If there is one law that gives employers fits—including physician practices—it is the Fair Labor Standards Act, the federal minimum wage, and overtime law. The FLSA, as it is commonly known, was passed in the 1930s. In actuality, the long-time law itself is fairly simple: with some exceptions, all workers must be paid at least minimum wage (currently $7.25 an hour) and, with many exceptions, workers must be paid one and one half times their regular hourly rate when they work more than 40 hours in a week. As the expression goes, the devil is in the details—and it is the details of the FLSA that make it a tough code to crack.
Most employers are subject to the FLSA. A covered employer has to employ at least two employees. The business must have at least $500,000.00 in annual revenue. The employer must engage in “interstate commerce” but that can be satisfied by, for example, buying equipment that originates out-of-state.
Assuming the employer is subject to the FLSA, the next step is to determine which employees are subject to the law, and more particularly, which ones are subject to the overtime requirement. In today’s healthcare environment, very few medical employees are paid at or near minimum wage, so minimum wage is rarely an issue. And here is where the details get tricky. For an employee to be exempt from overtime, the employee’s duties must satisfy one of the FLSA’s overtime exemptions and the employee must receive a guaranteed weekly salary of no less than $455.00. The salary amount is not usually a problem—it is the nature of the employee’s duties where the focus usually lies. There are a variety of exemptions under the law but the ones most likely to apply are the executive, administrative, and professional exemptions. “Exempt” for our purposes means salaried and exempt from overtime; “non-exempt” means hourly and overtime pay is mandatory.
The “executive” exemption applies to managerial employees whose duties include the power to hire and fire employees, or make effective recommendations about hiring and firing, and who regularly direct the work of two or more other employees. Other criteria for the executive exemption include the ability to promote or demote, or resolve employee grievances, or again to effectively make recommendations about such decisions. Also, any employee who earns more than $100,000.00 a year and who performs non-manual work is presumed to be exempt. Non-physician managers in a practice may satisfy the executive exemption.
The “administrative” exemption applies to employees who would be deemed managers or executives but they do not supervise other employees or do not usually hire and fire. However, their primary duties are nonetheless so vital to the management of the practice that their exercise of independent judgment and discretion qualify them for an exemption. Examples of the administrative exemption might include billing supervisors or utilization review employees. The key is the exercise of independent judgment and discretion. Typically not satisfying the administrative exemption are payroll supervisors or accounts receivables employees; most clerical employees are not exempt from overtime. The employee must do more than simply apply policies or procedures to be exempt.
Employees who are exempt as “professionals” are those whose work requires an advanced degree—such as physicians and nurse practitioners (also lawyers and CPAs). RNs are generally exempt if paid a salary; but if paid by the hour, they are not exempt. LPNs and CNAs are generally not exempt regardless of work experience or training. Registered or certified medical techs with at least three years of college and a year of course work in a school of medical technology are generally exempt. Also exempt are physician assistants with four-year degrees and who have graduated from an accredited PA program and who are certified by the National Commission on Certification of Physician Assistants.
It bears repeating that not only must the employee’s duties qualify as exempt but the employee must receive a guaranteed weekly salary. Paying an otherwise exempt employee on an hourly basis negates the exemption.
It is important to remember that employees cannot waive their right to overtime. Employees will occasionally prefer to receive a salary and not “punch a clock” but unfortunately the FLSA does not permit an employer and an employee to agree to forgo overtime if the employee is otherwise entitled to overtime. The concern is that some employers might pressure employees into “volunteering” to work extra hours at straight time just to avoid the premium overtime rate.
The next article “Cracking the Overtime Code, Part II” will look at examples of how the FLSA overtime rules apply in practice.
