Compliance

Evaluating salaried-exempt employees

Practices will need to comply with upcoming law changes.

BY C. JOLYNN COOK, RN

This summer, the Department of Labor released the final rule to the Fair Labor Standards Act (FLSA), which may impact salaried-exempt employees in your practice (those who receive a salary as opposed to hourly pay and who are not paid overtime). This is the first update to this law in 12 years.

Previously, the Department of Labor used short and long duties tests to determine whether an employee paid a salary met the requirements of the federal government to be considered a “salaried employee.” The salaried-exempt test included:

1. The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed;

2. The amount of salary paid must meet a minimum specified amount;

3. The employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the FLSA regulations.

The Labor Department last updated these regulations in 2004 when it set the minimum weekly salary level at $455 (or $23,660.00 annually). Other changes to the regulations included collapsing the short and long duties tests into a single standard duties test and introducing a new exemption for highly compensated employees (HCEs).

Changes for practices

The most significant change is the amount of pay required for an employee who receives a salary, as opposed to receiving a pay based upon an hourly rate (plus overtime).

The new law sets the amount to qualify for being paid a salary at a minimum of $47,476.00 per year. To further simplify, an employee must make at least $22.83 per hour to be put on salary and meet the legal requirements.

Many mid-size and larger practices likely have managers, supervisors or clinical employees who currently receive a salary that falls below the threshold for the employee to remain a salaried employee when divided by 2,080 hours (hours worked per year at full-time).

Remember, a job title of manager or supervisor does not necessarily qualify an employee to be exempt from overtime under the FLSA minimum wage and overtime rules. To qualify, an employee must meet the duties and the salary requirements set for in the FLSA.

Action required

The practice should take the time to evaluate each employee’s job duties if paid a salary less than $47,476.00 per year. Each practice needs to develop a plan to raise the employee to this new level or change the employee’s status to hourly-nonexempt from overtime.

Another change will also increase the salary level for those to be considered an HCE to $134,004.00 for a full-time, salaried employee. In most practices, it is likely that an HCE would also meet the professional salaried-exempt requirements. These include: an employee who is paid $134,004.00, whose primary duty is to perform office or non-manual work, and who customarily performs at least one or more duties or responsibilities of an exempt executive, administrative, or professional employee.

Conclusion

For a practice with a human resources professional or manager and/or counsel specializing in human resources law, it is prudent to reevaluate any salaried-exempt employee’s pay rate and job duties to ensure compliance with the new law.

To be in compliance by Dec. 1, 2016, the time to do this is now. OP

Ms. Cook is the administrator of the Laurel Eye Clinic and the Laurel Laser & Surgery Centers. A certified ophthalmic executive and certified administrator surgery center, she is a registered nurse and also has a degree in Health Care Administration.