How New Overtime Regs Will Impact Hospital Workers

Coming federal regulations will change "white-collar exemptions" by increasing the maximum amount of salary workers need to earn before being considered exempt. Here's what hospitals need to know.

Ready or not, the overtime regulations proposed by the US Department of Labor are coming. Out for public comment through September 4, the new regs are on-track to be implemented during the second quarter of next year.

Now is the time for healthcare organizations to start making preparations for these new laws around payment, says Jonathan Kozak, employment litigator with the workplace law firm Jackson Lewis in White Plains, NY. "There is no reason to believe this won't take effect as planned," he says.

First published on July 6, the  proposed regulations will change "white collar exemptions" by increasing the maximum amount of salary workers need to earn before being considered exempt to $50,440 annually.

I wrote about the proposed regulations last month after speaking with Kozak. Here's more of our conversation, edited for clarity and brevity:

HealthLeaders Media: Hospitals typically employ many service workers—cafeteria staff, gift shop managers, and so on. How does this affect them?

Jonathan Kozak: Most of these workers already earn under $455 weekly and are hourly employees, so I don't see the new regulations impacting those positions very much. The people this will more likely impact are those in management positions in those departments: For example, cafeteria and gift shop managers.

They may currently be considered exempt executives and ineligible for overtime, but going forward, if they earn less than $50,000 annually, they will be overtime pay-eligible. If they're not exceeding the new salary minimum, they won't be exempt, regardless as to their job responsibilities.

HLM: Should Healthcare HR consider this a good time to reevaluate which jobs within their organization are exempt and which are non-exempt?

Kozak: The fact that the regulations are changing should be an impetus to review which positions are considered exempt and nonexempt. There's likely plenty of positons in a grey area or on the borderline that are considered exempt where the change in the salary basis amount is going to make it crystal-clear that the position is nonexempt. But there are probably other positions that aren't quite so clear and will need to be closely evaluated.

One expected change that as of now has not come to fruition is primary duty analysis. Many had anticipated that the DOL would implement a quantitative analysis as to how much exempt work an individual has to perform for it to be considered their primary job duty.

Under the current regulations, there is no specific requirement as to how much time an exempt employee has to spend performing exempt work, but there was quite a bit of talk in anticipation of the regulations that there would be a quantitative review of many roles. One suggested methodology is the 50% test—if 50% of an employee's duties are not exempt, they should not be considered exempt.

The state of California has a 50% test, and many expected that the US DOL regulations would follow suit and include one as well. They did not do that, but they have asked for comments from stakeholders as to whether the primary duty test—or lack thereof—also should be changed.

That the DOL is soliciting comments on that additional change means that it's certainly possible that the final regulations will go further than just increasing the salary basis. That would be big change and would have broader impact on the applicability of exemptions.

HLM: Is it possible that hospitals will give workers shorter shifts to try to get around paying overtime?

Kozak: Yeah, I think it's possible, but I'm not sure that's an option in terms of stuff not getting done in hospitals. I mean, things have to get done, so I'm not sure if that's a viable option.

Here's how it is: Either more people will need to do same amount of work—maybe the same number of people will have to be engaged to do the same amount of work in less time—or the way people are paid will have to change in respect to newly non-exempt employees.

HLM: What about employees who work 12-hour shifts, such as nurses? Does this kind of schedule have any bearing on whether or not overtime pay is required?

Kozak: Under federal law, no. If their hours worked exceed 40 hours weekly and their income is below the minimum set by the DOL, they are entitled to overtime pay. I know that some schedules are set up in patterns that would be unfamiliar to many—like three shifts one week, four shifts the next—but whenever the individual works more than 40 hours, they will be entitled to a premium for the hours worked over 40.

The fact that an individual worked 32 hours this week doesn't have any bearing on the fact they worked 48 hours this week—they are entitled to eight hours of overtime pay for those extra hours this week.

HLM: What penalties can hospitals expect to face if they don't stay on top of this?

Kozak: There are two ways that a complaint based on misclassification can arise.

One is if the DOL receives a complaint or conducts an audit and identifies misclassified employees. In that case, the DOL can issue a finding of back wages. They would calculate what the overtime paid should have been, plus an equal amount of the back wages as liquidated damages at 100% of the back wage amount.

The second way a claim can arise is through private litigation by an impacted employee. Impacted employees on an individual or a collective basis can pursue back wages and overtime for themselves and for similarly situated persons. Within litigation, a claimant can recover liquidated damages at 100% and back wages that are owed, and they can also recover their attorney's fees. Plus employers will have to pay the additional expense of defense costs, of course.