How Will New Overtime Laws Affect Your Practice?

If you're a nurse practitioner practice owner, you've likely heard about the Department of Labor's new overtime rules. These rules increase the salary threshold for employees eligible to receive overtime pay. Proponents of the new law argue that the DOL's new regulations prevent lower level employees from being taken advantage of by working long hours without fair compensation. Opponents of the ruling argue the new threshold is too high, and that the ruling decreases the number of flexible employment options available to workers, as well as has negative financial and cultural consequences for businesses and employees. 

As nurse practitioners, struggling to keep up to date with evidence based patient care is difficult enough. Keeping track of employment law is another story. Nurse practitioner practice owners, however, must be aware of these new rules that take effect on December 1, 2016. Here's a quick breakdown of the Department of Labor’s new overtime law and how it could affect your practice. 

What do current rules say about compensation?

Current employment law outlines the following compensation requirements: 

  1. All hourly employees must be paid time-and-a-half overtime pay for any hours worked above 40 in a given week. 
  2. Salaried employees earning less than $23,660 must be compensated time-and-a-half overtime pay for any hours worked above 40 in a given week. 
  3. Salaried employees earning above this $23,660 threshold are not required to receive additional compensation for hours worked above the 40 hour week.

How will the new rules change the way employees are compensated?

The new Department of Labor ruling increases the threshold at which salaried employees must be compensated for hours worked above 40/week. With the new law in effect, compensation for employees will look like the following: 

  1. Continued requirement that all hourly employees to be paid time-and-a-half overtime pay for any hours worked above 40 in a given week. 
  2. Salaried employees earning less than $47,476 must be compensated time-and-a-half overtime pay for any hours worked above 40 in a given week. 
  3. Salaried employees earning above the $47,476 threshold are not required to receive additional compensation for hours worked above the 40 hour week.

There are exceptions to the new rule. Teachers, for example, are exempt from these laws, so schools will not be required to change the way educators are compensated. 

Why should my practice care about the new overtime laws?

Raising the threshold at which overtime pay is required is a huge deal for many companies. Employee compensation structures affect company’s financial outlook, company culture, and the flexibility of employment arrangements. Changing the way your employees are paid may be perceived negatively on part of employees, resulting in turnover in your practice. 

Take an employee working in the billing department of your practice earning a salary of $40,000, for example. This individual may currently have the option to work from home, or while away from the office, providing the employee a good work-life balance. The arrangement also allows your practice to keep a high quality, motivated employee who values flexibility. As a salaried employee, this individual is able to work additional hours during busy times such as the end of the fiscal year, while putting in fewer hours when the practice is not as busy.

New overtime laws change the above scenario. Under the new laws, as an employer, you must compensate this employee time-and-a-half for hours worked above 40 per week. It will likely make the most sense to convert this employee to an hourly compensation structure, removing the incentive of working from home. A busy season in the billing department will mean paying this employee time-and-a-half during those weeks or months. Meanwhile, during slow times, the employee will earn less as he or she will be putting in fewer hours. 

How should I prepare for the implementation of new overtime laws in my practice?

Practices with salaried employees must think through the following as they make changes to comply with new overtime laws: 

  1. Time and attendance - how will employees’ hours be tracked? 
  2. Compensation structure - will you keep employees as salaried, or transition to an hourly compensation structure?
  3. Overtime - will you allow employees to work overtime hours, or not?

Ultimately, the answer to these questions depend on the needs of each individual employer. Think through the financial implications of each scenario, and how change to employee compensation will affect your bottom line. 

What cultural changes can I expect in my company as a result of new overtime laws?

Telling an employee who doesn’t typically punch a time clock that this is now a requirement of the job may not go over well. As a result, employers must think through the cultural considerations new laws have for their practice and prepare to respond to them. Consider the following: 

  1. How will salaried employees feel when hourly employees are getting extra compensation during busy times of year, or at company trainings?
  2. Many employers are flexible about taking time off or working from home. This becomes trickier when employees are paid hourly. Will you need to implement a new PTO, or flexible work policy?
  3. Employers may not have worried about employees taking time off for a doctor’s appointment, or a child’s event before. But, if they are paid hourly, or get extra compensation for weeks where they work more than 40 hours, do you need to start paying more attention to time not working in slower weeks?

While many employees in your practice will not be affected by new overtime laws outright, a few likely will. Making changes around these employees has the potential to affect your practice as a whole. Careful attention to financial and cultural considerations must be taken as you transition to keep your practice in compliance with the Department of Labor’s new overtime law.