On June 29, President Obama officially announced new overtime regulations after months of hints and media discussions. On June 30th the Department of Labor (DOL) released the official text of the regulations for a comment period.
The regulations, likely to be effective January 1, 2016, are the first major overhaul of the exempt-from-overtime rules for several decades. (Could there be other changes in the new regulations? Probably.)
Although the rules may not become effective for some time, many employers need to be planning for the changes in dealing with current employees, future employees and in structuring workforce positions.
Long-term care facilities with 24/365 staffing, complex schedules, call-off substitutions and heavy payroll costs must be especially vigilant.
Overtime must be paid to covered employees working more than forty (40) hours per week unless the employee is “exempt,” Almost all employees in the U.S. are covered, a very few are not. Keep in mind the optional special 8/80 rules for healthcare facilities.
One misconception abounds, putting someone “on salary” exempts them from overtime. It is not that easy. In order to be exempt at this time, the employee must genuinely fit into certain categories--executive, managerial or professional—and be paid more than $23,700 per year ($455 per week).
Simply calling an employee a manager is not enough, job titles are not as important as the substance of the job.
The biggest change from the Obama administration will be to boost the base wage to $50,400 per year, which is the $23,700 adjusted for almost four decades of inflation (the just published regulations listed $47,892 per year and $921 per week, so there is a little communications problem in Washington).
The Obama administration has taken a tough stance on wage-and-hour issues, referring to non-compliance as “wage theft,” whether intentional or not. The administration has a mixed record of supporting their union friends, so this is a big payback.
Wage-and-hour law works on a “strict compliance” standard meaning that any problem is the fault of the employer, not the employee. This includes time clock protocols, schedule setting and failure to supervise work hours.
Should an employee call the feds, or should the feds pick you organization at random, an audit will include a three-year look-back. Payroll records, time records, job descriptions and employee interviews will all be a part of the fun.
Be advised that claiming someone is an exempt manager but making them clock in-and-out is not a sound practice. The best defense is to be in compliance before the auditors arrive.
Administrators should begin now to review and update employment practices, especially job descriptions and pay rates. Time clock or swipe card procedures and compliance should be reviewed.
Odds are “managers” in the zone between $23,700 and $50,400 are support staff rather than clinicians. Any position with dual or “swing” duties between management and clinical should be carefully reviewed.
Your work list for the remainder of 2015 includes:
- Review all job descriptions.
- Perform a detailed review of all “exempt salaried” positions.
- Review all policies related to time worked and time paid.
- Audit time clock in-and-out compliance (audit through calculation of paychecks).
- Review all positions related to Affordable Care Act coverage.
- Consider the pros and cons of current and future full-time and part-time positions.
No one said this job would be easy!
Author's update: It turns out the $49,892 per year and $921 per week are effective for Y2015, although the rules likely will not be effective until very late in Y2015.
Tom Ealey, a professor at Alma College, has more than three decades of experience as a long-term care consultant and compliance expert. He can be reached at email@example.com
Disclaimer: Legal advice should always be obtained from a licensed and qualified attorney.