The Department of Labors (DOL) new regulations governing overtime pay went into effect on August 23, 2004, and will impact millions of employees and healthcare organizations. Senior department officials from the DOL estimate that American businesses, including hospitals and healthcare facilities, will incur a one-time implementation cost of $700 million. However, organizations can encounter more than $1 billion in savings annually from reduced penalties and costly lawsuits.
- The salary threshold has been increased, almost threefold, to $455 per week ($23,660 annually). This means that any healthcare employee earning less than this amount automatically qualifies for overtime pay. Until now, workers making as little as $8,060 per year could be considered “white collar.” This change can impact many mid-level to lower-level salaried employees who will now be entitled to receive overtime pay automatically regardless of their job functions and responsibilities. The DOL estimates that 1.3 million additional workers making less than $23,660 annually and not currently receiving overtime pay will qualify for an additional $375 million in overtime wages under this change.
- Highly compensated healthcare executives who earn $100,000 per year or more and who customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee are exempt from the overtime requirements. The new regulations add a requirement that exempt highly compensated employees must “customarily and regularly” perform exempt duties.
- The “white collar” exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. Effectively, these types of employees are not exempt regardless of their salary.
- Healthcare executives are no longer required to “regularly exercise discretionary powers” in order to qualify as exempt (as they were required to do by the old “long test”).
- It is no longer a requirement that executive, administrative or professional employees devote no more than 20 percent of their time to nonexempt work in order to qualify as exempt, as was required by the old “long test.”
- Exempt executives must still have the authority to hire or fire other employees, or their suggestions and recommendations as to the hiring, firing or any other change of status of employees must be given “particular weight,” as in the old rules. In the new rules, though, “particular weight” is defined by a set of factors to consider including whether it is part of the employee’s job duties to make such suggestions and recommendations, the frequency with which such suggestions and recommendations are made or requested, and the frequency with which the employee’s suggestions and recommendations are relied upon by others.
The new regulations are not a “victory” for management as some have labeled them. Instead, they provide mixed results for employers and employees.
How will these changes affect the healthcare community? Under the new regulations, a healthcare organization will pay approximately $15,000 more per year to an otherwise exempt manager who makes a yearly salary of $20,000, but who routinely works 60 hours a week. If an organization has 50 of these types of managers, the DOLs new regulations could impact that business by more than $1 million dollars. However, preparation now can help healthcare organizations avoid the risk of being included in the current explosion of lawsuits. As part of corporate due diligence, it is critical that hospitals and other healthcare facilities become compliant before the regulations change or the liability could actually increase. As part of these efforts, employers should:- Review job descriptions to determine whether they are still accurate, reflect the jobs being performed and reflect the skills necessary to perform the job;
- Review employees’ actual job duties to ensure that they still fall within the administrative, executive, professional, computer or outside sales exemptions;
- Pay past overtime due to employees that have been misclassified. Paying them now will be far less expensive than paying them in a DOL settlement or class-action lawsuit; and
- Implement and enforce accurate time record-keeping mechanisms for employees.
These are a few examples of what hospitals and other healthcare companies can do to reduce their exposure to DOL claims. For more specific questions, contact a lawyer that primarily deals with these types of claims and has handled DOL audits to fully understand how these new changes may impact your organization.
