The long-awaited U.S. Department of Labor (DOL) regulations on the “white collar” exemptions are finally here. As per the regulations, which are to be issued on May 18, 2016, the new minimum salary level for the executive, administrative, and professional employee exemptions under the Fair Labor Standards Act (FLSA) will be $913 per week, or $47,476 per year. This new salary threshold—which will become effective on December 1, 2016—more than doubles the current minimum salary level of $455 per week, or $23,660 per year, and will have a dramatic impact on all employers, including those in the healthcare industry.
The new rule will carry the same burdens for healthcare employers as it will for covered employers in all industries, and depending on the financial and workforce implications for individual facilities, various adjustments will need to be implemented in response to the new rule no later than the effective date of December 1, 2016. The DOL has projected that millions of workers in the healthcare industry will potentially be impacted by the new rule. The new minimum salary level of $47,476 per year will apply to exempt employees who work in administration, information technology, therapy, human resources, facility and department management, marketing, technical, compliance, medical records, and other departments of healthcare facilities.
To comply with the new regulations, healthcare employers will either be required to increase employees’ salary levels to maintain their exempt status or convert previously exempt employees to nonexempt status and pay them overtime compensation when they work over 40 hours in a workweek. Converting employees to nonexempt status will allow healthcare facilities that qualify to use the “8 and 80” system of overtime compensation under Section 7(j) of the FLSA, as described in the Wage and Hour Division’s Fact Sheet #54. Healthcare employers will also need to prepare effective communication strategies for employees being converted from exempt to nonexempt status, since such conversions are often perceived negatively by affected employees.
This added economic burden and/or possible negative impact on morale on those employees impacted by the change comes at a difficult time for most healthcare employers, many of which are struggling with changes and regulations imposed by federal and state agencies, cuts to their funding and reimbursements (and related issues), and organizing efforts by unions in many parts of the country. The good news is that healthcare employers will have over six months to evaluate their best course of action before the new regulations’ effective date.
Special Note: The DOL issued a time limited Non-Enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. The special non-enforcement period will last from December 1, 2016 to March 17, 2019. The policy provides that the Wage and Hour Division will not bring any enforcement actions against qualified providers during the non-enforcement period. Whether the policy will have any impact on private actions by employees was not addressed in the regulations. Note that this policy only applies to providers with regard to the new salary level and not to other alleged FLSA violations.