A federal proposal to require overtime pay for many professionals who support people with disabilities living in the community could force service cuts, providers say.

The U.S. Department of Labor is weighing whether to move forward with finalizing a proposed rule that would dramatically increase the number of American workers eligible for overtime pay.

Currently, salaried employees earning more than $23,660 annually don’t have to be paid extra for working more than 40 hours per week. However, the Labor Department is looking to more than double that threshold to about $50,000, with additional automatic increases over time.

That change could have big consequences for people with disabilities, according to officials with the American Network of Community Options and Resources, or ANCOR, a trade group that represents over 1,000 private agencies providing disability services across the country.

An analysis commissioned by ANCOR suggests that paying overtime for workers who are currently exempt will add over $1 billion in costs for agencies serving those with disabilities in the first year alone. That’s a problem, the group says, since providers are paid primarily through Medicaid.

“This leaves providers between a rock and a hard place,” said Mark Davis, president of the Ohio Provider Resource Association, during a call announcing the findings of ANCOR’s analysis. “Our members want to pay their employees more, but already struggle to do so and this new rule would only compound the challenges they already face.”

If the Labor Department rule does take effect, the ANCOR analysis suggests that disability service providers may make staff adjustments to curtail their costs, with many agencies thinking of converting salaried employees to hourly or raising salaries above the new threshold.

But, the group warns that some changes could impact the services that people with disabilities receive. ANCOR’s report indicates that 37 percent of providers would lay off higher paid employees and nearly a third said they would hire more low-wage workers to reduce overtime expenditures. Some providers said they would lower pay or eliminate future pay increases.

Meanwhile, 21 percent of providers said they might have to reduce services in order to meet their new payroll requirements.

“If the overtime exemption rule is implemented as written, it threatens to put an unreasonable strain on already overstrained providers of community-based supports for people with disabilities, which could have a serious impact on their ability to provide quality support to those who need it,” said Gabrielle Sedor, chief operations officer at ANCOR. “That is why we are calling on Congress to pass legislation to provide states with temporary assistance to increase Medicaid funding support for providers accordingly so that they can afford to comply with this rule and other unfunded mandates like it.”

Jason Surbey, a spokesman for the Department of Labor, says the agency is considering feedback from ANCOR and other stakeholders as it works to develop a final rule, which is expected by July.

“We are committed to thoughtful, responsible implementation, and do not believe that providing quality care is incompatible with providing basic labor protections to workers,” Surbey said.