New Overtime Rules Could be Costly for Colleges

President Obama on Tuesday issued a new rule on overtime that could have a costly impact on colleges and universities, according to The Chronicle of Higher Education.

In March 2014, President Obama signed a memorandum directing the U.S. Department of Labor to raise the bar for certain employees to qualify as exempt from overtime pay requirements under the Fair Labor Standards Act. Under the current rules, employers must provide overtime to salaried workers making less than $455 per week, or about $23,660 annually.

The long-awaited proposed regulations would increase the minimum salary threshold to $970 per week, or approximately $50,440 per year, reported The Hill. The change could boost affected workers' pay by between $1.2 billion and $1.3 billion per year, Labor Secretary Thomas Perez told reporters on Tuesday.

With such a dramatic change, a large number of employees who are currently classified as overtime-exempt would automatically lose their exempt status. Teaching positions are exempt from the overtime rule, at least for now. But most of the workers on American college campuses are outside of teaching and the economic effect of the change could be significant, according to several labor lawyers.

The new rules are expected to affect many college campuses, potentially forcing employers to reevaluate staffing levels to limit overtime and consider decreasing employee compensation to manage overtime costs. Additionally, employers would need to prepare to track employee hours and satisfy certain recordkeeping requirements.

The rule, which is being issued by the Labor Department, will be subject to a public comment period once it is finalized and could take effect as soon as 2016.


Related Links

The Chronicle of Higher Education

The Hill