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The wage and hour laws that employers must follow are complex, confusing, and ever-changing. A tidal wave of new legislation arrives almost daily and is thrown on top of the old legislative debris. No wonder more and more dentists are struggling not to run afoul with the governing bodies. The sheer volume and complexity of old and new regulations makes it very hard for employers to keep up and be in compliance.
Here we will briefly look at some of the regulations that seem to cause dentists the most problems.
Misclassifying employees as independent contractors
An independent contractor is a person who contracts to perform services for others without having the legal status of an employee. Independent contractors are considered self-employed and are not subject to employment tax withholding. As a result, many dentists strive to classify workers as independent contractors to avoid the taxes, paperwork, labor laws, and other challenges associated with employment.
The IRS uses 11 factors to determine whether a worker is an employee or an independent contractor. However, not all factors apply in each case or carry the same weight. A general rule of thumb is that if the business receiving the service controls not only the results to be achieved, but also the means used in achieving the result, an employer/employee relationship exists.
While it is important to evaluate the detailed criteria for independent contractor status, in the final analysis, the overwhelming majority (in excess of 95%) of dental office employees do not meet the criteria to qualify as independent contractors, and therefore should be considered employees.
Misclassifying employees as exempt
Many dentists classify employees as "salaried" to avoid having to pay overtime. Unfortunately, the salary criteria doesn't always translate to what the federal Fair Labor Standards Act (FLSA) calls an "exempt" employee. Exempt employees are the only classification of employee that is excluded from overtime regulations as well as other rights or protections afforded nonexempt workers.
There are only three exempt-level classifications according to the FLSA: executive, administrative, and professional. Each classification has its own defined job duty criteria. The position must meet the established criteria or it will be considered a misclassification.
Misclassifying employees as exempt can lead to penalties and fines, particularly for failing to pay required overtime. The penalties and fines can include back wages and overtime plus punitive damages that can be as much as two to three times the back wages/overtime assessment.
Under revised FLSA regulations, hygienists may now be classified as exempt employees. This is permitted only if the hygienist has successfully completed four academic years of preprofessional and professional study in an accredited college or university approved by the Commission on Accreditation of Dental and Dental Auxiliary Educational Programs of the American Dental Association. As such, the hygienist generally meets the duties requirements for the "learned professional" exemption (similar to dentists).
The same is not necessarily true for hygienists who have not obtained licensure that is based in part to a directly related baccalaureate degree. Furthermore, several states retain their own exempt standards and have not adopted the federal exempt criteria for hygienists. In these states, hygienists, even with a baccalaureate degree, do not qualify as exempt.
As becomes quite evident once the exempt vs. nonexempt criteria is examined thoroughly, the overwhelming majority (estimated at 95%) of all dental employees do not qualify for exempt status and consequently should be accurately classified as "nonexempt."
Nonexempt employees must be paid at least federal or state minimum wage for time worked. They can be paid an hourly rate, commission, or salary. They need only be paid for the actual hours worked and must be paid overtime for any hours that exceed the federal or state overtime provisions.
Not providing the final paycheck in the appropriate time
Employees whose employment ends must receive their final check for unpaid wages, unused vacation, unused sick leave, bonus, etc., within a prescribed period of time according to state regulations. The time period will often vary depending upon whether employment is ending voluntarily or involuntarily.
Ideally, the final paycheck is handed to the departing employee in person. If not feasible and mailing is the necessary choice, send it certified mail. This ensures confirmation of receipt.
The ramifications of not providing the final paycheck in a timely manner are usually daily fines and assessments for each day that the final paycheck is not received, which can add up pretty quickly.
Deducting monies owed from the final paycheck
There are times when an employee owes the employer money or has an outstanding balance to the practice. Examples can be a loan, paid continuing-education courses, or dental treatment provided. Often there has not been any formal written agreement stipulating payback arrangements.
Many dentists mistakenly deduct the monies owed from the final paycheck. Even with a separate written agreement signed by the employee, this can be problematic. Many states prevent this type of deduction from the final paycheck and federal minimum wage laws require that any deductions do not reduce the resulting compensation below minimum wage.
Mishandling wages when attending continuing-education courses
Continuing education is a vital and important part of dentistry. Depending upon the circumstances, attending continuing-education courses can raise wage and hour issues related to time, seminar/course expenses, and travel/lodging/meals expenses.
FLSA revisions in recent years modified long-standing assumptions that many dentists had regarding continuing-education compensation.
First, when do you not have to pay?
1) When the program is not directly related to the employee's job and is attended voluntarily outside normal working hours
2) When the continuing-education course(s) are to maintain certification(s) or license(s) that are requirements of the job
When do you have to pay?
1) Time must be counted as paid time when conducted during an employee's normal work schedule or when attendance is required by the employer outside the normal work schedule.
2) If the seminar/course is one day or less, then travel time to and from the seminar must be paid.
3) If the seminar/course is more than one day (overnight), then travel time must be paid for the hours traveled during working hours, regardless of the day of the week.
4) Travel expenses, lodging, and meals are typically negotiable in most, but not all, states.
An offset that exists with continuing education is the "different capacity work rate" (DCWR), which allows you to pay a different rate of pay for substantially different work. Therefore, in the case of continuing education, you can pay for the time at a rate different (usually less) from the regular rate of pay.
To prevent problems with a DCWR:
- The hourly rate of pay must equal or exceed the minimum wage requirements.
- Affected employees should be informed in writing of the differing rate(s). (Call our office for the Different Capacity Work Rate form, No. 406.)
- The employer should keep records showing: 1) the regular hourly rate at which the staff member is employed; 2) the different hourly rate of pay paid for the time attending seminars or workshops; and 3) the number of overtime hours worked in the work week.
- The calculation for overtime should be done on a "weighted average method," which means that an employee's total straight-time wages for the workweek at all applicable rates of pay are divided by the total hours worked.
It's a jungle out there! Whether it's misclassifying your employees, mishandling employee paychecks, or neglecting to properly pay for continuing-education courses, employers must tread carefully through the wage and hour minefield. Failure to do so can result in substantial financial setback if a particular practice or decision is challenged in court. Employers must remain up-to-date and consult with appropriate professionals when in doubt to ensure compliance with the ever-changing labor laws.
Bent Ericksen is the founder and Tim Twigg is the president of Bent Ericksen & Associates. For more than 25 years, the company has been a leading authority in human resources and personnel issues, helping dentists successfully deal with the ever-changing and complex labor laws. Both authors are members of the Academy of Dental Management Consultants. To receive a complimentary copy of the company’s quarterly newsletter or to learn more about their services, contact them at (800) 679-2760 or at www.bentericksen.com.