Overtime Laws are Changing
UPDATED November 20, 2024: In the State of Texas v. Dep't of Labor, Case No. 24-cv-468-SDJ:
The federal court ruling on November 15, 2024 invalidated the Department of Labor's 2024 Final Rule, which had increased salary thresholds for overtime exemptions under the Fair Labor Standards Act (FLSA).
This decision has nationwide implications, effectively vacating the rule and restoring the previous salary thresholds that were in effect prior to July 1, 2024
Key points of the ruling include:
The court found that the DOL exceeded its authority by allowing salary levels to overshadow the duties test central to the EAP (executive, administrative, and professional) exemption
The decision vacates both the July 1, 2024 salary threshold increase and the upcoming January 1, 2025 threshold increase
The salary threshold for the EAP exemption reverts back to $684 per week (or $35,568 annually)
The highly compensated employee (HCE) exemption threshold also reverts to its prior level of $107,432 per year
There is a deadline looming… Are you aware? As January 1, 2025 approaches, practice managers need to be acutely aware of a significant change in federal wage and hour laws that have reshaped the landscape of employee compensation. The Department of Labor's (DOL) new overtime rule, which took effect earlier this year, has had far-reaching implications for how we classify and compensate our staff. Let's break down these changes and explore what they mean for your practice.
The crux of these changes lies in the classification of employees as exempt or non-exempt from overtime pay. As of July 1, 2024, the minimum salary threshold for exempt employees increased from $684 per week ($35,568 annually) to $844 per week ($43,888 annually). This shift required many practices to reassess their staffing structures and compensation strategies.
But the changes don't stop there. Come January 1, 2025, we're looking at another significant increase. The salary threshold will jump to $1,128 per week ($58,656 annually). For those relying on the highly compensated employee exemption, the threshold rose from $107,432 to $132,964 on July 1, 2024, and will further increase to $151,164 on January 1, 2025.
These changes have profound implications for everyone. Our support staff, technicians, clinicians, and even some managers who were previously classified as exempt may now fall under the non-exempt category. This shift means that practices need to be vigilant about tracking hours and potentially paying overtime for these employees.
For instance, a clinical assistant who was previously salaried at $40,000 per year and considered exempt may now be entitled to overtime pay if their salary isn't increased to meet the new threshold. Similarly, a clinic manager earning $50,000 annually will need to have their salary adjusted come January 2025 to maintain their exempt status.
So, how do we navigate these changes? Here are some strategies that allied health practices should consider:
Conduct a Thorough Audit: Review all exempt positions to identify those that fall below the new thresholds. This is crucial not just for the July 2024 change but also in preparation for the January 2025 increase.
Evaluate and Adjust: For positions that fall below the new thresholds, decide whether to increase salaries to maintain exempt status or reclassify employees as non-exempt. This decision should be based on factors like budget constraints, workload, and the nature of the role.
Implement Time-Tracking Systems: For newly non-exempt employees, robust time-tracking systems are essential. Many allied health practices are turning to digital solutions that integrate with their practice management software to streamline this process.
Train Your Team: Both managers and affected employees need to understand these changes. Provide training on time-tracking procedures and the implications of non-exempt status, especially regarding overtime rules.
Review Job Descriptions: This is an excellent opportunity to reassess job duties. Remember, salary is just one component of exempt status – job duties must also meet specific criteria.
Consider Alternative Work Arrangements: To manage overtime costs, some practices are exploring flexible scheduling or job-sharing arrangements.
State-Specific Considerations
It's crucial to remember that these federal changes may be superseded by state laws that are more favorable to employees. For instance, California's exempt salary threshold is already higher than the new federal standard. Allied health practices operating in multiple states need to be particularly vigilant about complying with the most employee-friendly regulations in each location.
Moreover, as we've seen with previous attempts to change overtime rules, legal challenges may arise. It's prudent to stay informed about any developments that could impact the implementation of these new thresholds.
Adapting to these new overtime rules requires careful planning and potentially significant operational changes for allied health practices. By proactively addressing these shifts, we can ensure compliance, maintain financial stability, and continue to provide the high-quality care our patients deserve. Remember, in the ever-evolving landscape of healthcare, staying ahead of regulatory changes is not just about compliance – it's about creating a sustainable and thriving practice that values your most important asset: your people.
OPIE is your partner in practice success. If you are an OPIE hosted customer participating in one of our value tiers, you get free HR legal advice through Keystone’s Risk Management Division. Reach out to your Customer Success Manager for more information!
Disclaimer: This Blog is adapted from a recent blog by Keystone’s Risk Management Division. The information provided in this Blog is for informational purposes only and not for the purpose of providing legal advice.