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This issue causes a tremendous amount of confusion for many employers, which can lead to major headaches, and oftentimes, monetary awards for back wages that are determined to be due by the Department of Labor (DOL).
Wage and Hour Investigations by the DOL have been increasing in recent years and actually set an all-time record in 2016. This area has seen aggressive scrutiny and focus by the DOL in recent years. Wage and hour cases are the most active types of litigation in the field of employment law. The year-to-year increases have become a pattern since 2000, going up by more than 450% since that time. Every employer must follow wage and hour laws to the fullest. There is no room for shortcut or a lax approach when dealing with employment laws.
So, what is the major mistake that many employers make that is getting them into hot water? There are actually two major mistakes and one of them revolves around misclassifying employees and how they have to be compensated. We will talk about that one in this article and then cover the other in our next newsletter.
Most employees in a healthcare practice are normally paid on an hourly basis and must be paid overtime wages. Overtime wages, which are 1 and ½ times the employee’s normal hourly rate, must be paid for any time worked over 40 hours in a work week for an employer. The definition of a workweek is your normal pay period week, which is figured on a basis of 7 days. For example, you may have a workweek that begins on a Monday and runs through the following Sunday, which will be your 7-day work week period. The 7-day workweek period is determined by the employer and can vary from one employer to another, so that really is not the issue. Just to be clear, if your office is only open 4 days per week and has a 32-hour work schedule for the workweek, an employee would still have to work over 40 hours in a work week to be eligible for overtime pay.
Where employers get into trouble is when they misclassify an employee as being exempt from overtime compensation. The big question for managers is “how do you know if an employee should be paid overtime compensation if they work over 40 hours in a work week?” The DOL tries to help give guidance with this by providing the following exemption criteria or “tests” to determine qualification for overtime pay.
For what is known as an Executive exemption from being paid overtime wages an employee must do the following:
The other exemption from overtime rule that most frequently applies to healthcare practices is related to the Administrative exemption. This one can get a bit tricky.
To be eligible for the Administrative exemption from overtime compensation, an employee must do the following:
Examples of employees who would not be exempt from overtime pay positions in a healthcare practice would be front desk staff, medical assistants, dental assistants, and clerical staff.
An example of a position that would likely be exempt from overtime compensation would be practice managers. However, a word of caution here is that job titles do not matter when it comes to determining if a position is exempt or nonexempt. For example, you may call a position the Office Manager or Practice Manager and still not meet all of the criteria for being exempt from overtime pay. We have seen examples of this with clients where they have an office manager, but the office manager is actually the receptionist and handles primarily clerical duties. Please be careful with what you call your practice jobs. This is where job descriptions are very valuable with helping determine if a position is exempt or nonexempt.
This area of Wage and Hour regulations can get very tricky and complex. If you have any questions on this subject, please do not hesitate to let us know.
Our recommendation here at Healthcare Management Consultants and The Dental CFO™ is to perform a compensation audit of your pay practices and job descriptions to ensure legal compliance and that your employees are classified properly. If you have any questions regarding whether any of your employees are classified properly, please give us a call. We will be glad to help you with making the right determination and how to correct any misclassifications if necessary.
Our next newsletter article will talk about how to properly classify those who perform work for your practice as being your employee or an independent contractor.
FedEx recently paid out $228 million to settle a lawsuit filed by drivers who claimed they had been misclassified as independent contractors. Next time, we will take a closer look at this case and learn some things from the mistakes of FedEx and others that will help you avoid issues like this at your practice.