Government

What Obama’s Overtime Rule Could Mean for Colleges

May 20, 2016

This week the Obama administration released a final rule that will extend overtime pay to millions more American workers, including hundreds of thousands of lower-level salaried employees on college campuses. Much of the attention has focused on the impact on postdoctoral fellows, the overworked, underpaid backbone of the academic research enterprise.

But it’s not just postdocs who will benefit from the rule, which will double the annual salary cutoff below which workers are generally eligible for overtime pay, raising it to $47,476. Many entry-level and midlevel professionals — from admissions officers to athletic trainers to student-aid administrators — will qualify too.

That means the rule will be expensive for colleges, many of which already struggle with high labor costs. And that’s where the downside comes in: Already college groups are warning of consequences when the rule kicks in, at the start of December.

"Requiring such a dramatic and costly change to be implemented so quickly will leave many colleges with no choice but to respond to this regulation with a combination of tuition increases, service reductions, and, possibly, layoffs," Molly Corbett Broad, president of the American Council on Education, said in a written statement.

Peter McPherson, president of the Association of Public and Land-Grant Universities, wrote in a blog post published on Thursday that "there is simply no way for universities to absorb costs of this magnitude without an impact on our academic, research, and outreach missions."

Here’s what the new overtime-pay rule means for your campus:

It’s a boon to postdocs — but not all of them.

Postdoctoral fellows have been agitating for higher pay for years, and the National Academy of Sciences has recommended that colleges pay postdocs a starting salary of at least $50,000. This rule will compel colleges to increase their pay to at least $47,477, to avoid having to pay them overtime. (The National Institutes of Health has already announced that it will raise its own research stipend for postdocs above that threshold.)

On Thursday the National Postdoctoral Association, which represents 79,000 postdoctoral scholars, issued a statement calling the rule "a positive step towards achieving our goal of increasing compensation for postdoctoral researchers nationwide."

Yet the association also expressed disappointment that the overtime expansion leaves out researchers who primarily teach, including some in the humanities. Most salaried teachers — including adjunct instructors and graduate teaching assistants — aren’t eligible for overtime pay, under a longstanding policy that exempts them from the benefit. The postdoc association says that exception creates an unfair distinction between scientific and humanities postdoctoral studies. The group has called for a "uniform application" of the rule.

This doesn’t affect just research universities and large public institutions.

While such institutions are more likely to have large numbers of scientific postdocs, the rule’s reach extends well beyond the laboratory. In fact, the new salary threshold applies to many administrative employees, including those in admissions, financial aid, academic affairs, and athletics.

David S. Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges, said his organization’s members include 386 colleges whose business and financial-operations staff members each earn less than $47,000, on average. They employ, on average, 12 staff members each. The association includes 364 institutions where the average computer, engineering, and science salary is below the threshold, with an average staff of 10.

Private colleges, meanwhile, said the rule would undermine their efforts to rein in tuition growth. In a statement, the National Association of Independent Colleges and Universities said that "the rule will have a significant impact on campus budgets — most of which have already been set for the next fiscal year, if not the next two fiscal years."

Darron Collins, president of the tiny College of the Atlantic, in Maine, said he feared the rule could spell a "potential reduction in autonomy for employees who up until now have viewed their work as a vocation more than a job."

There’s more than one way to comply with the rule.

When President Obama first proposed raising the overtime-pay threshold to just over $50,000, last July, the College and University Professional Association for Human Resources sent a letter that warned that the new rule would force colleges to reclassify many workers to hourly status, "to the detriment of employees, institutions, and students."

But the Labor Department, in guidance issued with the rule this week, said colleges have "numerous options for compliance." They can raise the salaries of newly eligible employees so those salaries are above the threshold; they can pay such employees overtime, on top of their salaries; they can "reorganize workloads, adjust schedules, or spread work hours" to limit overtime pay; or they can reduce employees’ base pay so the amount they are paid, with overtime, "remains largely the same."

The guidance also notes that public colleges that qualify as "public agencies" under federal labor law may provide employees with compensatory time off in lieu of cash overtime premiums. Private colleges do not have that option.

Kelly Field is a senior reporter covering federal higher-education policy. Contact her at kelly.field@chronicle.com. Or follow her on Twitter @kfieldCHE.