Long hours are nothing new to workers in the healthcare industry. Although extensive shifts are an expectation for those in the medical field, the healthcare industry is facing increased scrutiny by the Department of Labor as of late. Many healthcare employers have been unknowingly violating the Department of Labor’s wage and hour rules, and are now being investigated for improper compensation of employees.
More often than not, neither the employees nor the employers are aware that there are any violations, but healthcare employers are being audited even with no filed complaints. It is vital, now more than ever, for you to be able to identify potential wage and compensation violations so that you’re sure you are properly compensating your employees, and so that you are protecting your company from violation repercussions. The federal law which addresses wage and compensation violations is the Fair Labor Standards Act, or FLSA for short.
4 Compensation Mistakes – And How to Avoid Them
Incorrect Overtime
You are familiar with overtime compensation, but you may not be aware of the state and federal laws put in place surrounding overtime. A recent study by the National Employment Law Project showed that 76% of employees who worked more than 40 hours in a workweek weren’t paid overtime or were paid overtime at an incorrect rate. According to the FLSA, most employees are entitled to “time and a half” compensation for any hours exceeding 40 in a given workweek.
There are some employees who are exempt from overtime pay, but the typical employee is entitled to overtime compensation. A “workweek” is defined as 7 consecutive 24 hour days, and any time worked over 40 hours during the week is considered overtime. Employees are entitled to one and a half times their regular rate of pay, including bonuses and commissions, as their overtime compensation. Because of the rate of pay changes once 40 hours is exceeded, it is very important to track hours effectively and accurately to be sure that the employee is being compensated appropriately and your company isn’t subject to an FLSA violation.
It’s best to have a clearly outlined system for your employees to follow on how they should be tracking their hours. Clear communication with your team can help avoid any discrepancies. Careful attention to regular and overtime hours worked will protect your company and ensure the proper compensation for the employee.
It is also common for employees to be required, per their company policy, to submit an approval request for overtime. In this case, the policy would state that the employee should submit a request to the practice manager prior to the overtime being worked. A question that frequently comes up is, “Do we have to pay the overtime rate if the overtime hours were never approved by the practice manager?” The answer is yes. Overtime has to be paid appropriately even if approval was not given by practice management for the employee to work over 40 hours.
Another common question is whether or not “comp time” can be given to the employee the following week to decrease the exceeding 40 hour workweek. Meaning, if an employee works 48 hours one week, could they work 32 hours the following week for a sum of 80 hours for the two weeks? The expectation is that because the average of the 2 weeks is 40 hours per week, there wouldn’t be a need for overtime pay. The answer is no, because the workweek is only 7 days long. The employers mistakenly expand the workweek from 1 week to 2 weeks, however each workweek stands on its own. Each 7 day workweek is independent of any other workweek, and the hours exceeding the typical 40 hours must be compensated as overtime pay. Workweeks can start and end on any day of the week, but they must be consistent.
Many companies choose for their workweeks to be Sunday to Sunday, but any start and end day works fine. The practice’s team policies manual should always include the policy on overtime pay and the definition of a workweek. You can and should include a statement outlining your policy in the manual that overtime must be approved. Requiring approval is not a problem and should be communicated to your team, just be sure to avoid creating an environment where your team members work overtime without documentation out of fear that it will not be approved.
It is important that your team is tracking their hours accurately so that they are being compensated lawfully, which will keep employees happy and keep you free of violation. To be sure you’re following the FLSA rules, and to maintain positive workplace morale, the best policy is to communicate expectations clearly, and document hours closely.
Misclassifying Employees
Another common mistake is misclassifying employees as independent contractors. It is important to thoroughly analyze if “independent contractors” truly work there. In the healthcare industry, especially in medical and dental practices, it is unlikely that you have any workers who are independent contractors. The majority of your employees will be regular employees.
There can be some confusion as to how you can identify regular employees from independent contractors. The confusion is so common that many employers use the “ABC test” to see if the employee could be considered a contract employee. If the employee fits into these three requirements, they will be considered an independent contract employee:
A. The person is “free from the control and direction” of the practice when it comes to the performance of their work.
B. The worker performs work that is “outside the usual course of the hiring entity’s business.”
C. The person is “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
Generally speaking, if the employer has scheduling, behavioral, and financial control over the worker (as in controlling the method and manner of work), the employee will normally be considered a regular employee and not an independent contractor. But to be sure, check with the “ABC Test” so that there is no confusion when identifying employees. Do not make assumptions, address, and analyze each employee carefully.
Recognizing Compensable Time
As an employer, you’re required to pay employees for each hour of work completed for the employer. There are, however, some hours that are related to work that the employee is not compensated for. An example of this is commute time. Regular or daily travel time for the employee to commute to and from work is not compensable time.
However, if the employee travels to an irregular location, such as out of town or to a different part of town, the rules are different. In this case, any travel time from their usual place of business to another location is compensable. Another example of paid travel time is if an employee runs an errand on the company’s behalf.
Compensation for Training Events
Employee training is considered compensable time if the training is conducted during usual work hours, during the employee’s regular schedule, and if the training is mandatory for the employee to attend. When training events are held in a different location or during different times, the rules change. If you are conducting a training event that is overnight or out of town, any travel time that occurs during the employee’s regular work hours must be paid and is considered work for the employee. Additionally, the time spent traveling between the employee’s home or regular workplace to the place of departure (for example an airport), is paid if it exceeds the employee’s usual commute time. Only the time that exceeds the usual commute tie should be paid.
Keeping Your Practice’s Employee Compensation in Compliance
When looking at finances and compensation policies for your practice or healthcare industry company, it is important to reference your manual and make sure you are following the FLSA laws. Compensating employees for overtime, training, and regular work hours correctly is incredibly important, so that your employees know exactly what to expect, and so that you are avoiding any possible wage violations. Be sure to identify each employee so you know what type of employees you have, as that could change the wage and compensation laws for that employee.
Carefully tracking hours and keeping your policies up to date to reflect the current FLSA laws will keep your company running smoothly and violation-free. Additionally, partnering with a financial management or accounting firm can ensure your employees are being compensated appropriately. The Dental CFO has years of experience with vast knowledge of the challenges dentists face. Contact us to discuss how The Dental CFO can service you.
