New Overtime Rule May Pose Little Threat to Home Care

A new wage rule that increases overtime benefits for millions of American workers is expected to put some wage pressures on employers across many industries, but how much it will impact home health care is still up for debate.

The Department of Labor (DOL) recently issued its new overtime salary exemption limits that will become effective December 1, 2016. The rule increases minimum salary requirements for overtime exemptions for salaried worked from $23,660 per year, or $455 per week, to $47,476 per year, or $913 per week. Salaried employees under that new threshold will be entitled to overtime wages, which are calculated as 1.5 times an employee’s regular rate for labor beyond 40 hours within a workweek.

While the rule is expected to impact 4.2 million workers and add up to $12 billion in added wages for Americans, according to the DOL, the new limit might not have as large of an impact on home health providers. This is largely because the majority of workers are paid on an hourly basis.

“We really don’t think this is going to impact home care at all,” Caitlin Connolly, home care fair pay campaign coordinator with the National Employment Law Project (NELP), told Home Health Care News. “There are very few home care workers who are salaried workers.”

NELP is a national advocacy and research group for the employee rights of lower-wage workers. As the home care fair pay campaign coordinator, Connolly works to ensure home care workers receive the labor protections they are afforded through the Fair Labor Standards Act (FLSA).

Connolly says the nature of the health care system is why many home care workers are compensated on a hourly basis, and why the salaried rule is unlikely to much of an effect on home health care.

“The reason these models are hourly is because the reimbursement is set up for hourly,” she said. “There are some salaried home care positions, but generally speaking, they are hard to find. That’s why there is a disconnect from this specific overtime rule and home care. There are other fields and industries where this is going to have more of an impact.”

However, home care companies will have to establish methods to track hours for their salaried workers who are under the new threshold if they were not already doing so. Some industry groups, including the National Association of Home Care and Hospice (NAHC), have noted this could create a “significant administrative burden” for employers.

Long-Expected Change

With six months until the rule goes into effect, most businesses should have enough time to figure out how to implement the rule, according to the DOL. The new threshold should also not be much of a surprise, as President Obama first announced an intention to boost the salary exemptions in 2014. The proposal for the salary threshold was published by the DOL in the Federal Register July 6, 2015.

The advanced notice enabled some home care providers to plan ahead for upcoming changes to comply and also avoid an expense shock when the rule did come into effect. 24Hr HomeCare, a private duty-home care provider based in California, began planning after the initial proposal last summer. The provider has also been dealt with wage increases for hourly workers as California raised its minimum wage rates to $15 per hour.

“Planning ahead is the key to ensure success when preparing for legislative changes,” 24Hr HomeCare CEO David Allerby told HHCN. “We have been carefully tracking the proposed changes to the overtime salary exemption since President Obama announced his proposal almost a year ago and planned for the changes.”

There are a number of ways that home health care providers can comply with the rule and reduce their exposure to added costs, including simply paying overtime rates, raising workers’ salaries above the new threshold, limiting workers’ hours to 40 per week or engaging in a combination of those options.

24Hr HomeCare, for one, already sets salaries about the threshold, which means its exposure to the new rule is limited. The company also focuses on higher hourly wages for caregivers and has had little exposure to increasing minimum wage laws as a result.

“A vast majority of our staff is already above the new threshold,” Allerby said. “Since day one as an organization we have focused on ensuring that our staff is compensated competitively and above industry standard. For the hourly staff that we have, there are systems in place to ensure they are compensated well and appropriately for the great work that they perform for our clients and caregivers.”

Written by Amy Baxter