Analysis of U.S. Department of Labor Proposed Rule on New Overtime Requirements
July 10, 2015 08:44 AM
In follow-up to a directive from President Obama, the U.S. Department of Labor (DOL) issued a proposed rule that would raise the minimum compensation level to qualify for an exemption from minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA), as previously reported. The FLSA permits the exemption of certain executive, administrative, and professional employees provided that the workers are paid on a salary or “fee basis” at least at the level of the prescribed minimum standard. The current minimum of $455 weekly has been in place for a number of years.
DOL proposes to raises the minimum compensation level for the exemptions to the 40th percentile of weekly earnings for full-time salaried workers. That current level would be $921 weekly or $47,892 annually. The FLSA exemptions are determined on a weekly basis. In addition, DOL proposes to raise the “highly compensated employee” standard from $100,000 annually to the annualized value of the 90th percentile of full-time salaried workers ($122,148).
These proposed levels would be automatically adjusted annually under the new rule. DOL estimates that the minimum would rise to $970 in 2016 ($50,440 annual). Certain highly compensated employees are exempt provided they customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee.
A business concern in advance of the issuance of the proposed rule was that DOL would change the “duties” test, leading to the narrowing of the classes of workers that might qualify for the exemption. DOL does not propose any changes in the duties test.
The application of the FLSA exemptions in home care and hospice are likely to be extensive. While exact data is not available, it is believed that the vast majority of executive, administrative, and professional staff are paid on a salaried or “fee basis.” In the event that the salaried employees are paid less than the proposed minimums, home care and hospice organizations will face increased costs through higher salaries or overtime obligations along with the added cost of tracking working hours for those staff near the minimums.
A home care and hospice specific issue is the use of the per visit compensation method with health care professionals such as RNs and therapists. Per visit compensation can, if applied correctly, meet the standard for “fee basis” compensation. With per visit compensation, there has been no real concern with meeting the current $455 weekly minimum with staff working 40 or more hours weekly. A worker hypothetically doing 4 visits a day, working 5 days a week at just $22.32 per visit, would receive in excess of $455. With the minimum potentially rising to $970 in 2016, companies will need to do a full evaluation of the impact in their specific organization.
For example, if a home care or hospice company pays $45 a visit in the above hypothetical situation, the weekly compensation would be only $900, falling short of the proposed minimum. As such, it would be essential that the company then track the hours worked to ensure that those hours do not exceed 40 in any given week. Under the FLSA, “hours worked” can be very complicated when applied to home care or hospice employment when considering the possibility of compensable travel, training, and documentation time.
The permutations in the combination of visits per week, per visit compensation levels, and hours worked is nearly endless. Managing under the proposed rule will be increasingly difficult for home care and hospice providers. Staff productivity varies greatly. Travel times between patients vary as well.
The proposed rule along with DOL analysis is available at: www.dol.gov/whd/overtime/NPRM2015/. Public comments on the proposal can be submitted through September 4, 2015.
Home care and hospice companies that do an impact analysis are encouraged to send the results to NAHC at email@example.com. The National Association for Home Care & Hospice will be submitting comments on behalf of the industry and such information will be used to compose those comments.