On May 18, 2016, the Department of Labor (DOL) issued its long awaited regulations increasing the salary and compensation levels required for executive, administrative, and professional workers to qualify as “exempt” from overtime requirements.
Key provisions of the final rule include:
1. Setting the standard salary level at $47,476 annually or $913 per week (up from the prior $23,660 annually/$455 per week);
2. Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level, provided that such payments are made on at least a quarterly basis;
3. Changing the highly compensated employee threshold to $134,004 (up from $100,000) – this is the level of compensation where an employer only has to make a minimal showing to demonstrate an employee is ineligible for overtime; and
4. Establishing a mechanism for automatically updating the salary and compensation levels every three years.
The DOL estimates that the rule will directly affect about 200,000 hospital workers and 300,000 non-hospital health care workers. Among health care workers, the rule is most likely to affect nurses, paramedics, medical and therapy assistants, medical and pharmacy technicians, researchers, and home health care providers.
Although some healthcare providers may raise their employees’ salaries above the overtime threshold, others may cut back employees’ hours to avoid higher overtime costs. Providers may also hire more part-time employees and hourly workers, limiting their hours to 40 and reducing fringe benefits.
The rule may also affect employees’ work schedules, imposing more difficult choices on employees about when they take time off from work. If salaried employees need time off for illness or childcare issues, they may not lose pay because they are compensated for completing the job rather than the number of hours spent at work. Hourly employees, however, will lose pay for taking the same time off since their compensation is determined by the actual number of hours worked.
Finally, the rule also threatens to eliminate part-time exempt positions. According to the DOL, Fair Labor Standards Act regulations prohibit employers from taking part-time status into account when determining whether a salary level meets the exemption’s requirements. In a 2008 opinion letter, the DOL stated that the salary requirement may not be prorated to reflect reduced hours, and employees paid a salary of less than the weekly salary amount do not qualify for the exemption.
For most employers, the effective date of the final rule is December 1, 2016. There is a limited, temporary exemption for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. The DOL promised to engage in outreach and technical assistance efforts until the delayed effective date for these providers—March 17, 2019. Otherwise, privately operated home health care providers must comply with the December 1, 2016 deadline.
To read more, please visit the DOL’s website at https://www.dol.gov/whd/overtime/final2016/
If you have questions or need assistance, attorneys in Stites & Harbison’s Employment Law Service Group are available to help you achieve compliance.
-Rebecca Weis is an attorney with Stites & Harbison in Louisville, Kentucky.
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