The U.S. Department of Labor (DOL) issued regulations this month that will likely make millions of American workers eligible to claim overtime pay. The rule is set to take effect in December and raises the salary threshold from $23,660 to $47,476 a year under which employees are eligible for time-and-a-half pay when they work more than 40 hours a week, regardless of job title or duties. This level will be revisited every three years, and will be maintained at the 40th percentile of full-time salaried workers. That could move the threshold to more than $51,000.
The DOL rule means that millions of workers who are salaried will now have to have their hours tracked to see if they qualify for overtime pay. In fact, according to the DOL, 4.2 million workers would be affected by the higher overtime level, but the Economic Policy Institute estimates that the higher pay threshold would give 12.5 million more employees, or 23% of salaried workers, a new or stronger right to overtime pay.
With this broad new class of workers becoming eligible for overtime, many small businesses, including those in health care, are scrambling to figure out how to factor the regulations into their bottom line. Healthcare professions, according to Modern Healthcare, that will likely be affected by the overtime threshold increase are nurses, medical and physical therapist assistants, medical and pharmacy technicians, and paramedics. Average mean salaries in these professions range from $25,710 to $47,010.
Phil Bongiorno, executive director of the Home Care Association of America, which represents 2,500 home care providers, said he predicts that the overtime threshold hike will also cause financial strain for small home care businesses, leading to increased costs for services and less pay for staff. “We’re limiting hours and shifts, and caregivers are actually making less,” Bongiorno said. The average mean salary for home healthcare services is $24,050 with approximately 470,710 employed in the profession, according to May 2015 data from the DOL.
William Dombi, vice president for law at the National Association of Home Care and Hospice (NAHC), also weighed in on the new ruling in Home Health Care News, saying that it will be “a significant administrative burden, more so for home care and hospice providers because the nature of the business is visit-based in many ways…We expect that the institution of tracking time is going to be a major task for home care agencies.”
While minimum wage and overtime protections are already implemented for hourly home care workers, the latest rule affects salaried employees who may have been making too much to be eligible to claim overtime pay. As a result, many see home health agencies responding to the salary exemption limit by perhaps cutting hours to avoid overtime limits, altering compensation methods by switching from a per-visit basis to an hourly rate, or a combination of both. This was underscored by Dombi in his interview with Home Health Care News. “Home health agencies are going to have to pay attention to this rule because of the nature in which they compensate professional staff,” Dombi said. “Many home care companies pay on a per-visit basis, and they don’t track hours. Businesses are going to look at all the options – raising the compensation level above the exemption, cutting and tracking hours, modifying the compensation method or simply paying overtime. A business might do a combination of all those.”
Note that Medicaid-funded home care providers for individuals with disabilities or facilities with 15 beds or fewer are exempt from implementing the new rule until March 17, 2019. The DOL is expected to engage in outreach with these home health care agencies for technical assistance during the time-limited, non-enforcement period leading up to when the rule takes effect.
Manchester Specialty specializes in providing the home health care industry with a portfolio of insurance products designed to address its unique risks. This includes everything from various Liability coverages to Employment Practices Liability (EPLI) and Workers’ Compensation insurance. For more information about programs, you or your local agent/broker can contact us at 855.972.9399.