The DOL's New Overtime Rules for Healthcare Employers

The DOL’s New

Overtime Rules

The Impact of the New Rules and Compliance Preparation for the

Healthcare IndustryGuest Presenter: Bruce Johanson Principal Partner| DB Squared

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The DOL’s New

Overtime Rules

The Impact of the New Rules and Compliance Preparation for the

Healthcare IndustryGuest Presenter: Bruce Johanson Principal Partner| DB Squared

What We Will Cover:• Current wage laws, audits and litigation trends/insight

• Current FLSA Basics Review

• DOL’s new final exemption rule

• Steps to ensure compliance for new rule by December 1, 2016

Facts & Figures around Litigation/Enforcement

• Number of audits conducted by DOL was an all-time high of a 42% increase in 2015, and 79% of these audits had FLSA violations.• Average cost for violations was $1,000 per employee

• More than a 500% increase in FLSA collective actions in federal court from 2001 to 2014. In 2014, 7,964 FLSA cases were filed.

• Wage & hour class/collective actions represent most of the federal and state employment law class/collective cases.• In 2014, the top ten Wage & Hour cases were settled at an average award

of over $21million.

FLSA Basics

Fair Labor Standards Act (FLSA) – wage and hour issues governed by federal law

• FLSA Coverage – Enterprise or Individual Coverage• Enterprise - $500,000 in annual, gross receipts + Interstate commerce • Individual – Employee perform work interstate commerce (week)

• It is best to start with the assumption that all employees are non-exempt (eligible for overtime pay for all hours worked over 40 in a work week or 80 hours in a two-week work period.

• Must also understand your particular state’s employment and wage law or acts which might be more stringent than federal law.

FLSA Basics

TWO TESTS THAT ARE USED TO CLASSIFY A POSITION/JOB AS EXEMPT. THIS APPLIES TO ALL ORGANIZATIONS INCLUDING HEALTHCARE.

1. Salary Basis Test• Paid on a salary-basis

2. Meet Job Duties Tests• Vary by Exemption• Detailed

FLSA Basics Review

Salary Basis Test

o Exempt employees must be paid on a “salary basis.”

o Current law requires salary to be at least $23,660 per year ($455 week)

o Cannot be paid hourly wages

o Currently, an employee is paid on a salary basis if he/she regularly receives each pay period a predetermined amount constituting all or part of the employee’s compensation

o The amount is not subject to change, regardless of the quality or quantity of work performed in a given week

FLSA Basics Exemptions Review (Job Duties Test)

White Collar Exemptions

Executive

Administrative

Professional• Learned professionals• Creative professionals• Teachers in a school system

Computer Employees

Outside Sales Employees

Others…

Executive Employees Exempt

Salary:o $455 per week or equivalent

Duties:o Primary duty is of the management of the enterprise or a recognized

department or subdivisiono

Customarily and regularly directs the work of two or more other employees

oHas authority to hire or fire other employees (or recommendations as to hiring, firing, promotion or other change of status of other employees are given particular weight.

Administrative Employees Exempt

Duties:o Primary duty of performing office or non-manual work directly related to

the management or general business operations of the employer or the employer’s customers.

o Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The Learned Professional Employee Exemption

Salary:o $455 per week or equivalent – paid in salary or fee basis (as defined in

the regulation)

Duties – primary duty test has 3 elements:o The employee must perform work requiring advanced knowledge;

o The advanced knowledge must be in the field or science or learning; and

o The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Three Categories of Professional Employees - FLSA

1. Employees in a field of science/learning, including lawyers, doctors, nurses, CPA’s architects, engineers, etc.

2. Employees performing work that is original and creative in character, such as artists, musicians, designers, etc.

3. Teachers in an educational establishment.

Creative Professional Employees Exempt

Duties:o Primary duty of performing work requiring invention, imagination,

originality or talent in a recognized field of artistic or creative endeavors.

Examples:o Actors, Musicians, Composers, Novelists, Conductors, Soloists, etc.

Computer Employees Exemption

Duties:o Primary duty of:

• (A) application of systems analysis techniques and procedures, including consulting with users to determine hardware, software or system functional applications, or

• (B) design, development, documentation, analysis, creation testing, or modification of computer systems or programs including prototypes bases on and related to user or system design specifications; or

• (C) design, documentation, testing. Creation or modifications of computer programs related to machine operating systems; or

• (D) a combination of duties described in (A), (B), and (C), the performance of which requires the same level of skills.

Outside Sales Employee Exemption

Duties:o The employee’s primary duty must be making sales (as defined in the

FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

o The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Highly Compensated Employee Exemption

What are “highly compensated” employees? • If employee earns total annual compensation of at least $100,000, the

employee will be deemed exempt as long as the employee regularly performs at least one of the exempt duties of an executive, administrative, or professional employees.

• The total annual compensation must include at least $455/week paid on salary basis. Reminder may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation.

• Applies only to those employees performing office or non-manual work.

How many of you are ready to comply with the new overtime rules?

Poll Question #1

DOL’s New Final Overtime Rules

Published in Federal Register on July 6, 2015 – Released on June 30, 2015

60-day comment period ended on September 4, 2015 – Silence until…

Final Rule issued by DOL on May 17, 2016 – Effective December 1, 2016

Increases the minimum salary to $47,476/year (or $913/week under the salary-basis test. This is what the DOL believes will be the 40th percentile of weekly earnings for full-time salaried workers in 2016 (located in South) based on 2013 data from the Bureau of Labor Statistics.

Increases the total annual compensation of the highly compensated employee to $134,034/year. This is the annualized value of the 90th percentile of weekly earnings of full-time salaried workers.

NEW ASPECT: allows incentive pay (non-discretionary bonuses, commissions, etc.) to satisfy up to 10 percent of the minimum salary level. Example $42,728 base salary + at least $4,748 incentive pay = $47,476

Must earn at least $4,748 by year-end or a year-end “catch-up” will be required.

Base salary figure will be automatically adjusted every three years beginning January 1, 2020.

Doesn’t change the Job Duties Test! But DOL is seeking comments on the necessity of adjusting the job duties test in light of the changes to the salary level test.

For example, to what extent are exempt lower-level executive employees performing non-exempt work?

Should exempt level primary work constitute a significant amount of the overall work performed?

DOL’s New Final Rule - Impact

As of December 1, 2016: Raise current classified exempt employees to the new

minimum amount, or

Reclassify exempt to non-exempt and pay them overtime pay.

DOL’s New Final Rule - Options

Options for employers included: Move exempt employees up to new required salary and increase to keep

exempt status every 3 years;

Keep salaried without any raise, but make non-exempt (fluctuating workweek) and pay overtime;

Pay non-exempt workers as pay hourly with overtime; and/or

Adjust workforce, schedules, work duties, etc.

DOL’s New Final Rule – Action Plan

Determine if you have properly classified your current exempt employees:

Estimate number of hours worked and cost to bring exempt employees up to the new salary basis figure.

Based on the job duties test, are your exempt employees performing the exempt level duties?

Do the current job descriptions encompass these duties?

If the duties test changes in the future, are you prepared to move more exempt employees to non-exempt employees?

How many of you had to use outside support to comply with the new

overtime rules?

Poll Question #2

Do you have the formalized policies and practices to avoid investigations and lawsuits?

o A way to keep records of time worked – employees kept with discipline for falsifying time records; signed time cards/sheet with paychecks checked by employees to verify accurate time paid

o Pre-authorization of any overtime worked – unauthorized subject to discipline

o Remote work issues (phone, emails, computer, etc.)

o Track “off the clock” time and discipline for abuse

Training/Work Ahead before December 1, 2016o HR/Accounting/Payrollo Training Supervisors on new policies/practices – determine if employees

are working reported and unreported hours

Recordkeeping o Payroll records and backup documentation as much as 5 years minimum

or longero DOL can inspect records within 72 hours of notice to audit

AGENDAQ & A

Live Q&A

DOL’s New Final Rule

Thank you for allowing us to present to your group today and hope 2017 is a great year for each of

you. If we can help you with your Compensation/HR needs, please email me at:

bruce.johanson@dbsquared.com

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