New regulation requires overtime pay for more employees

Labor Department offers webinars to explain new rules

tech_smA new rule finalized last week by the U.S. Department of Labor requires time-and-a-half overtime pay for far more salaried workers than previously have been covered. This rule applies to employees in the private sector as well as those in federal, state, and local governments. It also applies to nonprofit charities that provide veterinary services for a fee (see the nonprofit fact sheet for more information on nonprofits that may be affected by this rule).

The Fair Labor Standards Act (FLSA) Overtime Final Rule, announced on May 18, requires employers to pay overtime to employees who earn $913 per week or less – up to $47,476 on an annual basis – and work more than 40 hours per week, even if they are salaried workers who are classified as managers or professionals. Previously, the overtime requirement applied only to hourly employees and salaried workers earning $455 a week or less – up to $23,660 per year.

There are some exemptions to the rule, but most of these exemptions won’t apply to veterinary practices. Employees that are not exempt from the Fair Labor Standards Act must be paid the federal minimum wage (currently $7.25 per hour) and at least one and one-half times their regular rate of pay for any hours they work beyond 40 in a workweek.

The AVMA is monitoring implementation of this rule and evaluating legislation related to this issue. We’ll continue to keep our members informed of any important developments.

How does the new rule affect veterinarians?

What does this mean for veterinary practices? It will affect overtime pay for salaried veterinary technicians, who are not considered exempt from the requirements of the Fair Labor Standards Act, if their salaries are $913/week ($47,476/year) or less and they work more than 40 hours per week. If staff members are paid hourly wages, they already must be paid time-and-a-half when working overtime and therefore won’t be affected.

Office administrators and managers could qualify for the administrative employee exemption from guaranteed overtime pay if the following qualifications are met: the employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate of not less than the threshold salary of $913/week; the employee’s primary duty must be to perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and the employee’s primary duty must include exercising discretion and independent judgment with respect to matters of significance. The qualifications of this exemption have not changed; only the salary threshold has been increased.

Will the changes affect veterinary salaries? Not likely, unless the veterinarian is being paid below the threshold salary listed above. Otherwise, veterinarians are generally considered exempt as learned professionals because they meet the following three criteria: their primary duty is to perform work requiring advanced knowledge (defined as work that is predominantly intellectual in character and that includes work requiring the consistent exercise of discretion and judgment); their advanced knowledge is in a field of science or learning; and their advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. See the Labor Department’s fact sheet on the subject for more information. Veterinarians working as contractors or working on production may or may not be affected.

The rules are complex, and there are many additional nuances. If you have questions about your practice’s situation, or your own, it’s best to consult a labor attorney or the Department of Labor.

How will the changes affect higher education – including veterinary schools? Although the new salary thresholds will affect many employees, there are exemptions for teachers/professors and for undergraduate and graduate students engaged in research under faculty supervision. See the higher ed fact sheet for more information.

The final rule also:

  • Raises to $134,004 the total annual compensation requirement for so-called highly compensated employees to be exempted from overtime protection if they satisfy what is known as a “minimal duties” test related to the work they perform. See the fact sheet for more information. This change seems unlikely to apply to veterinarians and practices.
  • Provides for the Department of Labor to increase the salary and compensation levels every three years. Based on current projections, the standard salary level is expected to rise to more than $51,000 with the first update, scheduled for Jan. 1, 2020. This would mean that the current level of $23,660/year would rise to $47,476/year in December 2016 and then to more than $51,000 in January 2020.

The new rule is set to take effect December 1, 2016, although lawmakers are considering possible action to block it using the Congressional Review Act and riders to appropriations bills.

The Fair Labor Standards Act contains an exemption from the payment of both minimum wage and overtime pay to anyone employed as a bona fide professional employee. The professional exemption contains two main categories: learned and creative. The Labor Department’s Small Entity Compliance Guide to the FLSA “White Collar Exemptions” provides good guidance; you also can learn more about classification of employees on the Labor Department’s website. They also have a FAQ document available.

Webinars will offer more information

The Department of Labor is offering a series of 90-minute free webinars for employers who want to better understand what is happening and how to comply with the regulation:

  • General Information on the Overtime Final Rule: Starting at Noon Central Time on May 26, June 2 and June 9
  • For the Nonprofit Sector: Starting at Noon Central Time on June 7
  • For State and Local Governments: Starting at Noon Central Time on June 8

You can register for these webinars on the Department of Labor’s website.

The AVMA will continue to monitor the implementation of this rule and is reviewing legislation that would require the Labor Department to perform an economic analysis of how changes to overtime regulations would impact small businesses, employers in other industry sectors, and nonprofits before issuing a new rule. The proposed legislation, known as the Protecting Workplace Advancement and Opportunity Act (S. 2707, H.R. 4773), also would prohibit automatic increases in any new rule, and ensure that any proposed changes to the duties test receive scrutiny through the formal notice and comment process. For more information, contact Gina Luke in the AVMA’s Governmental Relations Division.

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