Why Senior Care Executives Fear the New Overtime Rule & How to Prepare

Overtime has always been a concern for senior care communities as they strive to manage their labor budget as efficiently as possible. However, the Department of Labor’s (DOL) new overtime rule has reinforced the need for strict management of overtime. In fact, the results of two recent surveys revealed that the new overtime rule is top of mind for executives in industries across the board, and especially those in senior care.

The July 2016 Littler Mendelson Executive Employer Survey Report stated that “employers expect a continued crackdown by the DOL, likely driven in large part by the recently revised overtime regulations. This year, 31 percent of respondents said they expect DOL enforcement of federal employment laws to have a significant impact on their workplaces – up from 18 percent last year.”

A separate survey by Ziegler, specifically of senior care CFOs, “gathered feedback on the impact of the Department of Labor’s overtime ruling, which will become effective on December 1, 2016. About 73% of the CFOs indicated it will have a moderate to significant negative impact on its organization.” In fact, senior living CFOs were more concerned about the overtime rule than minimum wage increases.

So what can senior care leadership do to prepare?

Understand the rule.

Under the new overtime rule, the threshold for employees who are entitled to overtime increases. The increase in the threshold is almost double-- from less than $455 per week to $913 per week (or from $23,660 per year to $47,476). Starting December 1, 2016, employees who earn yearly salaries of $47,476 or less will be entitled to paid overtime if they work more than 40 hours a week.

Eligibility for overtime is open to almost anyone making less than the $47,476 threshold—regardless of title, job description, or managerial status. The main exceptions are those who aren’t covered by the Fair Labor Standards Act (FLSA), the federal law that sets overtime rules and other labor standards like the minimum wage.

As you familiarize yourself with these new regulations, remember that state regulations may be different from the federal rule. Take into account that if the state directives are more generous to the employee, those are the one you will need to follow.

Take action now.

Legislation has been proposed to slow down the implementation of the new overtime rule and phase in the salary increases over the next three years to give businesses time to adjust. However, that legislation is still pending and may not pass. Senior care providers should start now to define their strategies and get prepared. Here are five things to check off your list before the new rule comes into effect.

• Classify employees—Staff members whose yearly salary is over $47, 476 a year may be exempt from overtime (depending on their job duties). However, those making less than the threshold are most likely entitled to receive overtime according to the new rule.
• Review job descriptions— Take another look at your job descriptions and the actual duties performed by each employee. If the primary duties do not fall on the exempt list, classification changes may be necessary. Also make sure job descriptions are correct. In order to verify if jobs are represented accurately, you should plan to consult with managers and employees--then you can determine if the work qualifies as exempt. In the case of a DOL audit, it’s not the job description that matters. It’s the duties that are actually performed by your employees that determine compliance.
• Conduct an audit of employee hours—It is imperative that you know exactly how many hours each of your employees work each week. This can help you avoid legal trouble moving forward. Leverage technology to gain visibility into your staffing data.
• Consider your compliance options—There are a few possible ways employers can comply with this new regulation. Each has pros and cons and it will depend on your current situation which is best for you.
  • Raise workers’ salaries over the threshold to make them exempt from overtime pay (while also making sure that they meet the exemption criteria). To determine if this strategy makes sense for your organization, compare the costs of an increased salary to the potential overtime costs.
  • When effective, pay the time-and-a half overtime for those workers who do not meet the new salary threshold and who work more than 40 hours-per-week.
  • Closely monitor employee hours to avoid overtime. This option may lead you to need more employees since your current staff may be working fewer hours. Consider this possibility when you are deciding your strategy.
• Pay attention to overtime—If managing overtime is not already on your to-do list, now is the time to add it. Many senior care organizations struggle to keep overtime under control, and with the necessity to track the hours of even more workers, it just got more complicated. An automated scheduling solution can be an important tool for managing overtime. Having overtime and staffing data at your fingertips can go a long way toward helping you proactively manage your labor budget and ensure compliance with the new regulations.

The seriousness of preparing for this new rule can’t be overstated. Employers found to be non-compliant could face significant fines and/or legal action. Make sure you are ready to meet all new requirements in December!