For many salaried hospital employees who rely on overtime to supplement their base pay, Dec. 1 will be a day they will long remember. That's when the Department of Labor’s new overtime pay rule goes into effect — raising the salary level for those exempt from overtime pay from $23,660 to $47,476.
Tim Garrett, an attorney with Nashville, Tenn.-based Bass Berry & Sims PLC, says the impact of the rule, part of the Fair Labor Standards Act, will depend on a hospital or health system's staffing and pay scales. Some nurse practitioners, charge nurses, administrators and technical staff could be affected. Few people who come into direct contact with patients will be impacted, but mid-level managers who oversee two or more people definitely will feel it.
While all workers are entitled to overtime of 1.5 times their regular pay for every hour over 40 hours worked in a week, the new rule applies to what is commonly called “white collar exemptions.”
The Department of Labor says the new salary levels automatically will adjust every three years based on the 40th percentile of the equivalent weekly wage of full-time salaried employees in the lowest-wage census region, which currently is the South at $913 per week or $7,476 annually.
What makes the rule seem even more complex is the fact that employers can raise salaries to the required levels or satisfy 10 percent of the higher salary by offering bonuses or commissions. Or they could reclassify employees as nonexempt and pay overtime based on a record of actual hours worked.
A major challenge for hospitals will be cost containment, Garrett says. “How are we going to avoid a big increase in labor costs? How do employers estimate what overtime hours would be?”
Plus, he says, “This will likely suppress employers from hiring, so it will be more challenging for young professionals to find entry-level management jobs.”
Richard Gundling, senior vice president of health care financial practices at the Healthcare Financial Management Association, agrees. “The challenge is this puts pressure on hospitals that are focused on reducing costs, but at the same time having to invest in their infrastructure.”
Garrett says the rule could also affect employee morale, especially if some people are given raises while others are not.
The advice offered by both Garrett and Gundling is to begin conducting an audit on those who are currently exempt, but won’t be after Dec. 1. “They need to do an analysis so they can adjust work schedules and staffing where needed, but they need to start now," Gundling says.