Case study: tracking hours worked

Feb. 1, 2004
An office manager was being paid a monthly salary. The doctor thought that by paying her a salary, he was exempt from having to pay overtime and that he did not have to keep track of her hours.

Bent Ericksen and Tim Twigg

An office manager was being paid a monthly salary. The doctor thought that by paying her a salary, he was exempt from having to pay overtime and that he did not have to keep track of her hours. After working for the practice for four years, her employment was terminated. She sued the doctor for back overtime. Including interest and penalties, it cost the doctor $38,000.

Where there are inadequate records, courts have ruled, "The employee must show that work was performed for which he was not properly compensated and the amount of such work as a matter of just and reasonable inference. When that is done, the burden shifts to the employer to produce evidence of the precise amount of work performed. If the employer fails to produce such evidence, it is the duty of the court to enter judgment for the employee, even though the amount be only a reasonable approximation." (Mitchel vs. Caldwell, CA 10, 13 WH Cases 469.)

Considerations

Let's start with four myths that cause problems for many dental employers:

Myth 1: When employees are paid a "salary," they are excused from overtime requirements.

Myth 2: Since an "office manager" has a management title, he or she does not need to be paid overtime.

Myth 3: If staff is paid overtime for any time they work more than 40 hours in a week, they need not be paid daily overtime if required by state regulations.

Myth 4: Hygienists are independent contractors and need not be paid overtime.

Reality: The sole determinant for having to pay or not pay overtime is whether a staff member is an exempt or nonexempt employee.

Nonexempt employees: The FLSA and state provisions require that nonexempt employees be paid overtime. The FLSA requires that nonexempt employees be paid overtime when working more than 40 hours in a week. Many states have enacted more restrictive legislation, such as daily overtime requirements, which must be followed first.

FLSA and state definitions are such that more than 95 percent of health-care staff fit in the nonexempt employee category. Non-exempt employees can receive their compensation either in the form of a salary, a daily rate, or an hourly wage. All nonexempt employees need not be compensated in the same manner.

Exempt employees: FLSA provides an exemption for overtime that applies to executive, managerial, supervisory, administrative, and professional positions that typically require special licensure. Qualified exempt employees have to be paid in the form of a salary and do not have to be paid overtime. The requirements to qualify for exempt status are specific and stringent. Again, dental staff seldom qualify.

Regardless of employee status (nonexempt or exempt), accumulating overtime and allowing staff to take the time off at a later date ("comp time") instead of paying overtime is not permitted.

For more in-depth information on exempt and non-exempt definitions and how to effectively handle "The Hygiene Overtime Dilemma," contact our office to obtain a copy of our "Staff Management" and "Salary Administration" resource manuals.

Solutions

Properly classify your employees, and err on the side of employees being nonexempt. For your protection, all employers should keep accurate records of hours worked for all employees. These records should include:

1) When they report to work and leave each day.
2) When they leave for lunch and return from lunch.
3) Total hours worked each work day.
4) Total hours worked each work week.
5) Total hours worked each pay period.
6) Rate of pay (salary, hourly, daily, etc.) for straight time hours.
7) Effective hourly rate of pay for overtime hours.
8) Total wages paid each pay period, including all types of compensation — hours, incentive, bonuses, prizes, etc.

Payroll records should be kept for at least three years or for the period during which a wage claim may be filed in your state. (Since regulations may change, check with your State Department of Labor or call our office.)

Bent Ericksen is the founder and Tim Twigg is the president of Bent Ericksen and Associates. For over 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, contact them at (800) 679-2760 or at www.bentericksen.com.

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