Providers worried with DOL making 4.2 million more workers eligible for overtime pay

The DOL's overtime update marks the first changes to overtime regulations since 2004
The DOL's overtime update marks the first changes to overtime regulations since 2004

The first updates to overtime pay regulations in 12 years will more than double the current salary threshold for overtime exemptions, the Department of Labor announced on Wednesday.

Currently employees are not eligible for overtime hours if they earn an annual salary of higher than $23,660 and perform certain executive, administrative or professional duties.  The final rule, published in the Federal Register, maintains the current “minimal duties” provision, but increases the salary threshold to $47,476 annually, or $913 per week. That level was based on the 40th percentile of earning for full-time workers in the South, which currently stands as the lowest-income Census region.

The new regulations will automatically update the salary levels every three years to “ensure that they continue to provide useful and effective tests for exemption,” the DOL said.

The final rule goes into effect on December 1, 2016, with the three-year calculations set to begin on January 1, 2020. An estimated 4.2 million workers at businesses covered by the Fair Labor Standards Act — which includes “businesses providing medical or nursing care for residents” — will become eligible for overtime under the rule.

The DOL's update is “critical” to adequately pay for the long-term care workforce but will pose a challenge to providers without increases in funding, Jennifer Hilliard, director of philanthropy and legal affairs for LeadingAge, said in a statement to McKnight's.

“Without corresponding increases in federal and state funding for the services LeadingAge members provide, many will be hard pressed either to raise salaries to meet the new thresholds or absorb the additional overtime costs,” Hilliard said “The sudden, marked increase occasioned by the final rule likely will force many members either to place strict limits on their employees' ability to earn overtime pay or adjust down their base rate with the expectation that they will work a certain amount of overtime to net the same salary they were making previously.”

While LeadingAge agreed that the salary threshold was outdated, it advocated for a more modest increase. The American Health Care Association echoed the group's remarks, calling the DOL's announcement “drastic.”

“The long hours put in by dedicated caregivers in long term and post-acute care centers do not go unnoticed, but we had hoped for more incremental changes to the overtime regulations,” said Greg Crist, senior vice president of public affairs at AHCA, in a statement to McKnight's.

In facilities forced to limit their workers' hours, employees who qualify for the “white collar exemption” — those who earn more than the salary threshold and perform executive, administrative or professional duties — may have to take on more work to compensate.

“The burden of compensating for limited hours would fall squarely on employees who remain qualified for the white collar exemption, thereby frustrating one of the stated purposes of the rule to prevent overwork,” Hilliard said.

The new rule, coupled with thin margins and strict staffing requirements, may also limit patients' access to care and force some providers to “fight to ensure their doors remain open,” Crist noted.

Click here to see a fact sheet about the final rule's key provisions, or here for a list of commonly asked questions surrounding the rule.