Home Health & Hospice Week

Proposal leaves you with 3 options.

A proposal to raise the minimum salary level for the so-called “white collar” exemption to overtime pay may change who qualifies for overtime at your agency.

The Department of Labor issued a proposed rule March 11 that “would raise the currently enforced salary level for exemption, thus extending overtime protection to more workers,” according to the regulation. The change would take effect in January.

“The DOL’s proposed rule will clearly have a significant impact on employers’ hiring, staffing and payroll decision-making,” warns law firm Cole Schotz in online analysis.

Reminder: “To be exempt from overtime pay requirements under the [Fair Labor Standards Act], employees must generally be paid on a salary basis at or above a specified minimum weekly salary level and meet certain requirements related to their primary job duties,” the rule notes. An Obama administration-era rule drastically raised the minimum salary level, but was declared invalid in Texas federal court a year later (see Eli’s HCW, Vol. XXV, No. 43).

Employers have been waiting on the revised methodology ever since the 2016 ruling, says law firm Polsinelli in its analysis.

The newly proposed methodology would result in a minimum salary level of $679 per week or $35,308 per year to qualify for the exemption, according to the rule. That’s up from the current $455 per week, $23,660 per year minimum.

Plus: Up to 10 percent of the $35,308 minimum salary could be satisfied by “nondis­cretionary” bonuses, incentives, and commissions, observe attorneys from Taft Stettinius & Hollister in analysis. “This is an employer-friendly carryover from the 2016 version, as current law does not provide any credit for incentive compensation,” the firm notes.

Another change is an increase to the FLSA’s highly-compensated employee exemption, from $100,000 to $147,414. “Highly-compensated employees must still perform exempt duties for the exemption to apply, but those duties remain unchanged under the new proposals,” notes law firm Kilpatrick Townsend in its analysis.

Result: “In 2020, 1.1 million currently exempt employees who earn at least $455 per week but less than the proposed standard salary level of $679 per week would, without some intervening action by their employers, gain overtime eligibility,” DOL expects.

While “the proposed amendments are not as severe as those promulgated during the Obama administration,” the change still will increase the minimum salary level by nearly 50 percent, points out law firm Fox Rothschild in online analysis. “Employers should reassess the status of certain exempt-level employees,” the firm urges.

Option: “If exempt employees currently earn less than $679 per week and the employer wants to maintain the employee as exempt, assuming the duties tests are satisfied, the employer must raise the employee’s salary to at least $679 per week or raise the employee’s salary to $611.11 per week and pay a nondiscretionary bonus or incentive compensation at least quarterly in an amount that averages out to $67.90 per week,” Fox Rothschild advises.

However, the proposed rule does allow employers to pay the bonuses annually as well, a departure from the 2016 rule, Kilpatrick Townsend points out.

Bottom line: “Employers should identify affected employees and consider whether they wish to raise their salary to the new level, limit their working hours, or reclassify them as non-exempt,” Kilpatrick Townsend counsels.

Note: The 219-page rule is at www.dol.gov/whd/overtime/overtime2019-nprm.pdf. Comments are due 60 days from Federal Register publication.