Biden Administration Finalizes Overtime Rule

Colleges and universities across the country will be forced to provide either a pay raise or overtime benefits to thousands of admissions officers, student affairs professionals and athletics staffers under a new rule finalized by the U.S. Department of Labor on Tuesday.

Previously, universities were exempt from clocking work hours and providing overtime pay to any employee salaried at or above $35,568. The new rule raises that bar nearly 65 percent to $58,656.

With a final implementation deadline of Jan. 1, 2025, employers have less than a year to comply, and experts say that’s bound to be a tall order. While the number of employees affected in higher ed specifically is not yet clear, the change is estimated to affect at least 4 million American workers nationwide.

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Over 33,000 public comments were submitted on the highly contested rule. Organizations that represent lower-paid employees in higher education say it will benefit those who are currently overworked and underpaid. But opponents of the ruling say it goes too far, too fast and will force college leaders to come up with millions of dollars in increased wages at a time when tuition revenue and state funds (for public institutions) are constrained.

The Biden administration has tried to quell these concerns by breaking the shift into two parts—first a smaller increase to $43,888 by July 1, and then a larger jump to $58,656 in the new year.

Seema Nanda, the department’s solicitor of labor, described it as a better “balance” than the hard and fast 60-day compliance window originally proposed in August. But college groups say it is still too much to ask.

“We are disappointed that DOL failed to fully address the concerns raised by the entire higher education community,” Ted Mitchell, president of the American Council on Education (ACE), said in a public statement. “Ultimately, students will be harmed if institutions are forced to cut services, reduce financial aid, reduce staffing, and raise tuition to address the rapid growth in costs this rule would produce.”

Mixed Reviews, Predictions

In the meantime, the rule’s final version, which also mandates an automatic minimum salary update every three years, still has a ways to go before it officially crosses the finish line.

Brett Coburn, a partner at Alston & Bird who specializes in employment litigation, said the rule will “almost certainly” head to court, and depending on the judges’ verdict, implementation of the update could be delayed or blocked entirely.

It may seem like déjà vu for some as the new rule resurrects similar efforts from the Obama administration back in 2016 and was blocked by a federal judge in Texas for overstepping regulatory authority before taking effect. The Trump administration then took its own stab at modernizing the regulation in 2019 and successfully raising the bar by a smaller 23 percent from $23,660 to the present day $35,568.

Coburn believes that, like the previous Democratic administration, the Biden White House bit off more than it could chew, and that it’s unlikely the newly proposed rule will win if taken to court.

“There are some pretty strong headwinds,” including a conservative-leaning court and a threshold raise that’s only four years old, “that have come into play since 2016,” he said. “I think they're going to make it even harder for this rule to survive.”

Other experts, including the College and University Professional Association for Human Resources (CUPA-HR), aren’t so sure.

In an alert sent out to members after the rule was finalized Tuesday, CUPA-HR explained that the first increase updates the minimum salary based on the 20th percentile of weekly earnings in the lowest wage census region—the same methodology used by the Trump administration. It’s not until implementation of the second increase that a new methodology, which sets the minimum to the 35th percentile of weekly earnings, takes effect. And the phased-in implementation will likely affect how litigation challenging the rule is both pursued and decided, they added.

“In terms of surviving litigation, if they use a formula that’s already been given the go ahead by a fairly conservative district court judge, it seems smart,” said Steven Bloom, assistant vice president for government relations at ACE. “I’m not saying we’d like that, but it is smart.”

Other higher ed organizations, particularly groups that represent historically low-waged staffers, hope that strategy will help the rule withstand any challenge.

Tom Kimbis, executive director and CEO of the National Postdoctoral Association (NPA), described the update as “a move in the right direction.”

“Thousands of postdoctoral scholars would likely be impacted by the new rule as exempt professionals whose current salaries fall in between the current and proposed exempt salary levels,” he said. “And although the final rule’s salary level does not reach the levels recommended for a minimum salary by the NPA, and is just below a key NIH postdoctoral pay level of $61,008 also announced [Tuesday], it should instigate analyses at many institutions employing postdocs to ensure that they are receiving fair compensation.”

Edward Conroy, a senior adviser at New America, a left-leaning think tank, acknowledged that colleges and universities are grappling with declining enrollment and underfunding from states. But he cites a mismatch between the skills and experience required in higher education and what people are paid.

“You can’t run world-class institutions without good people at the end of the day,” he said. “Nobody’s asking for everybody who works in higher ed to become millionaires; $55,000 is not crazy money by anybody’s standards.”

There’s also one major group of higher ed employees who colleges will not have to account for when mapping out their response—faculty. Instructors of any kind, be they tenured faculty or adjunct staff, fall under a federal exemption for educators and won’t qualify for overtime protections.

‘Wait and See Mode’

In the end, if the new rule does take effect, there will likely be three response options on the table: raise an employee’s salary high enough to re-exempt them, start tracking their work time and pay on an hourly basis, or, if the budget doesn’t allow for either, let them go. Many colleges will do a mix of all three.

“It’s going to play out differently at different institutions,” Bloom said. “It’s going to depend on the institution where they’re located, the resources they have.”

“Each college is going to have to navigate it after doing an analysis of which employees are potentially impacted by the changes in the rule, and what they can afford,” he added.

Even in cases where colleges avoid termination, potential ripple effects are likely. For example, when one employee’s salary is raised to meet the new threshold, they may make as much as their supervisor. To preserve salary equity, the supervisor’s salary may also need to be raised. Maintaining current wages and tracking hours worked can also be tricky. Many college staffers, especially student affairs workers and admissions officers, log odd hours, with schedules that fluctuate seasonally, but the new regulations would likely restrict that.

“Still grappling with the chaotic FAFSA rollout, public universities are also now contending with changes in Title IX policy [and] a new gainful employment rule with substantial new urgent demands,” said Mark Becker, president of the Association of Public and Land-grant Universities (APLU). “This raft of new regulations presents unprecedented challenges that will strain already stretched resources, and thereby impede public universities’ mission to serve students, advance path-breaking research and address the challenges facing their communities.”

For now, representatives from APLU, ACE and CUPA-HR will continue to lobby for lower raises and more time, and colleges will be forced to teeter on what Coburn described as the “delicate balance of getting ready to comply, but not necessarily pulling the trigger.”

“The court process is unpredictable,” he said. “So just as we have been, we are largely in wait-and-see mode, other than now, we know what the ultimate threshold is going to be.”