Tips for practices to best deal with new overtime pay rules

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Carol Gibbons, RN, BSN, NHA, who is CEO of CJ Consulting, which specializes in healthcare revenue cycle management. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.

Department of Labor changes this year are causing many healthcare businesses to reevaluate overtime requirements.

Over the years, many employers have utilized the exempt status for many midlevel employees to manage the overtime burden more efficiently. These employees work more than 40 hours per week most of the time and their salary takes that into consideration. In exchange, they have more flexibility to adjust work hours, take time off for an appointment without using PTO and can be available after hours if needed. 

In the news: What new rules on overtime pay mean to physician practices

The new guidelines from the Department of Labor require that any employee who makes less than $913 per week or $47,476 annually, cannot be an exempt employee and must be paid overtime for more than 40 hours worked in a week. To further muddle the matter, a federal judge in Texas granted a preliminary injunction against the rule, putting it on hold for the time being. I am sure you have seen articles stating that you need to make changes, but the majority of providers have not even started to consider what these changes could mean to morale of employees.  

After much discussion with both with other managers and with a labor attorney, I have developed some suggestions for my practices to guide them through the process of changing employees from exempt to non-exempt status.  

The first step in this process is to communicate to all employees that there have been changes in the overtime guidelines involving exempt and non-exempt employees. The Department of Labor (DOL) has issued new rules on recording work time and who can qualify as exempt employees, meaning they can be paid on a salaried basis and not paid for overtime. 

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There is a DOL fact sheet that I recommend you print and use as a discussion tool. Your communication with employees should reinforce that nothing in this rule changes the job description of any employee or changes their salary. It just means that you are now required to track actual time worked and pay overtime. 

Emphasize that the rule changes the administrative process of documenting time worked, but does not impact job responsibilities in any way and certainly does not diminish the employee’s value to the business.

The second step is to review your handbook. Does the handbook address that all overtime must be approved by a supervisor? If not, now is a good time to make changes to your policies, because employees who were previously paid by salary may take advantage of their new status to work extra hours to improve their biweekly paycheck.    

Next: Should you increase salaries instead of paying overtime?

Should you increase salaries instead of paying overtime?

The third step is to list any salaried employees as exempt employees. It is time to really evaluate, not only their salary level, but to apply the duties test to each of these positions. Do they interview and make or give input to hiring decisions about the staff assigned to that position? If the answer is no, then they probably do not meet the duties test.

Consider if the position is really a supervisor position rather than a manager. Remember that a license (ie RN, LVN, US tech etc.) does not automatically make an employee exempt. When looking at providers, they fall into the Professional Exemption  and must be paid on a salary-basis above the weekly base.

Once you have identified all the employees that do not meet the duties test for an exempt employee, start analyzing the employees that currently are below the threshold who can meet the duties test for an exempt employee.  Estimate the number of hours they are currently working overtime and what the annual cost of that overtime would be. 

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For example, Sally makes $40,000 per year and works about four hours of overtime per week as a unit manager and her job meets the duties test. If she works at least four hours of overtime per week, that would be an additional $5,998.72 per year or $884.59 weekly salary. If Sally started working five hours of overtime per week, that additional hour would put her at $913.43 per week. In this circumstance, it might make sense to increase Sally’s salary to $913 per week rather than run the risk of the employee working more overtime hours because she can now get paid for all overtime worked. 

Don’t forget about on-call after hours

The fourth step is to evaluate your personal expectations for your employees. If an employee gets a phone call, answers an email or completes a project after hours, that time must be calculated into their total hours worked for the week. Make it clear that working overtime includes any work completed outside the office and all those hours must be tracked. If it leads to overtime, then they must get permission to work overtime.  

Next: Transitioning with little drama

So, if you are a boss that expects employees to be available after hours, you may want to modify that behavior. If you email nonexempt employees after hours and they answer that email after hours, the employee can claim that time as time worked. If you call a nonexempt employee after hours to assist with a task or look something up for you, the employee can claim that time as time worked. Trust me, as we enter December and with a 24/7 news cycle, your employees will know all about the new overtime rules and are already figuring out how to generate overtime based on your current expectations about their availability.

Finally, look at your time tracking software. Can the software accommodate an internet-based time sheet and can it also be on a mobile app for staff that works out of the office, as well as in the office?  This software for mobile applications can even include GPS tracking of locations where employees login to work outside of the office.

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Make sure if you are using a cloud-based product in the office, it is limited to the IP address of the office so employees cannot login from home or on their way to work without preapproval. Remind your staff that all overtime must be approved and working overtime without approval will result in disciplinary action.

Remember that a good rule for a boss is to listen more than speak. Ask your employees for their suggestions toward transitioning to the new process. Encourage them to ask questions and provide them information about the law. 

Reinforce that the changing of the law regarding overtime does not change their job description, their pay nor their job responsibilities. Remember, the goal is to transition to the new process with as little drama as possible.