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Recent media coverage of the de-bate surrounding an increased federal minimum wage as well as increased “salary basis” test to determine exempt status has drawn employers’ attention. Although some claim that these actions are posturings on the part of politicians seeking to further their own party’s agenda and will have little impact on the majority of American workers, the news does provide an opportunity to clarify a few critical points for medical practice employers. The federal minimum wage and salary basis test are provisions within the Fair Labor Standards Act (FLSA),1,2 enacted in 1938, which is often referred to as the “Wage and Hour” law. Imagine the labor and employment landscape that must have existed in 1938, including oppressive working rules and conditions, and no worker protections for overtime, minimum wages, child labor, recordkeeping, and numerous other aspects of the employment relationship. The FLSA was also, in effect, an attempt at a national job classification program.Since its passage, certain jobs and entire industries have been excluded from coverage.2,3 There are regular court decisions on issues of working hours, class action suits regarding the “exempt” status of certain employees, and W-2 versus Form 1099 workers. Exempt status is based largely on income and job description; the classification impacts whether an employee is governed by rules regarding minimum wage and overtime pay.4 It is possible that employers may misclassify employees out of ignorance or inattention to job details. It is also possible that employers misclassify employees as independent contractors. The results of these misclassifications can be disastrous.Sanctions for violations (intentional or otherwise) can be severe,5 compliance is often uncertain, and most states (or municipalities) even have their own similar—but not always exact—replicas of the FLSA. If you are covered by any of these related statutes or ordinances and the FLSA, you must follow whichever requirements are more advantageous to your employees.The purpose of this article is to review a primary point of concern for medical practice management: the employee’s exempt versus nonexempt status. We will assume for the purpose of this article that your employing medical practice is covered by FLSA, and that your workers are, in fact, W-2 employees. The next step, then, is to determine each employee’s status as exempt from FLSA or if they are nonexempt.The FLSA specifically exempts certain workers and industries from its minimum wage provisions, overtime requirements, or both. The employee exemptions have some specific, and not-so-specific, standards (duties tests). Therefore, accurate, current job descriptions are critical to compliance. The main categories of exemptions are executive, administrative, professional, and outside sales. Readers may recall recent court decisions regarding pharmaceutical representatives and their exemption as “outside sales” employees. Other exemptions include computer, highly compensated, and first responder employees. In addition, if employees are determined to be exempt by virtue of their work (not their job title), they must ordinarily be paid a salary. There is also a salary level test, which is currently $455 weekly. Other rules apply to exempt employees regarding docking pay for no work, discipline, or garnishment.2-4Each duties test must be satisfied within its own category. The employer cannot choose duties from multiple exempt categories. Furthermore, the job’s primary duties are paramount for the exempt determination. Ideally, the job design will require any primary duties to account for more than 50% of the total work time. There is no percentage requirement in the FLSA, but employers are cautioned that having lower percentages of any exempt duties increase the legal risk if challenged. The actual FLSA language is too lengthy to include here, but can be found on the US Department of Labor’s Wage and Hour Division website6; most medical practice employees would have the following exemptions if their duties warranted such an exemption (Table)4:
The detailed rules and examples used to qualify for these exemptions appear to be specific.4 Unfortunately, the reality of our work processes, job designs, and shifting responsibilities are often less specific than the written examples. Employers should familiarize themselves with the criteria for each exemption before making a determination about and documenting their decision for FLSA coverage. Here are a few related issues that may arise in the course of implementing compliance programs for the FLSA4,6,7:
Recent proposals from members of Congress could include an increase to the current salary basis amount of $455 weekly. Should the duties test remain as written, but the salary test increase substantially, it is possible that many employees of medical practices may have their exempt status revised and, if then found to be nonexempt, would be eligible for overtime pay going forward.The FLSA is a critical piece of labor law and must always be taken seriously. The dynamics of the workplace and evolving nature of this law through presidential executive order, court cases, and congressional amendment demand our constant vigilance for compliance. No single article on the FLSA can possibly cover all aspects of it, and nothing can replace legal counsel for your human resources policy and practices review. Future articles will focus on other aspects of this important legislation.References
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