One of the issues that colleges and universities are struggling with under the new FLSA overtime exemption rules is how to compensate residence hall directors. While responsibilities vary from institution to institution, residence hall directors generally are responsible for overseeing students living in a college or university residence hall. Their duties may include counseling students, applying and enforcing rules of conduct, coordinating and scheduling other workers, supervising student RAs, and similar responsibilities relating to the residence hall and its student residents. These positions can meet the “duties” test for exempt status under the administrative exemption, provided that they exercise the required level of discretion and independent judgment in the course of their duties. In some cases they might also qualify for an executive exemption if they supervise at least 2 or more other full-time employees (or more part-time employees whose hours are equivalent to two full-time workers). Residence hall director salaries usually are not large, in part because part of their compensation is typically provided in the form of free room and board. Residence hall directors are often required to live in their assigned residence hall. They often have extensive “on call” hours during which they are expected to be in or near their assigned residence hall, available to respond to any issues that may arise.
This combination of low salary and long “on call” hours is what makes these positions so difficult for colleges and universities under the new rules. Often the salaries for these positions fall far enough below the new minimum salary of $47,479 that a salary increase to the new minimum is not an option. Paying overtime may be equally cost-prohibitive if an employee is required to be “on call” in the residence hall and therefore potentially entitled to overtime pay for extended periods of each week, well beyond a typical 8-hour work day. So what can colleges and universities do with their residence hall directors under the new rules?
Credit for Room and Board
Many of our higher education clients have asked us whether they can count room and board toward the new $913 per week minimum salary. Unfortunately the answer to that is no. The regulations specifically provide that the minimum salary is “exclusive of board, lodging or other facilities,” meaning that any such benefits cannot be counted toward the $913 minimum.
However, if residence hall directors are re-classified as non-exempt employees, colleges and universities may be able to count the value of food, housing and other facilities provided to employees toward their wages for purposes of minimum wage. But don’t get too excited. Restrictions do apply.
For lodging, the credit under Section 3(m) of the FLSA is allowed only where five requirements are met:
- Lodging must be regularly provided by the employer or similar employers;
- The employee must voluntarily accept the lodging;
- The lodging must be furnished in compliance with applicable federal, state, or local laws;
- The lodging must primarily benefit the employee, rather than the employer; and
- The employer must maintain accurate records of the costs incurred in the furnishing of the lodging.
While most of these requirements can be met, number 4 may pose a problem for resident directors who are required to live in the residence hall so that they can be “on call” during overnight hours. (For a discussion of this issue, see DOL Field Assistance Bulletin No. 2015-1.)
Further, even if the credit is allowed, only the lesser of the “reasonable cost” or “fair value” of the lodging may be counted toward the employee’s wages. “Cost” here means the share of the actual operational costs for providing the housing fairly allocated to the room or rooms provided to the resident hall director. How this is calculated is beyond the scope of this post, but suffice it to say that the amount will likely be significantly less than what students typically pay to live in the same residence hall.
Similar rules apply to credit for meals. Institutions can take credit only for the reasonable cost of meals furnished to employees. This means the marginal cost of the food itself, without any markup for profit or fixed costs that would be incurred regardless of whether the meal is provided to the employee. Again, this is likely to be far less than the rate charged to students for a typical dining hall meal or meal plan.
Academic Administrator Exemption
Some higher education institutions may also be wondering whether residence hall directors might qualify for the “academic administrator” exemption. That exemption applies to administrative employees of an education institution whose primary duties are administrative functions directly related to academic instruction or training. Unlike other administrative employees, academic administrators can be paid less than the minimum salary provided in the regulations, so long as their salary is at least equal to the starting salary of exempt teaching professionals in the same institution. Unfortunately, this exemption probably does not apply to most residence hall directors, as their job duties typically do not directly relate to academic matters such as curriculum, quality or methods of instruction, measuring and testing achievement, academic and grading standards, etc.
Strategies for Managing Overtime
If meeting the new minimum salary level to classify residence hall directors as exempt is not an option, colleges and universities will likely need to find ways to manage their expenses by restructuring the way residence hall directors operate.
One likely approach is to re-think the rules regarding when residence hall directors are required to be present in their facilities. Generally speaking, if an employee is required to be physically present at a given location for the benefit of the employer, the employee is working and is entitled to be paid for their time. So, if a non-exempt residence hall director is required to be present in the dormitory in case they are needed, they are likely entitled to pay for that time, even if much of it is spent studying, sleeping, or watching Game of Thrones rather than doing anything resembling work.
One way of dealing with this problem is to relax the requirement of physical presence and instead tell residence hall directors that they are free to go about their business, but are “on call” and required to return to the residence hall within a reasonable period of time (e.g., 30 or 45 minutes) if needed to deal with a student situation. Provided that the restrictions associated with the “on call” time are not so strict as to prevent the employee from going about his or her personal business, on call time generally need not be paid under the FLSA. Some colleges and universities may also elect to restructure their residence hall director schedules so that there is one “on duty” director available for a group of residence halls during key times. Others may simply increase the total number of directors and adopt staggered schedules so that no director has to work more than 40 hours in a given week.
Another option for filling the gap if residence hall director schedules must be cut back is to increase reliance on student Resident Advisors. Generally, the Department of Labor takes the position that traditional student RAs are students, not employees, and are not entitled to minimum wages or overtime pay under the FLSA. While student RAs cannot serve all of the functions of a resident hall director, a combination of student RAs present in the residence hall with a resident director “on call” and available on short notice may address the need.
Controlling Costs Through Compensation Adjustments
Because any response to this issue is likely to involve significant change to existing practices, colleges and universities should take the opportunity now to consider other creative ways to manage total costs for these positions. For example, the FLSA permits employers to adopt different pay rates for different sorts of work. Residence hall directors could be paid a lower rate – as low as the minimum wage – for time when they are required to be in the residence hall but are not actually working, and at a higher rate during designated “office hours” or when responding to actual student issues.
If a residence hall director’s actual work hours vary significantly from week to week, it may also be worth considering whether they can be paid on a fluctuating workweek basis (explained in our prior post), which might significantly reduce the total cost of overtime.
Whatever measures a college or university takes to control overtime costs, they will now be required to record work hours for any residence hall directors who are reclassified as non-exempt under the new rules. This may present some challenges, particularly for employees who are not used to recording their time. Whether an institution elects to use paper time sheets or a sophisticated electronic timekeeping and payroll system, it will need to carefully plan and communicate its expectations for any newly non-exempt employees and their direct supervisors. In particular, this includes adopting and effectively communicating clear policies regarding what hours are expected, what counts as “work” time, and how that time is to be recorded.
There is no “one size fits all” solution for this issue. Each higher education institution will need to strike their own balance between maintaining expected levels of service in the residence halls and controlling labor costs in a time of already-strained budgets and shrinking revenue. How is your institution addressing this challenge? Do you have ideas or suggestions that might benefit others? If so please share in the comments below.