On May 18, 2016, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issued its final rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” under the Fair Labor Standards Act (FLSA). The rule does several key things:
- It increases the minimum salary threshold from $23,660 annually to $47,476 annually (from $455 per week to $913 per week) for standard exemptions.
- It increases the total annual compensation required for the highly compensated employee (HCE) exemption from $100,000 per year to $134,004 per year.
- It provides for automatic adjustments to the new minimum salary threshold and HCE compensation requirements every three years (with the first adjustment to take place on January 1, 2020).
These changes will take effect on December 1, 2016. The DOL has stated that the two policy objectives behind both the original overtime rule and the newly released final rule are (1) “to spread employment (or, in other words, reduce involuntary unemployment) by incentivizing employers to hire more employees rather than requiring existing employees to work longer hours”; and (2) “to reduce overwork and its detrimental effect on the health and well-being of workers.”
Notably, the DOL has analyzed the anticipated effects on workers across industries and occupations and has found that “[t]he industry with the most affected  workers was education and health services.” Thus, simultaneously with the issuance of the final rule, the DOL also issued “Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act” to assist higher education employers in complying with the final rule. As set forth in the guidance,
[H]igher education employers, like other employers, are not required to pay minimum wages and overtime compensation to executive, administrative, and professional employees who satisfy the salary level and other requirements for one of the white collar exemptions. In addition, certain provisions of the FLSA regulations apply to many white collar employees at higher education institutions that may make them exempt from overtime compensation, even though they earn below the new salary level. These include special provisions for employees whose primary duty is teaching and special salary level rules for academic administrative personnel. Finally, public universities or colleges that qualify as a “public agency” under the FLSA may compensate overtime-eligible employees through the use of compensatory time off (or “comp time”) in lieu of cash overtime premiums.
While the DOL claims that “[e]xisting (and unchanged) regulatory provisions specific to higher education mean that the Final Rule may have limited impact on teachers and academic administrators,” some jobs in higher education do not lend themselves to hourly work, and employees find it difficult to perform their jobs as hourly employees. For example, postdoctoral positions require flexible scheduling practices to accommodate for the success of specific experiments. Hourly work is also impractical for positions that require significant travel or irregular hours, such as athletic coaches.
Postdoctoral fellows are employees who conduct research at higher education institutions following completion of their doctoral studies. Statistics and studies regarding the average hours that postdoctoral scholars work per week vary by institution, field, geographic region, and the like. Some polls and reports have concluded that at least one-third, if not over half, of responding postdoctoral scholars worked an average of 50 to 59 hours per week.
Under the FLSA, covered employees are entitled to overtime compensation for any hours worked over 40 per week. Thus, qualification for an exemption from the federal overtime requirements could have a tremendous effect on both an employee’s compensation and employers’ costs.
Duties Test: Is Teaching a Primary Duty?
Under the overtime regulations, a postdoctoral scholar may be exempt from overtime requirements if he or she meets various criteria. For example, teachers are not eligible for overtime compensation if their primary duty is teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment (such as an institution of higher education). Unlike many other job classifications that are exempt from the overtime rules, teaching professionals do not need to meet a salary requirement to be considered exempt. In other words, there is no minimum salary requirement for the teaching professional exemption. As the new guidance notes, “[s]ome postdoctoral fellows in the humanities also teach.” Because these postdocs are teachers (as well as researchers), higher institutions may continue to treat them as exempt from overtime rules.
However, higher institutions with postdoctoral scholars who do not have a primary duty of teaching are not considered bona fide teachers and thus would not be exempt from the overtime requirements unless they qualified for other possible exemptions from the overtime requirements. As the guidance confirms, “[p]ostdoctoral fellows often meet the duties test for the ‘learned professional’ exemption but must also satisfy the salary basis and salary level tests to qualify for this exemption.”
To qualify for the “learned professional” exemption under the final rule, the postdoctoral fellow must:
- receive compensation on a salary basis of not less than $913 per week (the equivalent of $47,476 a year); and
- primarily perform work requiring advanced knowledge in a field of science or learning, such as various physical, chemical, and biological sciences, theology, and architecture. The advanced knowledge is usually obtained while earning a degree.
The DOL’s guidance looks to the 2016 National Institutes of Health (NIH) salary guidelines for postdoctoral research fellows to conclude that “many postdoctoral research fellow salaries are close to the new salary level, and that any differences are not more than a few thousand dollars a year.” Contrast this conclusion with the National Postdoctoral Association’s (NPA) 2015 statement in response to the then-proposed overtime changes: “In 2013, over two-thirds of postdocs were paid at or below the National Institutes of Health (NIH) National Research Service Award (NRSA) minimum standard (then $39,264; currently $42,840).” Nevertheless, the DOL has asserted that its final rule’s lower-than-anticipated salary level increase to $47,476 “results in a salary level met by the NIH FY 2016 stipend level for post-doctoral researchers with at least three years of experience and is only $208 a year above the stipend level for a post-doctoral researcher with two years of experience.”
So, what is the bottom line regarding postdocs? Well, that depends. For postdocs who are primarily teaching, the final rule should not have any direct impact, as higher education institutions will likely continue to rely upon the bona fide teacher exemption without worrying about the increased salary level requirements. Institutions with postdocs who do not primarily teach—and instead, primarily perform research in a field of science—may want to evaluate whether the current salaries of those postdocs meet the new salary level of $47,476 and, if not, consider raising the salary level of those employees. If raising the salary level is not feasible, then it will be important to implement timekeeping methods (such as requiring postdoctoral fellows to complete weekly timesheets reflecting their hours worked). At that point, the institution should weigh the costs of limiting hours to 40 hours per week and bringing on additional employees against the cost of paying current postdocs overtime compensation for any hours worked over 40 per week.
So what about coaches and trainers? As noted above, there are several different kinds of exempt “professional” employees. These include “learned professionals” and teachers. Per the DOL’s Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act, a job title alone does not determine an employee’s exempt status. A trainer may qualify as a non-teacher learned professional, and a coach may qualify as a teacher. The guidance states the following:
In higher education, examples of non-teacher learned professionals that generally may meet the duties requirements for professional exemption include certified public accountants, certified athletic trainers, librarians, and psychologists, depending on the employee’s specific job duties and education. A job title alone is not sufficient for determining whether an employee satisfies the duties test.
The guidance provides insight into the status of coaches at higher education institutions:
Athletic coaches employed by higher education institutions may qualify for the teacher exemption. Teaching may include instructing student-athletes in how to perform their sport. On the other hand, if coaches’ primary duties are recruiting students to play sports or visiting high schools and athletic camps to conduct student interviews, they are not considered teachers.
The amount of time an employee spends instructing student-athletes in a team sport is a relevant—but not exclusive—factor in determining the employee’s exempt status. For example, assistant athletic instructors who spend more than half of their time instructing student-athletes about physical health, teamwork, and safety likely qualify as exempt teachers. In contrast, assistant coaches, for example, who spend less than a quarter of their time instructing students and most of their time in unrelated activities are unlikely to have a primary duty of teaching.
The new rule would initially seem to have created an easy line of demarcation: Any full-time coach who does not scout or recruit must be spending more than half of his or her time on teaching duties in order to likely qualify for an overtime exemption.
This does not, however, mean that coaches who are recruiting and scouting are not also spending enough of their time on teaching duties to qualify for the exemption. Taking into account the duties coaches must perform during the season, we believe that any full-time coach would likely be spending more than half of his or her time on what the new regulations consider teaching.
During the season, countable athletically related activities can occur no more than 20 hours per week, with a maximum of four hours per day. During championship segments and in-season, countable athletically related activities are prohibited by the National Collegiate Athletic Association (NCAA) one calendar day per week. During the off-season, in sports other than football, student-athletes’ participation in permissible activities is limited to a maximum of eight hours per week, of which no more than two hours can be individual skills instruction. During the off-season, coaches are limited in what they can do with respect to their players. They are expected to refrain from countable athletic related activity, which includes any required activity with an athletics purpose involving student-athletes at the direction of, or supervised by, any member of an institution’s coaching staff (including strength and conditioning coaches). Therefore, the analysis of time spent on teaching duties that constitute countable athletically related activity must take into account the maximum number of hours and periods during which such activities are allowed under NCAA regulations.
Duties that militate in favor of an exemption include preparing player playbooks; teaching plays; teaching formations; determining offensive and defensive alignment; conducting drills; among many others. Coaches’ teaching duties do not include academic advising, which would be considered for an academic administrator exemption which, unlike the exemption for teachers, has a minimum salary requirement.
Duties that might not qualify as teaching include checking class attendance, grades, and GPAs; meeting with tutors; assisting with financial aid; following up on academic progress; deciding which players should be offered scholarships; reviewing game and practice film; and traveling to and from games. Does coaching during an actual game constitute teaching? Any coach who has shouted “Good play!” or “What were you thinking?” from the sideline would certainly argue that it is instructive. However, coaches also spend a fair amount of game time analyzing formations, calling plays, strategizing, and engaging in similar activities that would not be considered teaching.
For some coaches, off-season duties include recruiting high school players and hosting clinics, and calling and visiting potential players and meeting with their parents, guardians, and high school coaches. The DOL guidance makes it clear that these activities do not qualify as teaching. However, even during the off-season, coaches who supervise weight training and conditioning activities, provide individualized skill instruction, and review game footage with students would be considered to be teaching. Such coaches do, however, need to be aware of NCAA rules for their sport to ensure that their teaching activities do not run afoul of NCAA limits on countable athletics related activities outside the playing season. For example, no off-season skill instruction is permitted in football. Therefore, although it would constitute teaching, it would also be an NCAA infraction.
This is a good time for higher education institutions to take a close look at the duties of both their postdocs and coaches to determine what, if any, changes need to be made to comply with the final rule. For postdocs who are primarily teaching, colleges and universities can continue to rely on the teacher exemption. Such institutions, however, may want to consider adjusting the salaries of some postdocs to meet the FLSA’s new minimum salary threshold for overtime exemption—$47,476 per year—or, alternatively, implement (and strictly enforce) timekeeping methods that record hours worked, weigh the cost of limiting postdocs’ work hours to 40 per week, and decide whether to hire additional employees or pay current postdocs overtime for any hours worked in excess of 40 per week.
Similarly, if coaches can be classified as teachers, they do not need to be paid overtime and, because the minimum salary level requirement does not apply to coaches, their rates of pay will be unaffected by the final rule. Coaches who cannot satisfy the requirements to be considered teachers, but perform a combination of exempt duties (e.g., duties of executive, administrative, or professional employees), may still qualify for an exemption. If their primary duties involve a combination of exempt administrative and exempt executive work and they meet the salary requirement (or the institution is willing to increase their pay), the coach may qualify for a combination exemption.