Agencies ask for time to comply with new overtime rules

WASHINGTON – Paula Hart and Dave Toeniskoetter sat outside the Cannon House Office Building last week after a day of back-to-back meetings with Minnesota's congressional delegation had ended.

Their pitch to extend the time their human services businesses have to comply with new federal overtime pay rules had been made.

Hart, the CEO of Volunteers of America Minnesota, and Toeniskoetter, CEO of the Mendota Heights-based independent living business Dungarvin, are trying to balance fair pay for workers with the cost of serving their intellectually and developmentally disabled clients.

The pair, plus others in the state's human services sector, want Minnesota's federal politicians to press the U.S. Labor Department to extend the time they get to apply rules that will more than double the base salary of workers who can be declared exempt from overtime.

They say they need the time to raise more government funding for Medicaid, which pays for virtually all of the services they provide.

"We're eternal optimists, or we wouldn't do this work," Hart said.

At issue are federal rules expected out in May. As proposed, those rules say employees must make more than $50,440 a year to be exempted from overtime. Under current law, they need only make more than $23,660 to be denied overtime.

The U.S. Chamber of Commerce opposes the new salary limit. So do some small business groups.

The Coalition for Sensible Safeguards, a collective of nonprofits and unions, and the Center on Budget and Policy Priorities say the overtime threshold in the Fair Labor Standards Act has barely been tweaked since 1975.

"This is bringing people up from a poverty threshold," said coalition manager Michell McIntyre.

Private providers of government-paid human services say they are caught in the middle. A study by the Association of Residential Resources in Minnesota has estimated that the new overtime rules would add $53 million a year to the payrolls of the state's human services providers.

Roughly 80 case managers and supervisors at Dungarvin would be affected, Toeniskoetter said. At Volunteers of America Minnesota, Hart put the number at 144.

"We don't disagree with paying more," Toeniskoetter said. "But virtually all of our funding comes from states."

Without more state funding, human services providers argue, they may have to choose between paying staff or cutting services.

"We already have people institutionalized who we'd like to serve but can't," Toeniskoetter said.

What human services providers are looking for, said Hart, is a "bridging strategy."

That could take a couple of forms, but the most likely solution, because it does not take an act of Congress, is a Labor Department extension of the time organizations such as Volunteers of America and Dungarvin get to comply with new overtime rules. In theory, the extension would allow them time to persuade states, including Minnesota, to increase Medicaid funding.

Human services providers took a similar position in 2013 when they faced federal rules that forced them to pay home health care workers at least minimum wage and overtime. In that case, the Labor Department gave them an extra 15 months to raise money to pay for the rule.

Rep. Collin Peterson of Minnesota's Seventh Congressional District is circulating a letter to colleagues trying to attract support for a similar position on the current rules. The letter warns that the new overtime rules could have "unintended consequences" on "organizations providing intensive community-based services for people with intellectual and developmental disabilities."

"We urge a longer implementation time frame — only for human service workers employed by Medicaid [home and community based] providers and Intermediate Care Facilities for Individuals with Intellectual Disabilities — in order to give state legislatures time to make appropriate reimbursement adjustments," the letter says.

The letter has not yet been sent to Labor Secretary Tom Perez, Peterson's spokeswoman said, because the congressman is still gathering signatures.

The Labor Department's overtime rules are now being reviewed by the Office of Management and Budget. The Coalition for Sensible Safeguards' McIntyre thinks there is some chance that the new salary threshold for exemption from overtime pay could be lowered. But it is not likely to be thrown out entirely.

What the Labor Department has proposed, she said, is already less than the rate of inflation since 1975.

Jim Spencer • 202-383-6123