problem
At a time when the cost of higher education is under fire, the federal government argues that raising wage levels to exempt overtime rules is necessary to:
- It is correct to exclude workers who are not “bona fide'' executives, administrative staff, or professional workers from the definition of workers required to work overtime.
- Eliminate workers who receive minimum wage but are required to work oppressive long hours. They argue that the result is a standard of living that fails to promote good health, efficiency, and general well-being.
- Stop employers from abusing current laws that allow them to take advantage of millions of workers who deserve overtime pay.
University finance chiefs claim the proposed adjustments would:
- It will only increase costs and therefore drive up tuition prices at a time when eliminating tuition price pressure is important.
- It lowers the morale of some workers who change jobs because their position on the payroll was highly valued. They argue that hourly positions do not hold the same professional status as salaried positions.
- Some jobs are subject to strict regulations regarding working hours, making them virtually impossible to accomplish with a high level of quality within a limited amount of time.
current proposal
Under the proposed Fair Labor Standards Act (FLSA); The exempt salary level will increase from $35,568 (set by the Trump administration) to about $55,000 a year, and millions more workers will be eligible for overtime. Final salary amounts are updated every three years to reflect changes in the labor market.
Estimated impact on higher education
The U.S. Department of Labor (DOL) reported receiving more than 33,000 comments arguing for and against the proposal. It seems likely that the legal battle will be prolonged. How might university leaders react? He has at least four possible reactions.
- There is likely to be a mass reclassification of traditional white-collar workers, especially in educational institutions with fewer resources and in regions with lower costs of living.
- Hourly wages and non-exempt status are appropriate for certain jobs, but not for all jobs (such as live-in resident directors or doctoral researchers). This can lead to poor job performance because it takes more effort than is acceptable to complete a particular task. tasks within a limited time.
- Reclassification negatively impacts employee flexibility, career advancement, and morale.
- The proposed minimum salary levels could also trigger mass hiring and sector restructuring, which could ultimately lead to layoffs.
As part of the College and University Professional Association's (CUPA) Human Resources Study, 61% of institutions said they would reduce their workforce if the salary threshold was increased to the level proposed in the Notice of Proposed Rulemaking (NPRM). It was reported that the response was expected. .
A review of some of the public comments on this bill indicates that schools of all sizes and in all sectors will be affected. Some institutions report that it can cost as much as $6 million a year in additional costs.
What happens next?
The DOL set a release date for this rule in April 2024 in its semiannual regulatory agenda (published December 6, 2023). However, its release date is optimistic given the large amount of public comments that require answers.
As always, there is widespread uncertainty about where the final rule will land. Many human resources and financial managers in higher education institutions are willing to compromise on the final overtime threshold.
For more information on the proposed Higher Education Regulations, please contact the following experts: Forvis.
