The Department of Labor's Final Overtime Rules: A Review for South Dakota School Districts

What is the Fair Labor Standards Act?

The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

Does the FLSA apply to school districts?

Yes. The FLSA’s minimum wage and overtime requirements generally apply to local governments, including school districts.

Do the FLSA’s protections extend to all workers?

No. Although the FLSA’s protections extend to most workers, a number of workers are exempt. Employees who are covered by the FLSA fall into two categories: nonexempt and exempt. Non-exempt employees are subject to all of the FLSA’s requirements. Exempt employees are generally not subject to the minimum wage and overtime provisions.

Who has the burden of proving that an employee is exempt?

It is the employer’s burden to prove that an employee is exempt.

Have there been recent changes in the FLSA’s overtime rules?

Yes. On May 18, 2016, President Obama and Secretary Perez announced the publication of the Department of Labor’s "Final Rule" updating the overtime regulations.

What is the Final Rule’s purpose?

The Final Rule updates the regulations for determining whether white collar salaried employees are exempt from the FLSA’s minimum wage and overtime pay protections. These employees are exempt if they are employed in a bona fide executive, administrative, or professional capacity. This exemption from the FLSA is sometimes referred to as the “white collar” exemption or “Executive, Administrative, Professional” (EAP) exemption.

When does the Final Rule take effect?

The Final Rule’s effective date is December 1, 2016.   

What factors determine if an employee falls within one of the white collar exemptions?

To qualify for this exemption, a white collar employee generally must:

     1.  be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");

     2.  be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) (the “salary level test”); and

     3. primarily perform executive, administrative, or professional duties, as defined in the Department of Labor’s regulations (the "duties test").

Do “highly compensated employees” also receive an exemption?

Yes. The Final Rule also provides an exemption for certain highly compensated employees (“HCE”) who earn above a specified annual compensation level ($134,004) and satisfy a minimal duties test.

Will these salary level requirements be annually updated?

Yes. In order to prevent the salary level requirements from becoming outdated, the Department is establishing mechanisms for automatically updating the salary and compensation levels every three years.

Are there other exemptions for school districts under the Final Rule’s overtime requirements?

Yes. Although schools are generally covered by the FLSA’s overtime provisions, several employees may be exempt from the Final Rule. For example, teachers are exempt if their primary duty is teaching, tutoring, instructing or lecturing.

Who is considered a “teacher” for this exemption?

A “teacher” includes regular academic teachers, kindergarten or nursery school teachers, teachers of gifted or disabled children, teachers of skilled and semi-skilled trades and occupations, home economics teachers, vocal or instrument music teachers, and under certain circumstances, athletic coaches and assistant coaches. Please note that the “teacher” exemption is not subject to any “salary level” or “salary basis” requirement under the FLSA.

Would preschool employees also qualify for the “teacher exemption”?

Probably not. Although a preschool may provide some educational activities, preschool employees whose primary duty is to care for the physical needs of the facility’s children would not likely meet the requirements for the exemption as a teacher.

Does the FLSA recognize an “administrative exemption” or “executive exemption”?

Yes. This “administrative exemption” or “executive exemption” generally includes three basic requirements:

     1.  a salary basis requirement;

     2.  a salary level requirement; and

     3.  a primary duty requirement.

What is an “administrative” or “executive” position in the school context?

An “administrative” or “executive” employee generally includes a person who engages in running or servicing the school district or a department within the school district. Employees who may qualify under this exemption include those who work in finance, accounting, budgeting, procurement, safety and health, personnel management, human resources, and labor relations.

What is an “academic administrative” position in the school context?

An “academic administrative” employee generally performs work related to the academic operations and functions in a school (as opposed to those administrators who lead general business operations). Employees who may qualify under this exemption include superintendents, curriculum directors, special education directors, and principals.