Why higher ed shouldn't panic about new overtime rules—yet

Teaching staff currently exempt from overtime pay

Sam Bernstein, staff writer

Looming changes to overtime pay rules may put budget pressure on colleges and universities, one administrator argues in The Hill. But only if the new rules change an exemption for teaching staff, which analysts say looks unlikely.

Background on the new overtime rules

Currently, workers who make about $23,600 are automatically eligible for overtime when they work more than 40 hours a week. Under the so-called the duties test, any executive, administrative or professional (EAP) workers are not eligible for overtime even if they make more than the salary threshold. Non-EAP workers can collect overtime regardless of their total compensation.

Under new rules being considered by the Department of Labor (DOL) for 2016, the threshold would rise to about $50,500 and be indexed to inflation thereafter. The so-called duties test would also be modified to make it more difficult for workers to be misclassified as overtime exempt.

Proposed law could mandate more pay for nearly one million higher ed workers

According to the Economic Policy Institute (EPI), the change would make 13.5 million more workers eligible for overtime in the first year. EPI estimates that about 22% of salaried workers with a college degree and 9.6% of salaried workers with an advanced degree would be impacted by the new rules.

A challenge for higher ed?

The changes could also increase costs for colleges and universities and make it more difficult for schools to provide affordable higher education, argues Thomas Jandris, dean of the College of Graduate and Innovative Programs at Concordia University Chicago.

But since teaching staff are currently exempt from the overtime rule,  some of the most significant effects would only come if the Department of Labor changes the faculty exemption during a broad exemption review currently underway.

Potential effect on completion efforts

In order to meet President Obama's goals of America having the highest proportion of college graduates in the world by 2020, Jandris explains, higher education has to invest in promoting access and completion among low-income and minority students. Faculty will need to "leave the ivory tower and bring the classes to the students—delivering instruction on-site with employers," he writes. "It also means entirely new positions within higher education: coaches, mentors, and tutors who help working students find their paths, and succeed."

Jandris says the proposed overtime rules make those investments much more difficult. In order to keep tuition low, "small private colleges and universities … pay salaries that are significantly lower than market average," he writes. "Any government action that significantly increases personnel costs will necessarily result in higher tuition, at a time when the economy and students cannot afford such increases."

Potential financial costs

As Jandris notes, faculty are not eligible for overtime pay. However, if the new rules are passed and the faculty exemption is eliminated, it would cost Concordia $6 million per year and "eliminate work for approximately 300 adjuncts." Alternatively, Concordia could raise tuition by 25% to offset the costs.

However, DOL has not announced plans to lift the faculty exemption. And experts told the Chronicle of Higher Education in July that a change to the faculty exemption would require a separate rulemaking process entirely. "They can't just slip that in at the end," said Tara Daub, a partner at the law firm Nixon Peabody.

Even so, colleges and universities would face new costs under a change to the overtime rules as the result of higher wages for some nonteaching staff and compliance costs. And Jandris warns the burden of these costs is likely to fall on students.

Two paths to sustainable labor savings

"It would be tragic for an administration so clearly committed to higher education success to rob institutions of vital elements of our student support workforce by promulgating these new rules," he concludes (Jandris, The Hill, 12/8; College and University Professional Association for Human Resources briefing paper, accessed 12/9; Johns, National Association of Independent Colleges and Universities release, 9/4; Basken, Chronicle of Higher Education, 7/1; Eisenbrey/Mishel, "Raising America's Pay," Economic Policy Institute, 7/3; Eisenbrey, "Working Economics Blog," Economic Policy Institute, 10/7).

Thoughts on the story? Tweet us at @eab_daily and let us know.


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