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A new overtime rule proposed by the federal government would worsen workforce issues for senior living providers and create unintended consequences for workers and residents, according to industry advocacy groups.

Most salaried workers earning less than $1,059 per week, or about $55,000 per year, would be eligible for overtime pay under the proposed rule. The Department of Labor estimates that 3.6 million more salaried workers would be newly eligible for overtime under the changed thresholds, and approximately 600,000 of them work in healthcare.

The rule would increase the standard salary level for eligibility to the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region (which was the South at the time of the rule’s proposal). Currently, employees earning up to $684 per week, or $35,568 per year, are eligible for overtime pay. The rule would

The Labor Department also is proposing to automatically update all of the earnings thresholds beginning three years after the overtime rule’s effective date and every three years thereafter, to reflect current earnings data. The proposed salary threshold represents an increase of almost 55% since 2019.

The rule also would restore overtime protections in US territories, where the overtime threshold applied from 2004 until 2019.

33,000+ comments received

The DOL’s Wage and Hour Division said it received more than 33,000 comments and as of Wednesday had posted almost 24,000 of them online. The deadline for commenting was Tuesday.

In a joint comment letter, Argentum President and CEO James Balda and American Seniors Housing Association President and CEO David Schless called the proposed rule “flawed” and urged the agency to withdraw it.

“The proposed rule constitutes bad policy at a time when employers and employees are adapting new and innovative approaches in staffing to meet these needs,” they wrote.

Specifically, their comments focused on the “unnecessary and harmful” layering of complexity on a workforce and workplace that already has imposed new demands on employers to offer new flexibility, higher wages and other accommodations. Balda and Schless also addressed what they described as the “flawed” methodology for determining the standard salary level for eligibility, urged removal of bonus caps to meet exempt status and include safe harbors of unintentional errors, and called for keeping the current salary threshold for “highly compensated” employees and for the withdraw the automatic indexing of the salary level test every three years.

“If enacted, these proposed rules would exacerbate the workforce crisis in senior living, increase costs and likely reduce access to assisted living at the same time that the population is aging at the fastest rate in more than a century,” Argentum Senior Vice President of Public Affairs Maggie Elehwany and ASHA Vice President of Government Affairs Jeanne McGlynn Delgado said in a joint statement. “We urge the Department of Labor to withdraw this proposed rule and work with stakeholders to develop solutions for overtime pay that more closely reflect current economic conditions, while also ensuring that senior living providers can continue to provide high-quality care to their residents.”

Argentum and ASHA said that during the pandemic, senior living operators faced substantial operating losses and increased care expenses exceeding $30 billion with minimal government relief. Providers also increased wages “significantly” for nonexempt employees and hired thousands of additional employees to meet residents’ needs, Balda and Schless said.

“The proposed rules would have a disproportionate and potentially devastating impact on the long-term care industry, which will need to attract more than 20 million workers by 2040 to keep pace with our rapidly aging population,” they said. Argentum previously calculated that of those 20 million workers, 3 million would be needed for senior living.

LeadingAge also submitted comments about the proposed rule, calling it “challenging to absorb” for providers.

“We are concerned that the impact of the Department of Labor’s proposed rule, if enacted unchanged, will add to the financial burdens of providers who are already navigating a lot of operational challenges, from inadequate reimbursements to cover the cost of care; a highly competitive labor market that drives up wages; and inflation-fueled rising prices for necessary goods,” LeadingAge Vice President of Legal Affairs Jon Lips told McKnight’s Senior Living

In submitted comments, Lips told the federal government that the proposed increases would  have significant effects on long-term care operators, especially those that heavily depend on reimbursements from public healthcare programs, which he said are insufficient. 

“Providers that are not able to absorb the full increased labor costs of the proposed rule will be required to make challenging decisions,” Lips wrote. “In some cases, a provider may have to reduce non-essential services and programming in some form, affecting the quality of life for those they serve, or, alternatively, choose to serve fewer individuals.”

Other unintended outcomes of the proposed rule, he said, could include increased costs for residents and added work burdens on exempt employees as employers reclassify some workers to hourly status.

In its comments, the American Health Care Association / National Center for Assisted Living asked that a final rule consider the challenges that providers face and to allow flexibilities.

AHCA/NCAL Associate Vice President of Constituency Services and Workforce Dana Ritchie raised concerns about the effects on operations at a time when long-term care is “being squeezed by inflation, wage increases rising interest rates” and, for skilled nursing facilities, the Centers for Medicare & Medicaid Services’ minimum staffing proposal

“While providers certainly understand what DOL is trying to accomplish here — and fully support appropriate overtime pay — there is concern on how many additional requirements the long-term care industry will be able to bear,” Ritchie wrote, adding that keeping up with the every-three-year update of the salary threshold would present additional challenges.

All of the association commenters said that if a final rule is adopted, there should be a transition period to enable employers to conduct analyses and make operational adjustments.

Cost? $664 million+ over 10 years

The Fair Labor Standards Act requires covered employers to pay minimum wage, and for employees who work more than 40 hours a week, overtime pay of at least 1.5 times the regular rate. Certain executive, administrative and professional employees are exempt, however.

Annualized direct employer costs over the first 10 years of the rule would total $664 million, according to a Labor Department estimate. But the proposed rule also gives employees higher earnings in the form of transfers of income from employers to employees, and the department estimates that those annualized transfers would total $1.3 billion.

In total, the Labor Department estimates that 3.4 million people earning $55,068 or less annually, and 248,999 “highly compensated” employees, would be eligible for overtime pay under the changes in the first year after implementation.