In April 2024, The Department of Labor (DOL) announced a Final Rule increasing the threshold level salary minimum for the “salary test”. (See the DOL document entitled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees).
Generally, under the FLSA, employees are exempt from minimum wage and overtime protections if they are employed in an executive, administrative, or professional capacity (EAP) and meet three tests set out by the department which include payment of a specified weekly salary level and performing executive, administrative, or professional duties.
The new rule takes effect on July 1, 2024. On that date, the new salary amount threshold for a nonteaching, salaried supervisor or administrator increases to $844 week/$43,888 annual salary (up from $684 week/$35,568/annual salary.)
Then, in January 2025, the method used to calculate the salary will change again- and the amounts will increase a second time to $1,128week/ $58,656 annual salary. After that, the salary threshold will be raised every three years after July 1, 2027.
Whether an employee can be exempted from the payment of overtime by meeting the EAP exception depends upon meeting the “salary and duties tests” set out by the Department of Labor in the law.
To be eligible for the exemption, the employee 1.) must earn a fixed salary, 2.) that salary is at least equal to the amount in the Final Rule, and 3.) that the employee performs functions that meet the executive, administrative, or professional duties as defined by the DOL.
The salary amount will increase twice- on July 1, 2024, and then again in January 2025. Due to that increase, some nonteaching administrative employees’ salaries may likely be lower than the new salary threshold amount.
The “duties” part of the test must then be applied to the employee’s job duties to determine whether a nonteaching administrator/supervisor is exempt from overtime requirements.
Administrative employees will meet the duties test if they primarily perform office or non-manual work directly related to the operations of the school district. Their duties must involve the exercise of discretion and independent judgment on matters of significance.
Executive employees are also eligible for the exemption. To meet the “duties test” for these employees means that their primary duty must be managing a particular department or division of school operations. They must regularly direct the work of at least two full-time (or their equivalent) employees and must have the authority to hire and fire, or have their recommendations for promotion, termination, hiring, or other actions given particular weight.
Teachers are specifically exempt from the FLSA overtime rules as professionals, so this rule change will not affect certificated administrators.
For highly compensated employees subject to the FLSA, the salary threshold is going up to $132,964 on July 1, 2024, and then up to $151.164. It is likely some employees formerly covered by this exception may no longer meet the salary threshold. Even if those employees still meet the requirements for exemption under the highly compensated employee test, the salary threshold to be eligible for the exemption must be met. If this is no longer the case due to the increases planned to the salary threshold, it is well possible these employees could qualify using the EAP exception.
Actions to take now:
Survey the salaries of nonteaching administrative employees to determine if any might fall below the new salary thresholds. Employees that may be affected by this change include supervisors and directors such as technology directors, transportation and cafeteria supervisors, facilities managers, and other similar positions.
If the new salary threshold exceeds a nonteaching administrative employee’s current annual salary, school districts may need to adjust upwards or recognize these employees are eligible for overtime pay. This means the employees would need to keep track of their time. Consult with Ennis Britton to review specific situations.