Proposed DOL Overtime Exemption Rule is Simply Solving the Wrong Problem

posted by Chris Sparks on Wednesday, April 13, 2016

Proposed DOL Overtime Exemption Rule is Simply Solving the Wrong Problem
Creating new issues in its wake

For those of you who don't know me, my name is Chris Sparks and I am the Executive Director of Exceptional Persons, Inc. (EPI). We're a nonprofit, in Waterloo, Iowa offering an array of community-based supports for people with disabilities. Our annual operating budget is just over $22 million - $14 million of that comes from Medicaid.

We employ over 400 staff - more than 300 of whom are Direct Support Professionals (DSPs) and frontline supervisors supporting persons with an intellectual disability, serious mental illness, and/or an acquired brain injury to fully participate in their community. Seventy (70) cents of every dollar in our organization pays the wages and benefits for such staff and the critical work they do.

DOL's Proposed Overtime Exemption Rule
The proposed U.S. Department of Labor’s Overtime Exemption Rule, which is currently being finalized and is expected to be released later this year, would update the Fair Labor Standards Act (FLSA) to more than double the salary threshold at which workers are exempt from overtime requirements, with the salary level increasing automatically over time.

This regulation, threatens to be the straw that breaks the camel’s back for many providers like EPI who are already seriously challenged by a myriad of federal, state, and local unfunded mandates.

Creating a New Problem
To be clear, we are certainly not opposed to paying our employees better wages. In fact, we are wildly in favor of paying the staff who do this important work more. Our dilemma is this: there is no money to fund this increased expenditure. Without a corresponding change in our Medicaid rate there is truly no mechanism to cover this expense.

Providers of community-based disability services are almost entirely funded with federal Medicaid dollars - a combination of federal and state monies. We have little flexibility to negotiate higher rates, even as operating costs rise and demand for services increase.

In Iowa most Medicaid funding is constructed to cover costs - barely - but often falls short. This means that providers like EPI have almost no margin to absorb cost increases.

The rule, in its current form, leaves EPI with few choices. Our best option would be to reclassify affected positions to non-exempt and pay overtime for every hour worked over 40, yet it comes with two major drawbacks.

We estimate it will cost us an additional $800,000 per year with no additional funding.
It would undermine the professionalization of our frontline supervisors as they would be required to track their time and work to limit overtime. As a frontline supervisor it is very difficult to do this.

Every business - not just long-term service and support providers - will face similar challenges as a result of this rule.

If this rule is implemented as proposed and no additional funding is provided, many organizations will have to make painful choices about the services they can provide. It will be the people needing these critical services who will suffer the most.

Solving the Wrong Problem
The increase in the overtime threshold - while obviously well intentioned - is simply solving the wrong problem. Our staffing crisis in community services for people with disabilities, and all long term service and supports, is in the direct support professional positions.

With many organizations running position vacancy rates of 15% to 20%, and DSP turnover averages at 50% to 75% per year, this is a critical problem. It demands our immediate attention.

At EPI we have made increasing DSP compensation our top priority. Taking more resources that we don’t have to comply with the overtime threshold rule erodes our ability to pay DSPs more – and threatens our ability to attract and retain them.

Without DSPs we wouldn't be able to provide these critical services. Quality services require a stable workforce – trusted, skilled workers to assist people to access their communities, obtain employment, and help with the most basic and deeply personal needs. At a time when more people than ever rely on these services to continue to live in their communities – with thousands more on waiting lists across the country – this would be devastating.

We take our mission of supporting people with disabilities to fully participate in their communities seriously. We urge Congress and the Administration to delay implementation, to adopt a lower overtime threshold, or to approve a temporary Medicaid funding increase for providers.