The Department of Labor (“DOL”) plans to more than double the minimum annual salary necessary for FLSA exemptions – currently $23,660 to $50,440. The DOL will likely issue a final rule later this year. This will be one of the biggest workplace regulatory changes of the year (hence, why you have probably heard so much about it). The proposed change will inevitably alter school districts’ operations through reclassification of employees, rearranged work schedules, modified job duties, etc. School districts are employers that are particularly susceptible to the risk of employee misclassification. We anticipate issues developing primarily with non-instructional positions such as cafeteria managers, transportation directors, personnel who handle human resources, and personnel who are licensed but perhaps are working in jobs other than teaching or administration.
For many employers, the proposed changes will convert otherwise proper employee classifications into misclassifications. And employee misclassifications can have costly consequences. For example, in 2012, Wal-Mart agreed to pay $4.85 million in back wages to more than 4,500 vision center managers who were misclassified as exempt; in 2014, Lowe’s paid $9.5 million to settle a class action brought by HR managers alleging they were misclassified under the executive exemption; and this past September, Halliburton agreed to pay nearly $18.3 million in overtime owed to approximately 1,000 employees after a DOL investigation revealed the company misclassified 28 job positions as exempt. Now, with the proposed rules changes, lawsuits and DOL audits are expected to increase dramatically.
Many school districts were the subject of FLSA lawsuits 10-15 years ago. The passage of time and new leadership make it very important to review your procedures district-wide, but especially in light of these anticipated changes. Just because a position has been treated as an exempt position in the past, does not mean that it will remain so under these new regulations. You should evaluate the impact of these rules on your district in advance of the anticipated implementation of the new FLSA rules. Specifically, we recommend you conduct an internal audit of all the positions within your district and consider how many exempt workers you employ with a salary below $50,440. Then, we suggest that you consider developing the proper strategy for (1) managing employees’ conversions to nonexempt status and/or continued exempt status and (2) implementing comprehensive policies regarding nonexempt employees’ time cards/time tracking, lunch breaks, vacation, sick leave, “off the clock” work (not permissible), and the like. It may be as simple as raising certain employees’ salaries to the new minimum, if possible, or, more likely, it may require restructuring operations to restrict schedules and avoid overtime expenses. Regardless of the simplicity or complexity of the rule’s impact on your district, changes are coming and changes must be made. And a thorough review now could save you money, time, and potential litigation later.