EMS Insider, Legal Consult

Employees Exempt from Overtime Pay? Think Again.

New regulations under the federal Fair Labor Standards Act (FLSA) that go into effect Dec. 1, 2016, require EMS agencies to take a fresh look at their pay practices. These regulations increase the minimum salary amounts that must be paid to EMS employees—from the current $455 a week to $913 a week—if they are to meet one of several discrete overtime exemptions under the law. If an employee meets one of the exemptions (and earns a salary at no less than the new threshold salary amount), then that employee need not be paid overtime wages. The change in the law should not affect front line EMS providers like EMTs, paramedics and dispatchers, but it could significantly impact management, business and office jobs in the typical EMS organization.

FLSA Basics

Here’s how the law works. First, the FLSA requires that employees be paid at least a minimum hourly wage. The federal minimum wage is currently $7.25/hour and has not been increased since 2009, which is in part why 29 states have established a minimum wage higher than the federal minimum. Both New York and California this year enacted legislation that would increase the minimum wage to $15/hour over several years, which could affect many ambulance companies.

Second, the FLSA requires that employees be paid overtime—usually at one and a half times the employee’s regular rate—for hours worked beyond 40 in a seven consecutive day workweek. There are exceptions to the general overtime rule, such as Section 7(k) of the FLSA, which provides that employees engaged in fire protection may instead be paid overtime on a “work period” basis that ranges from seven consecutive days to 28 consecutive days in length.

White Collar Exemptions

Beyond the basics, the FLSA regulations include several so-called “white collar” exemptions from the general rule that the employer must pay overtime wages. These exemptions can be met for employees who work in certain executive, administrative and professional jobs if they are:

  1. Paid a fixed salary that is not subject to reduction due to variations in the quality or quantity of work performed (the “salary basis” test);
  2. Paid a fixed salary that meets a minimum level set by the regulations (the “salary level” test); and
  3. The employee’s actual job duties involve executive, administrative or professional duties as specifically defined by the FLSA regulations (the “duties” test).

Many employers are of the mistaken belief that if they just pay the employee a salary, that employee is exempt from overtime: not so. Paying a salary is just one of the three required elements to meet the legal exemption from the payment of overtime. And now, under the new regulations, the minimum salary amount (the second part of the exemptions test) has nearly doubled to an annualized amount of $47,476. This in itself could affect many EMS employers who have exempt employees but who are not currently paying them at least this threshold amount.

The Duties Test—Often Overlooked

The third essential element to meet the overtime exemption is the duties test, which many employers have not adequately examined when concluding that an employee is exempt from overtime. It is the most hotly litigated area of the FLSA when it comes to an employee challenging the employer’s claim that the employee is not entitled to overtime. The new regulations do not change the duties test, but EMS employers must review the positions they currently treat as exempt from overtime now to ensure that each employee classified as exempt meets all the elements of at least one of the white collar exemptions (executive, administrative or professional) prior to the December 1st implementation of the new salary threshold.

If you are paying the employee a fixed salary that meets the new minimum threshold of $47,476 annually, the big question is: Does that employee perform exempt duties? You can’t just take a group of EMTs and paramedics and claim they are exempt from overtime solely on the basis of paying them a fixed salary of $47,476. They simply aren’t performing exempt duties under the law. The FLSA exemptions require that the exempt employee perform specific duties for the employer to consider them legally exempt from overtime. The primary duties for each of the three main exemptions are:

Executive Exemption: The employee’s primary duties must be managing the enterprise, or a recognized department or subdivision. Additionally, the employee must regularly direct the work of at least two or more full-time equivalent employees and must have the authority to hire or fire employees, or make suggestions/recommendations concerning hiring, firing, advancements, promotions or other staff changes that are given “particular weight” by the employer. In other words, the employee must directly supervise others and have actual supervisory authority to fit the executive exemption. Examples of potentially exempt positions include operations manager, shift supervisor, communications center director and billing office manager.

Administrative Exemption: The employee’s primary duties must be performing office or non-manual work that is related to management or general business operations and those duties must include the exercise of discretion and independent judgment in significant matters for the business. Examples of potentially exempt positions are marketing director, office administrator or quality assurance director.

Professional Exemption: The employee’s primary duties must be performing work that requires advanced knowledge that is predominantly intellectual in nature and requires consistent exercise of discretion and judgment. The employee’s advanced knowledge must be in a field of science or learning, and that advanced knowledge must customarily be acquired through a prolonged course of specialized education or intellectual instruction. Examples of potentially exempt positions are MICU registered nurse and flight RN. The FLSA does not consider paramedics to meet the educational requirements for the professional exemption. There are also white collar exemptions for computer professionals and outside sales employees, but these jobs are not typical in EMS agencies.

Keep in mind it is not the job title that determines if the employee is performing exempt duties, it is the actual duties performed by the employee that are evaluated for the exemption. It is a very “fact specific” determination, and each employee’s position has to be reviewed carefully. Also, exempt duties need not be the only duties the exempt employee performs. The exempt employee can perform some non-exempt duties, but the primary duties must be the exempt duties as defined for each exemption. For example, a shift supervisor who is in charge of running the operations of the agency on that shift and who supervises two or more employees on that shift may also be assigned to a medic unit and run calls while functioning as a shift supervisor without potentially violating the exemption. But if the majority of the duties that supervisor performs are not exempt, it could raise questions as to the supervisor’s exempt status.

Leadership Recommendations for Compliance

Now is the time to get your house in order when it comes to pay practices, especially for any position that you consider exempt from overtime. Here are some tips:

  1. Evaluate All Job Duties. Review all positions you have to determine if the primary duties of the position are truly exempt duties that fit within one of the white collar overtime exemptions. If the duties are not exempt duties, the employee will likely be eligible for overtime.
  2. Have Clear, Written Job Descriptions. Unfortunately, many job descriptions are outdated and do not accurately describe the actual job duties performed by the incumbent in that position. Accurate job descriptions are critical not just for pay practice compliance, but to help ensure that the employee knows and understands what is expected in the job.
  3. Review All Pay Policies and Practices. Make sure that your agency is properly paying employees for all hours worked and that you are calculating and paying overtime properly, in addition to reviewing job duties. Many employers make fundamental pay practice mistakes such as not properly counting certain on-call time as hours worked, failing to pay for meal and rest periods that are interrupted, and not properly factoring in other payments such as shift differential and non-discretionary bonuses into calculating the employee’s “regular rate” for overtime payment.
  4. Review all Exempt Positions. Don’t assume that because you have already classified the employee as exempt that you have done so correctly. Misclassification of overtime exempt status is a common problem—and a costly one. If you misclassify an entire group of employees with the same job title as exempt, and the reality is that they are not exempt from overtime, you could have back pay liability of two to three years for the entire group of misclassified employees. And you would be stuck paying the attorneys’ fees of the employees who successfully challenge the exemption in court. The Wage and Hour Division of the U.S. Department of Labor, as well as state labor law agencies, investigate wage and hour complaints and may conclude that back pay must be awarded. Get good legal advice when evaluating positions your agency would like to consider exempt and, of course, when there is a pay practice complaint or lawsuit filed against the agency.
  5. For Properly Exempt Employees, Make Sure the New Pay Threshold is Met. If you have properly classified employees as exempt, and they are not yet being paid a salary of at the least $47,476 per year, that salary must be increased to at least this amount effective Dec. 1, 2016. The alternative is to not consider those employees exempt and to pay them the properly calculated overtime rate for overtime hours beginning December 1. Or, you could eliminate overtime hours, as you are permitted to pay non-overtime exempt employees a salary.

We recommend that all EMS agencies engage in an organization-wide pay practices audit by legal counsel knowledgeable in wage and hour law to help ensure compliance with federal and state pay practice laws. There are additional aspects of the new overtime rule not covered in this article, such as the use of non-discretionary bonuses and incentive payments to satisfy up to 10% of the new salary level, as well as the mechanism to automatically update the salary level requirement every three years. The Department of Labor has published some very good resource materials on the new overtime rule, including a fact sheet describing the changes. 

Stephen R. Wirth, Esq., EMT-P, is a founding partner of Page, Wolfberg & Wirth, LLC, which represents EMS agencies throughout the United States, and a co-founder of NAAC, the National Academy of Ambulance Compliance. Reach him at [email protected].