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Weekly UpdatesThe Wage and Hour Division (Wage/Hour) of the U.S. Department of Labor (DOL). which administers and enforces the Fair Labor Standards Act (FLSA of the "Act"), hasn't exactly waged war on the long-term care (LTC) industry, but it has come close. In the late 1990s and early 2000s, Wage/Hour singled out "nursing homes" and "group homes" for an unprecedented audit of compliance with the FLSA's minimum wage, maximum hours (overtime), and child labor laws. Long-term care was targeted in large part because of the perceived presence of a large number of "low-wage workers" and a suspicion that substantial noncompliance with the Act may have existed. At first. DOL was focused on fact-finding and educations. However, after finding an unacceptable level of violators in its first series of audits, DOL conducted a second round of investigations a few years later, only to find that matters had not improved and in some respects had gotten worse. At that point, Wage/Hour shifted its focus to enforcement and that's where we sit today. DOL believes, with good cause after the findings in its investigatory audits, that the LTC industry harbors an unacceptable number of FLSA violators and, as a result, is to a certain extent out to get us. LTC employers are squarely in the crosshairs of Wage/Hour and would be wise to clean up their FLSA acts before DOL comes a-knocking on the doors of their facilities.
Generally speaking, these laws govern minimum wage, overtime pay, and child labor. As all should know, under the FLSA, with very few exceptions, each employee must be paid at a just-increased minimum wage of $5.85 per hour. The federal minimum rate will increase to $6.55 in 2008 and eventually be at $7.25 in 2009. Because Congress acted so slowly increasing the $5.15 rate that was established in 1997, many states have already established a higher rate applicable to employers within their boundaries. LTC employers must pay the higher of the two.
Overview
The FLSA maximum hours provisions require that "nonexempt" employees be paid at one and one-half times their regular hourly rate of pay for all hours worked in a workweek in excess of 40 hours. Except as follows, there is no general requirement under the FLSA that employees be paid overtime on a daily basis for work in excess of eight hours. Also, nonexempt employees may be paid on a salary basis, but the salary must be reduced to an hourly equivalent for purposes of calculating overtime obligations. A special provision applicable only to healthcare facilities for which most (if not all) LTC employers qualify, Section 7(j) of the FLSA allows employers to measure overtime pay entitlement over a 14-day period to accommodate the need for 24/7 scheduling. Employers availing themselves of the benefit of Section 7(j) must pay overtime to employees who work more than 80 hours in the 14-day period but, to take advantage of this provision, they must also pay employees daily overtime premiums for all hours worked in excess of eight in a workday. (I recommend that employers taking advantage of an "8 and 80" program limit it to full-time employees for reasons that are somewhat beyond the scope of this article.) By statute and regulation, certain classes of employees may be exempted from overtime pay regardless of the number of hours worked. Some classes of employees are exempt from both minimum wage and overtime pay and others are exempt only from the overtime pay provisions.
The child labor laws place restrictions on the hours and types of work that may be performed by employees under the age of 18. Youth workers, except for family members, must be at least 14 to work in your facility.
Finally, by way of background, the FLSA, and the regulations issued thereunder, imposes certain recordkeeping requirements on employers with regard to the hours worked, timekeeping, and pay of employees. Employers found guilty of FLSA violations are liable for two years of back wages--three years in the case of "willful" violation--and, potentially, for liquidated damages that effectively double the amount owed. Criminal penalties can be sought, but rarely are, in the case of serious violations, and repeat violators can be, and frequently are, assessed "Civil Money Penalties" of $1,100 for each such violation. Child labor law violations also carry "fines" that can be relatively severe.
For this article, however, I would like to focus on the provisions of the FLSA which, in my experience over the past 30 years, have been most misunderstood or misapplied by LTC employers--the minefields.
Overtime
The most frequently violated provision of the FLSA--also confirmed in the special DOL audits--is in the calculation of regular rate of pay for purposes of paying overtime when due. The rules and regulations are actually fairly simple and straightforward but, more often than not, they are not followed. In the 1997 audit, Wage/Hour found that 30% of the nursing homes investigated were miscalculating regular rate and not paying employees all of the overtime pay they were due. Overtime pay for hours worked in excess of 40 in a workweek (or 8 in a day and 80 in a two-week period if the employee is paid under Section 7[j]) must be calculated not necessarily at the employee's established hourly rate of pay, but at the employee's regular hourly rate for that particular workweek. In its simplest form, regular hourly rate is arrived at by dividing the employee's total straight time compensation for that workweek (without regard to overtime premium pay) by the number of hours actually "worked" (not necessarily paid) in that workweek. When Section 7(j) is applicable to an employee, the calculation is based on the two-week pay period.
Regular rate differs from the employee's set hourly rate in that the employer must include in total compensation for purposes of the calculation all differentials, all commissions, most bonuses, certain meal and lodging payments, and the value of certain employer-furnished facilities and incentive pay. In sum, virtually any payment the employee receives for "working" must be included. Payments that an employer does need to factor into the calculation of regular rate include paid leave, pay for unworked time (such as holidays, vacation, sick leave, paid time off), voluntary premium payments (e.g., time and one-half for work after eight hours or on a holiday), on-call pay, callback pay, reporting or show-up pay, idle time pay, awards, gifts, most discretionary bonuses, referral bonuses, benefit payments, and expense reimbursements. Although sometimes cumbersome depending on the level of sophistication of the employer's payroll processing function, employers are cautioned to ensure that they understand the importance of properly and accurately calculating the regular hourly rate and paying employees for overtime work accordingly.
Frankly, however, this minefield itself is not fatal. Liability for miscalculations of the "regular rate" is usually not that great in terms of dollars (e.g., calculating the time and one-half at $10.00/hour rather than $10.50/hour), but the error becomes significant in that the employer is then tagged as an FLSA violator. As such, that employer becomes exposed to Civil Money Penalties under the FLSA in the event of any future FLSA violation--and they can be very significant. Civil Money Penalties, in the event of a subsequent violation, can be assessed at $1,100 per violation per workweek in which a violation occurs. Each employee so "violated" can give rise to a separate penalty.
Tracking Hours Worked
Another minefield, as simple as it may seem to navigate, is tracking and counting "hours worked" to determine if overtime pay is due. The key words are "compensable hours," and hours can be considered compensable even if they are not scheduled or authorized beforehand or approved after the fact if they are indeed "worked" by the employee. The time is worked for purposes of the FLSA if the employer "suffers" or "permits" it to be worked. That is, if the employer, or one of its "agents" for this purpose (head nurse, unit coordinator, department head or, for that matter, any supervisor), knows or reasonably should know that the employee has performed work, it must be counted. Rank-and-file employees should be instructed that any time they are performing work, it is "on the clock." Supervisors must be trained to, among many other things under the FLSA, recognize that any time an employee is performing job-related tasks, be it before or after the start or end of a shift, during lunch or other unpaid breaks, or even at home, he/she must ensure that the time is included in compensable hours for overtime calculation purposes. If the supervisor "suffers" or "permits" the employee to work, it is counted toward the overtime threshold. If you don't want work to be performed, it is incumbent on you, the employer, to put a stop to it, even if it requires disciplinary measures.
Employers must also become familiar with what job-related activities are considered compensable activities and which are not. For example, requiring an employee to change into a uniform at the worksite is compensable, while worksite clothes-changing for employee convenience is not. Pre-shift distribution of work or assignments and, by all means, shift change meetings or "report" are compensable, as are simple things like having an employee pick up or drop off mail or packages on the way from/to home or during lunch. Performance of work during unpaid lunch periods is particularly troublesome--a huge minefield--for healthcare employers. Regulations require that the lunch break be "uninterrupted" and be at least 30 minutes for the employer to exclude it from time worked. It is not uncommon for LTC employees to eat at their work stations or with residents, and it is also not uncommon for caregivers to be called or be called back during lunch break to deal with resident issues. All of these are problematic. If the employee's lunch break is interrupted--he/she performs any work--the entire break becomes compensable time in determining if overtime pay is due.
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