures on Dec. 1, the day new requirements to the Fair Labor Standards Act (FLSA) kick in.
Specifically, the new rule increases the minimum annual salary for exempt employees from $23,660 to $47,476.
“We have a lot of people that make more than $23,000 but less than $47,500 that are in that managerial responsibility and so we’ve gotta figure out how we’re gonna handle that,” said MSU President Clif Smart.
According to the Department of Labor, The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.
Those subject to this law that work more than 40 hours are entitled to time and a half compensation. The FLSA does allow exemptions from these overtime requirements for employees who earn above the minimum salary and perform certain types of work. Exempt employees include executive, administrative, professional positions, sometimes referred to collectively as the “white collar” exemptions. Furthermore, teachers and coaches are exempt from the rule.
“This is gonna be a rule that primarily impacts staff because of the teacher exception – all of our faculty members, including instructors, are exempt – and so the overtime rules don’t apply to them,” says Smart. “So then we focus on our executive, professional, administrative employees. And we probably have about 150 to 200 people that are gonna be in that category of making more than the old minimum but less than the new minimum.”
Smart says there are a variety of strategies university officials are considering to ensure compliance with the new rule.
Many employees may become subject to the rule, he says. That includes those that, for the bulk of the year, work 40 hours a week.
“The likelihood is we will not adjust those salaries… They’ll be non-exempt, and so they will become hourly employees that are paid by the hour and if at any given week they work more than 40 hours a week they’ll be paid overtime.”
Some may have their overtime limited, unless given special permission, while others may be asked to work adjusted hours so they don’t exceed 40 hours a week.
“For other people that regularly work more than 40 hours, particularly if you’re close to the $47,500, I expect we will adjust some people’s salaries.”
Smart says while it’s the university’s goal in reviewing these options is to try and preserve as many jobs as possible. He acknowledges that there may end up being “a handful” of people laid off.
“But as we sit here today I don’t know the number and it may not be any. But that is a strategy that cost center heads have.”
One policy the new rule allows is reducing salaries and then paying overtime, which Smart notes “we’ve taken off the table.” He said such a move would be devastating to morale, adding “no one’s gonna make less money from this.”
Smart says for those that are impacted, information pieces will be distributed as officials continue to work out specifics ahead of the Dec. 1 implementation date.
Above, listen to the full conversations with President Smart on the FLSA’s new rule. His remarks are part of KSMU’s monthly program Engaging the Community, heard the third Friday of the month at 7:45 am.