Could Well-Meaning New Labor Rule Hurt Charter Schools, Preschools, & Tutoring Programs?

The Obama administration’s Department of Labor is moving to revamp the “overtime rule” under the Fair Labor Standards Act (FLSA). Today, so long as they earn at least $23,660 a year, people in salaried jobs are not required to receive overtime pay if they exceed 40 hours a week. Last summer, the Department of Labor proposed that the minimum amount be changed to $50,440 a year. It’s estimated that the change would affect about five million workers. The proposed change was submitted to the federal Office of Management and Budget last week, the final step in the process of issuing a new rule.

It is easy to see the proposal’s appeal. U.S. Secretary of Labor Tom Perez’s blog post announcing the proposal begins with a touching anecdote about the manager at a discount retail store in Massachusetts, who works long hours with no overtime pay. It’s easy to empathize with the concern, especially for any of us who have even a distant memory of 12-hour days spent landscaping or selling doughnuts for minimum wage. Of course, there are also a number of possible unintended consequences–with the new rule potentially forcing businesses to eliminate employee flexibility, downsize staff, or reduce base pay. But I don’t want to wade into the macro debate here. (If you’re interested in the big picture debate, you can check out arguments for the new rule here, here, and here and arguments against it here, here, and here.)

What I do want to touch upon is what the proposed change might mean for education. As I’ve noted before, one big problem with federal policy and regulation is that it’s not a delicate, surgical intervention. The implications for education are complex and uncertain. For instance, while one might think that a fair number of teachers might be covered by the new rule, there is a “professional” exemption which means it doesn’t apply to teachers, clergy, architects, dentists, and so on. But many school administrative and support staff would be affected, as would nearly all preschool staff (who are not defined as “teachers” by the Department of Labor for purposes of FLSA). And lots of people employed by local educational programs, advocacy groups, and the like could be affected too.

Similarly, while organizations with budgets of less than $500,000 a year are exempt from the law, understand that it’s the whole organization that matters and not just the program in question. So, if a program is run by a YMCA or local initiative, it has to be the entire enterprise that’s spending less than $500,000 a year. Moreover, certain entities, including “schools and preschools, and government agencies” are never exempt.

What to make of all this? Think about summer programs or charter schools that run based on elbow grease and the passionate commitment of small staffs. Or of local tutoring and mentoring programs that rely upon single twentysomethings who aren’t earning big bucks. Many of these employees do the work out of passion. They recognize that this kind of work doesn’t lend itself to conventional 9 to 5 days and can require long, irregular hours out in the community. The new rule could bring many such efforts to a grinding halt. An employee who makes $40,000 a year would not be allowed to say, “Gosh, I don’t mind working long days or irregular hours because I believe in what we’re doing.” It would be the law, not a suggestion. An employer that allowed that would be guilty of violating federal employment law. This means that hours would have to be systematically policed and curtailed for any employee earning under $50,440, whatever the practical consequences.

Furthermore, employers like charter schools, mentoring programs, and preschools generally don’t have in-house counsel or a lot of money set aside for lawyers, so they have reason to be careful. The easiest way to stay on the right side of the law and keep their budget from getting eaten up by overtime is to track hours carefully and ensure that employees are working exactly 40 hours. The need to worry about any missteps means that the safest best for employers is to invest in a time clock, require everyone to arrive and depart at the same time, and eliminate room for employee discretion or flexibility.

While the case for the change is easy to make, the benefits come at a price. The new rule may force programs that rely on their flexibility to become more bureaucratic. It may frustrate passionate and committed employees who’ve chosen to throw themselves into local mentoring or tutoring programs. It may make it more expensive to provide programs and preschools, reducing their availability and the number of kids who can benefit. It may make it harder for all-hands-on-deck charter schools to thrive. These are not the considerations that will determine whether the law is adopted, but they’re well worth our attention—and a useful reminder that the impact of regulations is almost always broader than we might imagine.

– Rick Hess

This first appeared on Rick Hess Straight Up.

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