For the first time since 2004, the U.S. Department of Labor (DOL) has updated the Fair Labor Standards Act (FLSA) in the form of revised overtime provisions. These updated provisions have widespread ramifications for all industries—including healthcare. Let’s dive into the rule changes and what they mean for healthcare providers and workers.
New Overtime Rules for 2020
On Jan. 1, 2020, the new overtime provisions went into effect. The biggest change is updates to the minimum salary thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements. Specifically, the minimum salary level for exempt employees was raised from the current $455 per week to $684 per week (or $35,568 annually).
The DOL also increased the total annual compensation level for highly compensated employees from $100,000 to $107,432. Finally, employers can use nondiscretionary bonuses and incentive payments paid at least annually to satisfy up to 10% of the salary. (There are no changes to the job duties test to determine whether someone is exempt.)
For most employers, these changes aren’t a surprise. Back in 2016 the Department of Labor unsuccessfully attempted to push forward an update to the minimum salary level. Unlike those proposed changes, 2020’s new overtime provisions don’t stipulate automatic adjustments to the wage thresholds. They also provide a lower minimum threshold than was originally proposed.
While unsurprising, the DOL’s changes present the need to reevaluate your workforce and their current status as exempt or nonexempt to assure you are compliant with the new provisions.
Reexamining Exempt vs. Nonexempt Employees
Many companies now face the prospect of paying overtime to newly nonexempt employees who may be paid below the new threshold. To avoid falling short of FLSA compliance and incurring fines, it’s worth revising the status of each employee.
- Exempt: These employees are, as their classification would imply, exempt from overtime regulations. They earn a salary and hold a job that meets the DOL’s salary and duties test.
- Nonexempt: These employees are eligible for overtime benefits under the FLSA. They may be paid on a salary or hourly basis and receive overtime pay for hours worked over 40 in a given week.
If you’re a healthcare provider, FLSA regulations become more complex as there are additional exemptions and rules to consider. Some examples include:
- Registered Nurses (RNs) may be classified as either exempt or nonexempt. RNs paid on an hourly basis should receive overtime pay (exempt employees must be paid on a salary basis). RNs registered by the appropriate state examining board generally meet the duties requirements for the learned professional exemption and, if paid a salary of at least $684 per week, may be classified as exempt.
- Licensed Practical Nurses (LPNs) and Licensed Vocational Nurses (LVNs) are generally nonexempt and do not qualify for professional exemption.
- Physician Assistants (PAs) may be exempt if they have an advanced degree and meet the duty requirements for professional exemption.
It’s prudent to reevaluate these positions and others to determine if any updates are required.
How does this affect healthcare?
Beyond reclassifying employees, you should be aware of potential pitfalls as you seek to remain compliant with FLSA rules. For example, home healthcare workers no longer qualify for the companionship service exemption. This could fundamentally change the business model of hospice and in-home caretaking services that may not have previously paid overtime.
Meal breaks are another potential problem for healthcare providers. FLSA rules stipulate that meal breaks at least 30 minutes in length don’t need to be compensated by an employer. Unfortunately, meal breaks in the world of healthcare can easily be interrupted by work. For nonexempt employees, an interrupted meal break may result in pay for the interruption as well as overtime for the week.
Finally, there’s also the matter of on-call nonexempt healthcare workers. According to FLSA regulations (29 C.F.R. §785.17), “An employee who is required to remain on call on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while ‛on-call.’” You will need to follow the FLSA guidance for how you compensate for this on-call time.
Consider state laws—and seek HR expertise
To add another layer of complexity to FLSA rule changes, state-specific wage and worker laws also come into play. This may include anything from specific documentation of overtime hours and wages to how overtime wages are paid. Improper tracking or payouts can lead to costly fines from the DOL.
The prudent thing to do is work with an HR specialist to audit current employee classifications and overtime accounting practices. For some healthcare providers, new FLSA updates may mean a major shakeup to their current workforce structure. For others, it may be an opportunity to take a closer look at current wages and reporting practices.
At any rate, the expertise of a human resources professional is a vital tool in your efforts. And James Moore’s healthcare team is ready to assist as you seek to remain compliant with evolving DOL regulations.
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