Physician Practice and New Overtime Rules
On September 24, 2019, the Department of Labor issued its final ruling to increase the minimum salary threshold for executive, administrative and professional exemptions from $455 per week ($23,660 annually) to $684 per week ($35,568 annually). The new rule goes into effect January 1, 2020. The Department of Labor (Department) updated and revised the regulations issued under the Fair Labor Standards Act (FLSA) to allow 1.3 million workers to become newly entitled to overtime by updating the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements. Here are some highlights as they might related to your physician practice.
Key Provisions of the Final Rule
The final rule updates the salary and compensation levels needed for workers to be exempt in the final rule:
- Raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
- Raising the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year;
- Allowing employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
- Revising the special salary levels for workers in U.S. territories and in the motion picture industry.
Standard Salary Level
The Department is setting the standard salary level at $684 per week ($35,568 for a full-year worker). The salary amount accounts for wage growth since the 2004 rulemaking by using the most current data available at the time the Department drafted the final rule.
HCE Total Annual Compensation Requirement
The Department is setting the total annual compensation requirement for HCEs at $107,432 per year. This compensation level equals the earnings of the 80th percentile of full-time salaried workers nationally. To be exempt as an HCE, an employee must also receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of non-discretionary bonuses and incentive payments).
What determines if an employee falls within one of the exemptions?
To have exempt employee status, there are three exempt employee requirements that must be met: The worker must be paid on a salary basis, make the minimum salary for exempt employees, and have job duties that are considered exempt. Please refer to this fact sheet from the Department of Labor for more information
Who is covered by the FLSA?
Any employee that does not fit into the exempt category is considered a nonexempt employee. This fact sheet from the Department of Labor provides additional insight.
If an employee works more than 8 hours on a given day but less than 40 hours for the total workweek, is that employee entitled to overtime pay?
The Federal Department of Labor does not require overtime for hours worked over 8 in a day. However, there are states that have this regulation and you will want to verify the states overtime regulations.