In 2016, the Obama administration made headlines when it passed an update to the overtime rules, effectively requiring overtime pay for most employees earning less than $913 per week, or $47,476 annually. Although the new rule was set to go into effect on December 1, 2016, a number of legal challenges continued to delay its implementation. Well, as of September 6, 2017, the rule change is officially dead in the water and will not take effect thanks to a federal judge in Texas.
The Overtime Rule in a Nutshell
Under the original Department of Labor Rule (DOL), most employees earning $455 per week, or $23,660 annually, were exempt from automatic overtime. The rule had been in place since 2004, without any increases or adjustments for cost of living or inflation. According to proponents of the new thresholds, the existing rules had an especially detrimental effect on women and people of color, who tend to hold lower-paying, non-management positions but don’t always qualify for automatic overtime.
Under the new overtime rules, the threshold for automatic overtime pay would almost double, effectively making nearly 4.2 million Americans eligible for higher paychecks. Although in many cases, overtime pay rules do not apply to management, under the higher threshold, managerial employees — who often work more than 40 hours per week — could be included in the pool of overtime eligible employees. While many labor and worker’s rights groups applauded the decision to raise the overtime threshold, many business groups were concerned about the potential ripple effect that overtime pay increases could have on businesses.
Why the Overtime Rule Was Overturned
Despite the support from labor groups and many legislators, 21 states and a number of business groups filed suit against the Department of Labor to prevent the rule from taking effect. The plaintiffs argued that the higher threshold would require many businesses to spend millions of dollars more on overtime pay, significantly effecting the bottom line. In industries like home health, which only recently gained overtime coverage under the Fair Labor Standards Act, a requirement to pay more employees more overtime could change operations even more. In fact, according to one survey, after the FLSA overtime rules went into effect in 2015, more than half of the agencies that responded noted that they had rescheduled clients or cut caregiver hours in order to avoid paying overtime. Not only that, but 25 percent of agencies stopped providing live-in or overnight care due to the new rules.
Increasing the number of employees eligible for overtime pay would only put further strain on agencies already operating under slim margins, and in some cases, potentially put them out of business. The potential impact on businesses is the primary reason that U.S. District Judge Amos Mazzant in Sherman, Texas overturned the rule, noting that the increase in the overtime threshold was too extreme for many parts of the country, and would have a detrimental effect on small businesses. He also cited the possibility of the higher threshold allowing managers to earn overtime, despite their existing exemption from overtime pay.
What the New Rules Mean for You
The judge’s decision regarding the overtime rule means that, at least in the short term, businesses are to continue using the 2004 rules for overtime, and can adhere to the threshold of $23,660 for determining eligibility. All other rules regarding overtime pay remain in place.
It’s important to also note that the Department of Labor is currently looking at alternatives to the overtime pay threshold. Many lawmakers, and even Secretary of Labor Alexander Acosta, agree that the current overtime threshold is too low, but raising it so high at one point is too far-reaching. Judge Mazzant did agree that the DOL can use a salary threshold as a determining factor for overtime pay, but that the rule should also include consideration of a worker’s duties. In other words, any new rule passed must include provisions to maintain the exemptions on management employees earning overtime.
Until that rule is passed, your agency must continue to track overtime and pay employees in accordance with existing federal and state laws. If you have not already done so, invest in home healthcare software that will not only track hours worked, but also track and calculate compensation for travel time, in accordance with federal law. Regularly audit your company’s time-keeping practices to ensure accuracy and compliance.
If time-keeping and other agency management tasks are taking too much time, Complia Health can help. Visit our site to learn more about our family of home health software solutions that can help you manage your agency efficiently and accurately, while also improving the quality of care you provide and improving your compliance. And stay tuned to this space to stay up to date on the latest news that affects the home health industry.