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Overtime work can jeopardize access to services for people with disabilities

The U.S. Department of Labor is moving forward with a plan to increase the number of workers eligible for overtime pay, a move that disability providers say will further tie their hands amid a workforce crisis. (Chuck Myers/TNS)

Services for people with developmental disabilities across the country could soon face additional cuts, an unintended consequence of requiring millions more workers to qualify for overtime pay.

The US Department of Labor said this month that it is finalizing the rules raising the wage threshold, where employers will be obliged to pay overtime. The change is expected to affect about 4 million workers across the country in the first year.

Now, disability advocates say the wage increase could have serious consequences for people with developmental disabilities who need support to live in the community. That’s because disability service providers depend on Medicaid funding and without changes in reimbursement rates, they have no way to pay their workers more.

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«While rightfully focused on strengthening our nation’s workforce, the DOL has sadly and dangerously overlooked the effect this increased overtime pay threshold will have on Medicaid-funded disability service providers,» said Barbara Merrill, executive director of the American Network of Community Options and Resources, or ANCOR, which represents 2,100 disability service providers across the country. «Unless lawmakers increase Medicaid reimbursement rates to allow providers to meet this unfunded mandate, many providers simply won’t be able to comply with this rule without shutting down programs and services, putting thousands of jobs at risk and threatening access to critical services for people with disabilities.»

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ANCOR issued a report last year warning that the increased threshold for overtime pay would result in over $1 billion in additional costs for disability service providers in the first year alone.

The report included a survey of 700 providers in 45 states. A third said they would be forced to cut jobs if the proposed rule went into effect, while 61% said they would shift salaried employees to hourly hours and nearly half said they would limit overtime.

Under the Labor Department’s final rule, employers will have to pay overtime to most salaried workers who make less than $43,888 starting July 1 if they work more than 40 hours a week. That threshold will increase to $58,656 in January, and starting in July 2027, the level will be updated every three years based on salary data.

Disability advocates have pressed the Labor Department to consider the unique position of providers who depend on Medicaid reimbursement before finalizing the rule. But officials didn’t do much as part of the regulation to address those concerns other than to say the agency would coordinate with the Community Living Administration and the Centers for Medicare & Medicaid Services.

«The services offered under the Medicaid program for people with disabilities are absolutely critical,» a Department of Labor spokesperson said in response to questions from Disability Scoop. “The Department’s rule affects lower-wage workers who earn between $684 and $1,128 per week, and does not affect the many hourly workers who provide critical services for people with disabilities. The department will continue to work with employers to understand these impacts and coordinate across the federal government to provide education and resources to support Medicaid-funded providers.”

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The overtime mandate comes as the disability services sector is already under great pressure. AND separate research by ANCOR of service providers last year found that 77% declined or no longer accepted referrals, 44% discontinued various offers, and 60% said they were considering closing additional programs or services.

Merrill, who heads ANCOR, said the Department of Labor should ensure disability service providers have the time needed to meet the new requirements without jeopardizing services and called on Congress to increase federal funding for disability services to the additional costs imposed by the overtime mandate were taken into account.

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