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Impact of Fair Labor Standards Act Revisions on Schools

By Lee Green, J.D. on April 14, 2020 hst Print

The New FLSA Regulations

In October 2019, the U.S. Department of Labor (DOL) announced changes to the Fair Labor Standards Act (FLSA) requirements for an employee to be considered exempt with regard to the application of minimum wage and overtime requirements, an issue relevant to the use by high school athletics and activities programs of non-exempt school employees as coaches, support personnel at sports events, and sponsors of a wide variety of other school activity programs.

During the past two decades, approximately 40 percent of all administrative complaints filed with the DOL’s Wage & Hour Division (WHD) have involved non-exempt school employees seeking to recover unpaid minimum wage and overtime from their districts for the hours they have invested in extracurricular athletics and activities, with such complaints often leading to federal lawsuits. When an aggrieved worker is successful with an FLSA complaint or suit, the remedy is generally three years of back-pay for the amount of minimum wage and overtime owed in arrears to the employee, with the ensuing sum doubled as a liquidated-damages “slap on the wrist” to the employer for its wrongdoing, typically resulting in a total of $10,000-plus per complainant or plaintiff, and in some cases an award of tens of thousands of dollars to the successful litigant.

Although a school district may be able to absorb the damages from an occasional, isolated FLSA case, the trend is that an award of damages to one non-exempt district employee triggers a flood of litigation by other employees – often numbering in the hundreds of cases in larger districts – and sometimes resulting in millions of dollars of liability for those school systems.

The October 2019 changes to the FLSA, which went into effect on January 1, 2020, are to the minimum salary amounts for an employee classified as having executive, administrative or professional duties (EAP) in order to qualify as exempt – the compensation requirements have been increased from $23,660 per year ($455 per week) to $35,568 per year ($684 per week). And separately, for an employee to qualify as an exempt “highly compensated individual,” the increase is from $100,000 per year to $107,432 per year. A set of greater increases ($913 per week or $47,476 annually for EAP workers and $134,004 for highly compensated workers) had been scheduled to go into effect on January 1, 2017, but were rescinded after the 2016 presidential election because of fears by the incoming administration regarding the potentially negative financial impact that those even-larger thresholds might have on all employers, including school districts.

Therefore, in addition to ensuring FLSA compliance for all school employees with regard to the hours they work performing their regular job duties, one of the additional challenges presently facing districts is the imminent necessity of reclassifying everyone who plays a role in school extracurricular activities or athletics to evaluate whether they are exempt from the FLSA or whether they are entitled to overtime for what are often extensive hours worked beyond 40-per-week as measured by the sum of the time spent on their regular job duties combined with the hours worked in assisting with scholastic sports, theatre, choir, band, orchestra, debate, forensics or clubs through service as coaches, assistant coaches, athletic trainers, activity or club sponsors, or any of the variety of support positions for school events such as ticket sellers, ticket takers, ushers, concession workers, public-address announcers, statisticians, scoreboard operators, scorebook keepers, security officers or event supervisors.

The Precise Requirements of the Law

The FLSA mandates that a non-exempt employee must be paid at least minimum wage for each hour of work for his or her employer up to 40 per week and must be paid overtime (at least time-and-a-half) for each hour of work in excess of 40 per week. As of January 1, 2020, in order to be considered exempt from the minimum wage and overtime mandates of the FLSA, an employee must satisfy three criteria:

  1. the employee must be salaried (all employees paid an hourly rate are automatically non-exempt); and
  2. the employee must earn a salary threshold of at least $684 per week ($35,568 annually for a 52-week contract year); and
  3. the employee must have exempt job duties, those categorized as executive, administrative, professional or highly compensated, precise definitions of which are set forth in the FLSA and its interpretive federal regulations, available full-text at www.dol.gov/whd.

Based on administrative law rulings from the DOL’s WHD, the administrative agency responsible for enforcing the FLSA, and on common law precedents established by federal court cases, the common categories of individuals with exempt job duties in schools are superintendents, assistant superintendents, program directors, district athletics directors, principals, assistant principals, building athletics directors, teachers, guidance counselors, nurses with an RN and certified athletic trainers.

The common categories of school employees with non-exempt job duties are teacher’s aides, safety and security officers, custodians, receptionists, cafeteria workers, secretaries, bus drivers, maintenance workers, bookkeepers, media assistants, nurses without an RN, and non-certified athletic trainers.

It is important to recognize that for an employee to be considered exempt, all three of the above-stated requirements must be met – the worker must be salaried, satisfy the salary threshold and have exempt job duties. However, notably, the salary level requirement does not apply to teachers (FLSA §13(a)(1) and 29 C.F.R. §541.303), therefore, the changes that took effect in 2020 will not impact the use by schools of teachers as coaches, event workers or sponsors of extracurricular activities.

The FLSA also establishes four broad categories of exceptions where even non-exempt personnel are not subject to the law’s minimum wage and overtime requirements – volunteers, trainees, independent contractors, and occasional and sporadic activities – precise definitions of which are set forth in the statute and supporting federal regulations at www.dol.gov/whd. It is important to note that each of these categories of exceptions requires satisfaction of multiple, highly-specific criteria that are beyond the scope of this article, but with which district personnel responsible for FLSA compliance need to be familiar.

Recommended FLSA Compliance Strategies for Schools

In order to proactively ensure adherence to the requirements of the law and minimize the likelihood of successful administrative complaints or federal lawsuits by employees, schools should create an FLSA Compliance Policy that includes the following components:

An FLSA Audit: An evaluation should be conducted of the status of all current employees to determine who is exempt and who is non-exempt, with a focus on reclassifying previously exempt workers earning between $23,660 and $35,568.

Financial Projections: A pro forma budget should be created to project the total financial impact of properly compensating per FLSA requirements all employees for time spent in their roles with school athletics programs or extracurricular activities.

Adjust Salary Levels: If the salaries of previously exempt, 52-week employees are close to the new threshold of $35,568 and it is possible given budget limitations, consider raising worker salaries to the new minimum to avoid paying what might be amounts of overtime significantly exceeding the limited salary increase.

Adjust Contract Year Lengths: Because the new salary threshold is defined per week, an alternative to increasing the salary level to maintain an employee’s exempt status would be, if logistically feasible, to reduce the length of the contract year. If a 12-month (52-week) employee contract year was reduced to a 9-month (39-week) contract, the salary threshold for exempt status would drop to $26,676 ($684 x 39).

Reduce Payroll Expenses: Develop a plan of action to creatively minimize overtime paid to non-exempt employees for their work in scholastic sports or extracurriculars.

  • Shift as many coaching, activity sponsor and event worker positions as possible from non-exempt employees to exempt employees.
  • Attempt to use the excess hours up to 40 per week of non-exempt employees who presently work only 25, 30 or 35 per week and for which the payment of minimum wage up to 40 would reduce costly overtime rates.
  • Require written authorization for less-than-40-hour, non-exempt employees to work overtime and ensure that such limits are adhered to by workers.
  • Attempt to shift non-exempt employees to the status of volunteers by ensuring compliance with all three criteria for the exception (see the DOL Opinion Letter at www.dol.gov/whd/opinion/ FLSA/2005/2005_11_10_51_FLSA.pdf and the federal court case Purdham v. Fairfax County School Board which is available full-text on Google Scholar).
  • Evaluate whether any non-exempt employees might fall into one of the other broad exceptions to the FLSA such as independent contractors, trainees, or occasional and sporadic activity workers (details are available at www.dol.gov/whd).

Compensatory Time Off: Create an option for non-exempt employees, at their discretion, to be compensated with extra hours off at slower times of year in exchange for hours worked in service to school sports or extracurricular activities, keeping in mind that each hour of overtime would require 1.5 hours of compensatory time off.

Timekeeping Methodology: Establish a reliable method of fulfilling the FLSA requirement of accurate timekeeping for non-exempt employees, using either hard-copy timesheets, specialty timekeeping software, or an internet based timekeeping app.

Counting the Hours: Ensure that employees understand all of the nuances regarding the hours that can and must be counted pursuant to the FLSA, including issues related to travel time, meetings, professional development sessions, time spent communicating with colleagues or students face-to-face, via phone conversations, or through digital exchanges, and work done at home in the evenings and on weekends (see www.dol.gov/whd for details).

Identify the Workweek: The employer may choose the seven-day period applicable for measuring the 40-hour limitation before overtime obligations are triggered and once established, the workweek must remain constant for the entire contract year.

FLSA-Required Record Keeping: The law includes mandates for maintaining numerous records for employees, posting FLSA notices in the workplace, and providing FLSA information to workers (see www.dol.gov/whd for details).

State Labor Law Issues: Before implementing any of these recommendations, consult your school district attorney to ensure that your policy strategies are in compliance not just with the federal FLSA, but also with state labor law regulations. Some states have enacted legislation imposing even tighter regulations on employers than the rules set forth in federal law.