Prepare for U.S. Department of Labor’s New ‘Overtime Rule’ or Risk Penalties
Posted on Thursday, October 20, 2016 5:26 PM
An internal audit must be conducted to determine if your agency’s employees are properly classified as exempt from new U.S. Department of Labor (DOL) overtime requirements. National agencies will be expected to comply with this new “overtime rule” on December 1.
If an agency is found to have violated the requirement, then they will face civil penalties of up to $1,894 per violation, including back wages for the affected employees. If agencies are willfully violating the laws, then they can be prosecuted criminally and fined up to $10,000.
Labor’s new “overtime rule” clarifies which salaried employees are entitled to Fair Labor Standards Act minimum wage and overtime pay protections, and modifies the minimum annual wage for salaried workers from the current rate of $23,660, or $455 per week, to $47,476, or $913 per week.
Eileen Maguire, a partner in the Indianapolis law firm Gilliland, Maguire & Harper, P.C., says agencies that haven’t prepared for this change need to audit their workforce now to determine whether exempt employees truly are exempt under the Fair Labor Standards Act, and find out if exempt employees’ salaries will meet the new threshold.
“Agencies must look at each individual’s job duties to see if it meets the test for exempt status, which Labor has indicated it will examine closely in the coming years,” Maguire says. Click here to view an exemption questionnaire, broken down by employee type.
Since May, Operations Manager Erin Ditto, from Cypress HomeCare Solutions, LLC, in Phoenix, has focused half of her time on determining workers’ job responsibilities and whether the employees are exempt. Then, she met with the employees to determine how much time each employee spent performing their particular job duties.
Focus attention on administrative duties test
For private duty agencies, Maguire suggests that they need to pay close attention to employees that are classified as exempt under the administrative duties test or the outside sales test.
“Under the administrative exemption, an employee really needs to be assisting in the running of the agency and not providing services,” she says.
Take the gray areas into account
Cypress decided to take a look at a gray area of exempt vs. nonexempt. After looking at the agency’s goals for growth, Ditto decided that hiring a person at an hourly rate would could overtime and employee burnout.
A mistake could be costly
If Labor receives a single complaint, it will quickly audit an agency’s pay practices, says Mark Tabakman, a partner in the Princeton, N.J., office of Fox Rothschild, LLP.
“It’s so easy for the DOL to focus in on the exemption issue, because all the investigator has to do is ask for is ask for a listing of salaried employees, go down the line, and ask, ‘What does this person do?’ ” he says. For agencies that misclassified an employee but raised that person to the $913 per week salary, the liability will be based on that higher wage.
The following steps are used to prepare for the OT rule:
• Focus on job duties when analyzing positions
• Make sure you’re ready to account for employees’ hours worked beginning Nov. 28
• Notify employees immediately of any compensation changes
• Know how to calculate overtime correctly
For the full article, please see the October 24, 2016 Home Health Line Edition.
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