For the first time in over a decade, the U.S. Department of Labor has issued a final ruling on an increase to the salary threshold for exempt employees. Starting on January 1, 2020, employees will need to be paid a minimum of $684 per week or $35,568 per year to meet the salary qualification for exempt status. This is an increase from the current exempt threshold of $455 per week or $23,660 per year.
What Does This Mean for Dental Employers?
If you are paying any of your employees on a salary basis you need to know whether you are paying employees as “salary exempt” or “salary non-exempt” – and if you are in compliance with federal rules.
To understand this, you need to separate the payment method from the classification. Salary and hourly are payment methods. Exempt and non-exempt are employee classifications. More specifically, the latter categorizes employees by determining whether they are exempt from the Fair Labor Standards Act requiring non-exempt employees to be paid minimum wage and overtime pay. You are not required to pay overtime to exempt employees so long as they are paid the same amount of salary each week.
Exempt vs. Non-Exempt Employees
Most employees in a dental practice are non-exempt because they do not meet the two standards for exemption. To consider an employee exempt from FLSA, they must be paid at least the minimum salary threshold and meet a duties test in at least one of the three categories: executive, administrative, or professional.
You know the new salary threshold but let me simplify the duties tests. In most cases, it’s likely the only two positions in your practice that meet qualifications for exempt status are your Dental Associate (professional exemption) and your Practice Administrator (executive exemption). The PA or Office Manager can be exempt so long as they are directly managing at least two employees with the authority to hire, fire, or discipline those they supervise. The Office Manager who just makes the schedule and deals with patient complaints while still taking on the regular front desk administrative duties would not qualify as exempt.
All other employees should be considered non-exempt. In some cases, there can be exceptions made for a hygienist who has completed four years of professional study. However, their education must be obtained from an accredited college or university that was approved by the American Dental Association’s Commission on Accreditation of Dental and Dental Auxiliary Educational Programs at the time of study. If your hygienist consistently works less than 40 hours per week, it’s likely not worth the risk of classifying them as exempt if they do not meet the qualifications.
Pro tip – you won’t have any problems classifying an employee who could be exempt as non-exempt; however, you could have an expensive problem if you classify an employee who should be non-exempt as exempt. The safer course is to consider the rest of your team as non-exempt employees, require them to track their time, and pay the overtime rate (1.5x regular hourly rate) for any hours worked over 40 in a 1-week period.
What If I Pay All My Employees A Salary?
Occasionally, an owner dentist will tell me they pay their entire team on a salary basis. Either they heard it was a good idea for employee retention or they don’t want to deal with time sheets. Regardless of the reason – or whether this is a good idea, which is an entirely different article – there needs to be an understanding of the regulations surrounding employee classification.
You can have a “salary non-exempt” employee. However, because this employee does not qualify for exempt status, you should require them to track their time and will need to pay the overtime rate for any hours worked over 40 in a 1-week period. To calculate this rate, divide their weekly salary by 40, then multiply by the number of overtime hours worked and add to the base salary pay for the week overtime was earned.
It’s not as complicated as it seems. Just be aware that if you have a truly exempt employee, you need to ensure they are paid the minimum salary threshold each week they work to avoid paying overtime. If you are paying a set salary to non-exempt employees, regardless of how much the salary is each week, you need to have them track their time and are required to pay them overtime (or make sure they don’t work past 40 hours in any given week). Stay compliant!
By Kara D. Kelley, SHRM-CP, Dental HR Consultant at Parkhurst Consulting CPA PC