Effective Jan. 1, 2020, approximately 1.3 million more employees will be eligible for overtime pay. Why? For the first time in 15 years, the U.S. Department of Labor has updated the FLSA — the Fair Labor Standards Act — increasing the salary threshold certain full-time, salaried employees must meet to be considered exempt from overtime pay, according to the FSLA Overtime Final Rule.
A Quick Review: What is the FLSA? This federal rule sets the guidelines for minimum wage, overtime pay, child labor, record keeping requirements, and a host of other subjects. The overtime requirements place employees into two categories:
- Exempt employees are not entitled to overtime wages. These include executive, administrative, professional, IT, and outside sales employees who meet the minimum threshold specified in the rule. An example would be a practice administrator or physician.
- Nonexempt employees are most everyone else. Nonexempt employees are entitled to overtime wages of not less than 1.5 times their regular hourly rate.
FLSA Overtime Final Rule Updates: The Basics
Here’s what you need to know about the FSLA Overtime Final Rule announced on Sept. 24, 2019:
- The overtime threshold (“standard salary level”) has increased from $455/week to $684/week. That’s equivalent to $35,569/year for a standard, full-time employee with a 40-hour work week.
- The threshold for “highly compensated employees” has also been raised: from $100,000/year to $107,432/year.
- Employers now may use certain bonuses and incentive payments — like commissions — to meet up to 10 percent of the standard salary level. Previously, only an employee’s base salary could be counted.
4 Tips Ace FSLA Overtime Final Rule Compliance
Staff compensation is a large part of any practice’s overhead, so you must be sure you’re handling overtime correctly. Pay out too much, and your bottom line will suffer. Pay out too little, and you could be on the hook for a lawsuit, including damages and back pay for violating the FSLA overtime final rule updates.
Beware: Once an attorney finds a staff member who wasn’t paid correctly — say, you let someone go and they seek legal counsel — that attorney will likely look for other staff members who potentially have the same issue. Sound familiar? It’s the same strategy auditors use when they investigate your coding and billing practices.
To safeguard your practice from costly overtime issues and stay in compliance with the FLSA overtime final rule, take the following steps:
- Review job descriptions for all positions to ensure they’re up to date. Whether you classify an employee as exempt or nonexempt is based on their pay rate and their job duties. Even if you’ve recently audited your job descriptions, review them annually since job duties may change enough to reclassify an employee.
- Review your overtime pay policy. The FLSA threshold for overtime is more than 40 hours worked in the 7-day work week. Businesses may classify overtime differently (such as more than 8 hours in a day). You may pay overtime however you like, provided it doesn’t fall below the FLSA standards.
- If you historically pay out a significant amount of overtime, consider bumping up non-exempt employees’ regular pay to exceed the FLSA threshold. It might be more cost effective.
- Ensure your employee handbook contains policies on overtime and timekeeping. For example, according to the FLSA, you must still pay a nonexempt employee for overtime worked, even if the employee didn’t request or have permission to work the extra hours. But you can discipline t the employee for working without permission.
Note: Many medical practices pay staff members hourly wages, and most of those positions fall into the nonexempt category. However, it’s a misnomer that all salaried employees are exempt employees. While this is the case much of the time, there is no rule that nonexempt employees must be paid on an hourly basis. If a nonexempt employee is salaried, you’d simple convert the salary to its hourly equivalent to determine overtime pay.
Document: Read the FSLA Final Rule at https://www.federalregister.gov/documents/2019/09/27/2019-20353/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and