Colleges that spent much of the past year preparing for changes in the federal rule governing overtime pay have been left in confusion after a federal judge blocked their implementation just days before they were to take effect. The last-minute ruling has forced institutions to either tell employees that pay increases and changes to hourly employment status are on hold, or proceed as planned in response to a standard that now may be moot.
The new rule, which updates the Fair Labor Standards Act, would make more full-time salaried employees eligible for overtime pay. Employees who earn up to about $47,000 per year would be eligible for extra pay for work over 40 hours a week; now only those who earn up to about $23,000 per year are.
Colleges have spent the months since the rule was finalized in May determining which employees fall under the new threshold, and which might receive raises to exempt them from overtime pay or be converted to hourly workers. Since many college employees, such as coaches and admissions counselors, work long and irregular hours, the changes promised to increase overtime payroll and further destabilize the finances of struggling institutions.
Now, with the new rule on hold, colleges must decide whether to continue with their plans to comply or to postpone them. “There’s a lot of uncertainty right now, which is not a good thing,” says Scott M. Fitzgerald, director of human resources at Otterbein University.
The injunction came in response to a federal lawsuit filed by 21 states and many business groups asserting that the rule would cause irreparable harm and that the U.S. Department of Labor had overstepped its authority in making it. Judge Amos L. Mazzant III issued a temporary injunction against the rule last week, days before the new rule was to take effect on December 1.
A change in federal labor law, originally scheduled to take effect in December, has colleges and universities scrambling to sort out what to do now that a federal judge has blocked the change. Here’s a look at how colleges are coping.
Colleges have several options for responding to the injunction, according to Andy Brantley, president and chief executive of the College and University Professional Association for Human Resources, or CUPA-HR. If they hadn’t informed employees about any changes to their pay or overtime-exempt status, or they had communicated the changes but not implemented them, colleges can postpone. “We’re all used to things with the federal government being changed at the last minute,” he says. If institutions had made changes, they should weigh which would be less disruptive to employees and campus processes — to go ahead and keep the changes, or to rescind them.
The California State University system has postponed rule-related changes in pay and overtime-exempt status on its 23 campuses in the wake of the injunction, according to Marc D. Mootchnik, general counsel for the system. The institutions had already informed thousands of full-time Cal State employees about forthcoming changes to their pay or overtime-exempt status, but “we’re in a holding pattern, and we’ll wait for further direction from the courts or the Department of Labor,” he says.
Otterbein had already converted about 40 of its more than 500 full-time employees to hourly pay and made them eligible for overtime before the injunction, according to Mr. Fitzgerald. The university also raised the salaries of a handful of employees above the $47,000 threshold to keep them exempt from overtime. Otterbein has no plans to rescind the conversions or the raises with the rule in limbo. “We need the dust to settle and get a final decision before we do anything,” Mr. Fitzgerald says.
‘A More Moderate Rule’
Right now, the new rule is dead, and the looming transition of presidential administrations makes its resurrection doubtful.
The Department of Labor is expected to appeal the injunction, a motion that would be taken up by the United States Court of Appeals for the Fifth Circuit. “Never say never, but that Fifth Circuit rarely overturns orders of preliminary injunctions,” Mr. Brantley says.
James H. Newberry Jr., a lawyer who represents colleges, agrees. “If you had to bet right now, you’d probably bet on the court system not undoing the injunction,” he says.
If the injunction remains in effect through January 20, the rule would become a matter for the incoming administration of President-elect Donald J. Trump. If the new administration doesn’t pursue appeals of the injunction, the new rule would go unenforced pending resolution of the lawsuit against it. If Mr. Trump and his Labor Department wanted to create their own new rule, they could begin the process of doing so.
Another new, or modified, rule could take months, or years. Amid the tumult of a transition, “one would doubt that this is really high on the list of things for the new President Trump to do,” says Mr. Newberry. The rule enacted by the Obama administration was first formally discussed in May 2015 and wasn’t scheduled to take effect until nearly 18 months later. A similar timetable for any new rule would stretch implementation into late 2018 at the earliest, “and that assumes a remarkable degree of alacrity on the part of the new Department of Labor to address this issue,” Mr. Newberry says.
Some college leaders are happy to see the rule put on hold for now. Campbellsville University in Kentucky had already raised the salaries of more than 20 of about 400 full-time employees, and had already converted about a dozen other workers to hourly employees eligible for overtime. Michael V. Carter, the president, says he has no plans to rescind the changes, but adds that the injunction “has come as welcome news.” While the new rule was designed to pay employees fairly for the work that they do, it also promised to add thousands of dollars in additional overtime to already tight college budgets. “Does this rule increase the cost of higher education?” Mr. Carter says. “Yes, it does.”
Many in academe would welcome a less-onerous overtime rule from the incoming administration. Mr. Brantley, of CUPA-HR, says that when he and other higher-education leaders first met with the Labor Department about the new rule in 2015, they proposed an increase in the salary threshold to the mid-$30,000 range. While there was bipartisan support for raising that ceiling, “doubling the salary threshold in one step was not reasonable,” says Mr. Fitzgerald of Otterbein.
But the threshold clearly needs to be raised from the current figure, set in 2004, he adds. “I do hope that, once the dust settles, people will remember that bipartisan support and do the right thing.”
Colleges, and their affected employees, will have to live with some uncertainty for now, but the process of preparing for the rule has had a silver lining for some institutions. It allowed Campbellsville “to really look at job descriptions and the roles that people are playing,” Mr. Carter says, highlighting critical positions and also areas where the university may be understaffed. “I think we’re going to be a better institution because of it.”
