Salary/bonus ratio important; check state laws
Changes to the Fair Labor Standards Act (FLSA) that passed in 2004 still may be under fire from opponents, but experts say home health managers should not wait for any rollback of the rules. "The changes were made to bring clarity to white-collar exemptions for overtime that applied to professional, executive, and administrative employees," explains Indianapolis attorney John C. Gilliland, who specializes in labor and employment law for the health care community.
"Lawmakers were trying to bring the regulations up to date by adjusting minimum salary requirements for exemptions and defining exemptions more clearly," he says. "The impact in home care is pretty small. If your RNs are paid a low salary combined with a per-visit bonus, you will need to evaluate your pay arrangements."
The law requires employees who are paid both salary and bonus to receive a salary that is a significant portion of their expected income. "While a certain amount is not specified, I recommend the nurse receive at least two-thirds of expected income as salary," he adds. "This change may mean that some agencies need to revisit the mix of salary and bonus they pay, and raise the salary portion."
One aspect that did not change — although many home health managers wanted it to — was the nonexempt status of LPNs, Gilliland notes. "An RN can qualify for a professional exemption from overtime, but LPNs are not exempt from overtime," he says. The educational requirements for the exemption reflect the difference between the two positions, he adds.
"I was hoping for the opportunity to change the status of our LPNs from nonexempt to exempt, but it didn’t happen," explains Kay B. Sykes, SPHR, director of human resources at Alacare Home Health & Hospice in Birmingham, AL.
Elimination of overtime pay for a large group of employees would be beneficial to the home health agency financially and administratively. However, home health managers need to keep the employee in mind when adjusting pay, should the rule change in the future, Sykes says. "We had planned to increase LPN pay scales to provide a set salary that was comparable to the LPN hourly wage plus overtime," she says. "We have to remember that, for many of these employees, the overtime pay is a part of their income upon which they depend to pay bills and meet expenses. We wouldn’t want to just eliminate overtime pay without recognizing the effect on our employees," Sykes explains.
Employers must have complaint process
A new provision that will help home health agencies as well as other employers provides some protection for employers who inadvertently violate the FLSA, Gilliland says. "As long as the agency has a bona fide internal complaint process that gives employees a chance to complain about their pay if they believe they are not being paid according the law, the employer will not lose exemptions for all of their employees," he explains.
The process must be designed to enable employees to file complaints that are investigated thoroughly, in a timely manner, with the decision supported by evidence that the agency followed the law or that a mistake was made and corrected, Gilliland adds. Previously, inadvertent violations might cost an employer the loss of all overtime exemptions, no matter how many employees were affected originally, he notes.
Another clarification in the law points out that if federal and state laws related to compensation differ, whichever law is most beneficial to the employee applies, Gilliland explains. "Federal law may say the employee’s position is exempt from overtime, but state law allows it. In this case, the employee might receive more money under the state law if he or she can collect overtime, so the state law would apply. Not paying attention to state law is a big error that is easy to make. It’s important to remember that your state has laws related to employee compensation, and you need to know them and compare them to federal laws," Gilliland notes.