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 Industry
Guest Presenter: Bruce Johanson
Principal Partner| DB Squared
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Talent Takeaways | Compensation ComplianceHealthcare Software Series
The DOL’s New
Overtime Rules
The Impact of the New Rules and
Compliance Preparation for the
Healthcare Industry Guest 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 subdivision
o
Customarily and regularly directs the work of two or more other
employees
o
Has 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
Salary:
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
Salary:
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
Salary:
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
Salary:
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, 2016
o HR/Accounting/Payroll
o 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 longer
o 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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The DOL's New Overtime Rules for Healthcare Employers

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