One of the chief concerns for any employer is determining the proper exemption status of its workers to ensure compliance with federal, state, and local wage and hour laws. Getting the exemption status of an employee wrong can lead to prolonged litigation and hefty penalties. Institutions of higher education (IHEs) can face particular challenges in this area, given the wide range of jobs that workers on campus perform. Accordingly, it is important that all IHEs be familiar with the factors that must be weighed when determining exemption status under the Fair Labor Standards Act (FLSA) to best mitigate the risk of lengthy and costly litigation.
Exemption Status Under the FLSA
The FLSA, among other things, establishes the minimum wage and overtime regulations for employers in the United States. The FLSA dictates that employers must pay their employees no less than time and one-half their regular rate of pay for any hours worked in excess of 40 hours in a given workweek, unless the employee falls under an exemption. Generally, to qualify for an exemption, an employee must satisfy two tests: (1) the employee must be paid on a salary basis at a rate not less than $684 per week, which is not subject to reduction based on the quality or quantity of work (“salary basis test”), rather than, for example, on an hourly basis; and (2) the employee’s primary duty must involve the kind of work associated with the exempt status sought, such as executive, administrative, or professional work (“duties test”). The FLSA sets forth several exemption categories that are of particular relevance to IHEs.
- Teachers – While many teachers could be exempt according to the two criteria above, the FLSA provides for the explicit exemption of “teachers” under the duties test, defined as any employee with a primary duty of teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment in which the employee is employed. Furthermore, “educational establishment” is defined as an elementary or secondary school system, an institution of higher education, or other educational institution. No distinction is drawn between public and private schools, or between for-profit and nonprofit schools. If a bona fide teacher satisfies this unique duties test, the salary basis test does not apply. Given these standards, professors, instructors, and adjunct professors typically qualify for this exemption. A faculty member who teaches online or remotely also may qualify for this exemption, as the regulations do not restrict where bona fide teaching may take place, whom the knowledge can be imparted to, or how many hours a teacher must work per week to qualify for the exemption. To determine a teacher’s primary duty, the relevant inquiry in all cases must address the teacher’s actual job duties, not what is written in the job description. Job title or full/part-time status alone does not determine exempt status.
- Coaches – Coaches may qualify under the “teacher” exemption as well; however, to apply this exemption, the bulk of their duties must actually involve student athlete instruction. Where a “coach” is primarily a recruiter, scout, or interviewer, they may not qualify under the teacher exemption, but they may qualify under a different exemption, as explained below.
Teachers, of course, do not encompass the entirety of an IHE’s staff. IHEs may still be able to classify employees who are not teachers as exempt under the FLSA.
- Learned Professionals – To qualify as a learned professional under the FLSA, the employee must satisfy three requirements: (1) the employee’s primary duty must be the performance of work requiring advanced knowledge; (2) the advanced knowledge must be in a field of science or learning; and (3) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. The phrase “work requiring advanced knowledge” means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical, or physical work. In the context of IHEs, this exemption commonly covers psychologists, certified athletic trainers, librarians, and postdoctoral research fellows, among others. Employees who would qualify under this exemption, but would not otherwise qualify under the teacher exemption, must also satisfy the above-referenced salary basis test to be an exempt learned professional.
- Creative Professionals – To qualify under this exemption, an employee’s primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. They must also qualify under the salary basis test. This requirement distinguishes creative professionals from learned professionals, whose work depends primarily on intelligence, diligence, and accuracy. Exemption status as a creative professional depends on the extent of the invention, imagination, originality, or talent exercised by the employee. In the context of IHEs, these employees will usually fall under the teacher exemption as well.
- Administrative Employees – Various employees at IHEs may qualify as exempt administrative employees. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. For IHEs, admissions counselors, and financial aid officers may fall under this exemption, provided their actual job duties entail more than rote bookkeeping. These employees must also satisfy the salary basis test.
- The FLSA specifically provides an exemption for employees “performing administrative functions directly related to academic instruction or training.” This means work related to the academic operations and functions in an IHE, rather than to administration along the lines of general business operations. The statute gives examples of employees who may fall under this exemption in the context of IHEs, including IHE department heads responsible for the administration of their respective department; academic counselors who perform work such as administering school testing programs, assisting students with academic problems, and advising students concerning degree requirements; and other employees with similar responsibilities.
- Executive Employees – To qualify under this exemption, an employee must satisfy the salary basis and salary level tests, as well as the following criteria: (1) the employee’s primary duty must be managing the enterprise or a customarily recognized department or subdivision thereof; (2) the employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and (3) the employee must have the authority to hire or fire other employees, or, in the alternative, the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight. In the IHE context, this exemption typically encompasses deans, department heads, directors, presidents, and any other manager or supervisor.
- Student Employees – Generally, students who work on campus are going to be non-exempt, hourly employees eligible for overtime. However, there are some examples of student employees commonly found on IHE campuses who the Department of Labor (DOL) guidance suggests are generally not considered non-exempt employees. Graduate-level teaching assistants are usually exempt, as they independently fall under the teaching exemption. Additionally, research assistants who perform research under the guidance of a professor or faculty member and student residential assistants are generally not considered employees at all by the DOL, despite any stipends or tuition credits that these students are paid.
It is important to remember that the FLSA sets a floor for minimum wage and overtime rules, and many states and localities have their own tests for determining whether an employee is to be considered exempt or non-exempt. When state law differs from the FLSA, an employer must comply with the standard most protective of employees, so any IHE should be well versed in the state and local wage and hour laws to ensure compliance.
This is a broad overview of factors involved in the complicated process of determining employee exemption status. IHEs would do well to engage with attorneys who are experienced in these topics when deciding how to categorize workers on their campus, as getting it wrong can be costly. Should your IHE have any questions on this or any other employment-related issue, please contact the author of this article or any other attorney in Venable’s Labor and Employment Group.
*The author of this article thanks Alex Clementi, law clerk, for his assistance in its preparation.