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Federal Overtime Rules

By Toni Talbot, SPHR

Question:
I keep hearing about these overtime rules. I truly don't understand what is going on, yet, I want to make sure my practice is in compliance. My office manager and an associate dentist are salaried (I do not pay them overtime). What do these rules entail and how will they affect me in my dental practice?

Answer:
The rules, which went into effect on Aug. 21, 2004, were the first major change to the Fair Labor Standards Act in close to 50 years. This act, the FLSA, regulates overtime, minimum wage, work time, and child labor. The changes to the regulations deal primarily with the determination of when a position is exempted from the overtime provisions of this act using what are referred to as the "white collar" exemption tests.

Let me first explain the way a position is considered exempt. One cannot, willy-nilly, decide that a job is exempt. It must first meet the requirements under the provisions of the FLSA. The provisions require a two-tiered test: one, mode of pay; and two, duties and responsibilities. The first tier requires the position to be paid on a salaried, rather than hourly, basis. In addition, even if you pay on a salaried basis, in order to be exempt you must not treat employees as hourly by tracking hours for pay purposes. The second tier requires the job to be "tested-out" to see if the duties and responsibilities qualify as exempt. These tests have been changed with the new regulations.

There are five categories of "white collar" type of jobs: professional, administrative, executive, outside sales, and highly skilled computer professionals. Formerly, there were two tests, a long and short test, for each category. These tests were broad and vague. The new regulations have introduced one more precise test for each category. There are some additional aspects of the new regulations that that either determine exempt status or exclude positions from exemption. For example, some "highly compensated" positions may receive an exemption, and police and firefighters cannot be considered exempt.

OK, enough of the technicalities. How does all this impact your practice?

Since you have two positions that you consider exempt, you need to test these positions to determine if they are truly exempt. You indicated both employees were being paid a salary, so you meet the first prong of the test. Now, they must pass the duties and responsibilities test. This is the hard part.

The tests contain multiple parts, including a minimum salary of $455 per week and a review of primary duties and scope of responsibilities. The requirements of the tests vary based upon the position. For example, the associate dentist position should be tested under the learned professional category, where the office manager should be tested using either the executive or the administrative tests. The actual tests can be found at the Department of Labor website, www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm.

Look at the job and compare its responsibilities with the test. Let's look at your office manager. The administrative test includes the following requirement: The employee's primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer's customer. You may look at the duties of the job, and if the job has a great deal of autonomy and handles all management decisions your justification may be something like: Position manages all administrative staff, including a receptionist, bookkeeper, and file clerk. Position researches and recommends purchasing decisions for all nonclinical purchases. Position works in partnership with owner on developing and implementing marketing strategies. Position handles all patient services complaints to resolution.

This is one aspect of the test; there are other aspects which must also be justified. Because this is a new regulation, one that has had its share of controversy, you should act carefully when deciding that a position should be classified as exempt. Take the time to make sure your justification is sound. Look to experts for help. You are always better off erring on the side of caution. When in doubt, keep a position nonexempt rather than making it exempt.

It will take time for the understanding of these regulations to pan out. But despite recent controversy in Congress, the new regulations are indeed in effect, and it's a good idea to be familiar with them.

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