The U.S. Department of Labor (DOL) on Tuesday released its long-anticipated final “overtime” rule.
The rule uses a tiered approach to increase to $58,656 by January 1, 2025, the salary level at which employees can be classified as “executive, administrative or professional” (EAP). As an interim step, the current salary threshold of $35,568 will increase to $43,888 on July 1.
The January 1 threshold is a 65% increase from the current level. Affected employees must earn at least the designated amount or be reclassified as nonexempt and eligible for overtime pay for working more than 40 hours per week.
The regulation also requires that the overtime exemption be updated every three years in an amount keyed to the standard salary level at the 35th percentile of the weekly earnings of full-time salaried workers in the lowest-wage Census Region. Additionally, as of January 1, 2025, “highly compensated employees” will be defined as those who earn $151,164 or more.
Last November, the American Association of Community Colleges (AACC) filed regulatory comments on the proposed rule, which were cited a number of times in the regulation’s preamble. The final regulation closely tracks with the proposed rule in many key respects. In its comments, AACC stated that it did not oppose an update to the salary threshold, but DOL’s proposal raised it to an extent that would create significant financial and personnel challenges for community colleges. Unfortunately, those arguments, which were reinforced by commenters from across the country in all sectors of the economy as well as the American Council on Education, fell on deaf ears.
Campus impact
Although the regulation’s effects will vary between colleges, it will certainly create enormous financial implementation challenges in many places, particularly given its timing, as state funding decisions for the 2024 cycle have either been made or are well on the way to being finalized.
The regulation’s impact is mitigated somewhat by the fact that the rule does not apply to faculty and certain other academic support positions. Nevertheless, one community college in the southern part of the country has indicated that about half of its staff would be affected, and it would cost hundreds of thousands of dollars to increase all their salaries. This money will have to come from somewhere, or academic services and other expenditures will have to be limited. In addition, changes made to EAP employees may well affect other campus positions that are not directly impacted.
Legal challenges
The regulation is almost certain to come under legal challenge. Final Fair Labor Standards Act regulations in this area that were promulgated by the Obama administration in 2016 were subsequently thrown out in a Texas District court, and the same outcome may occur in this instance. But that is certainly not a sure thing.
DOL’s rule comes on the heels of the U.S. Education Department’s just-released regulation on Title IX. On May 9, AACC will sponsor a webinar on these and other key regulations to help colleges prepare to come into compliance. The gainful employment and financial value transparency final regulations, as well as other institutional eligibility regulations, will also be covered.
