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Are Your Employees Classified & Paid Properly?

[ Practice Consulting, Human Resources ]

This question causes a tremendous amount of confusion for many employers, and when inaccurate, could lead to an unexpected bill from the Department of Labor (DOL) for back wages and potential fines. Every employer must follow wage and hour laws to the fullest; there’s no room for shortcuts or a lax approach when dealing with employment laws.

So, how do you remain compliant? Let’s take a look at setting fair compensation and proper classifications.

Compensating Your Employees

Most employees in 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 workweek.

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.

Just to be clear, if your office is only open 4 days per week and has a 32-hour work schedule for the work week, an employee would still have to work over 40 hours in a workweek to be eligible for overtime pay.

Misclassification of Employees

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 workweek?” The DOL provides the following exemption criteria or “tests” to determine qualification for overtime pay.

How Employees Receive Executive Exemption for Overtime:

All of the following criteria must be met:

  • The employee must be compensated on a salary basis at a rate equal to or greater than $684 per week, which is $35,568 per year.
  • Secondly, the employee’s primary duty must be managing the business or managing a department or function of the business.
  • The employee must regularly direct the work of at least two or more other full-time employees.
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations of the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular consideration and weight.
The other exemption from the overtime rule that most frequently applies to healthcare practices is related to the Administrative exemption. This one can get a bit tricky.


Administrative Employee Exemption Overtime Qualifications:

All of the following criteria must be met:

  • The employee must be compensated on a salary basis at a rate equal to or greater than $684 per week, which is $35,568 per year.
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the practice or its patients.
  • The employee’s primary duty includes the exercise of discretion and independent judgment concerning matters of significance.
Examples of employees who might not be exempt from overtime pay in a healthcare practice include 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 “Office Manager” or “Practice Manager” and still not meet all criteria for being exempt from overtime pay. Perhaps your “Office Manager” actually functions like a receptionist, primarily handling clerical duties. In this capacity, this individual would not qualify for the executive exemption or the administrative exemption. 

This is where job descriptions are invaluable in helping determine if a position is exempt or nonexempt. While job titles don’t matter, the appearance of the title does, so strive to label jobs properly to help avoid confusion with your employees.

Remaining Compliant

Our recommendation at The Dental CFO is to perform a compensation audit of your pay practices and job descriptions to ensure legal compliance of classifications and pay structure.

Wage and hour compliance is not always straightforward. If you have questions or concerns, it’s always best to consult a trusted advisor who understands your business and industry.

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