employment law developments affecting behavioral … · pennsylvania bar association and the bar...
TRANSCRIPT
EMPLOYMENT LAW DEVELOPMENTS AFFECTING BEHAVIORAL HEALTH PROVIDERS: A GOVERNANCE AND COMPLIANCE PERSPECTIVE
Joseph T. Kelley, III, Esquire Kelley Partners, Ltd. 1628 Pine Street Philadelphia, PA 19103 (267) 238 - 1300
Joseph T. Kelley III, a partner at Kelley Partners, Ltd. focuses his practice on healthcare law and issues of privacy, compliance, regulatory and administrative law. Mr. Kelley serves as compliance and privacy counsel to behavioral health care providers and other large and small businesses. Mr. Kelley received his B.A. from Tulane University and his JD from Villanova University School of Law. He is a member of the American Health Lawyers Association, Association of Corporate Counsel. He writes and lectures on Privacy Information Governance and regulatory compliance in Behavioral Health and Long Term Care industries. Mr. Kelley recently returned to Kelley Partners from NHS Human Services, where he served as one of the largest behavioral health company’s first General Counsel and its Privacy Officer. As General Counsel, Mr. Kelley:
• Established the Office of General Counsel and related protocols for the proper functioning of the office;
• Was responsible for managing all the legal affairs of the company; • Provided advice and representation on all transactional matters with regulatory and fraud
and abuse compliance; • Negotiated and directed government and payer contracts and grants; • Advised and worked with corporate compliance department; • Reported on legal matters and advised on governance to parent and multiple nonprofit
and for-profit subsidiary boards; • Oversaw and managed all outside litigation including medical malpractice, professional
liability unique to the behavioral health industry, employment, contractual and personal injury claims;
• Conducted and oversaw internal investigations and advised on restructuring internal investigation process;
• Managed and responded to government and other external healthcare investigations and reviews including HHS, state attorneys general, state Medicaid agencies, payers and third party contractors;
• Advised on incident management, peer review and compliance with mandatory reporting requirements;
• Advised on all labor and employment issues affecting the company’s over 13,000 employees;
• Personally handled multiple Department of Labor wage and hour audits; • Advised on employee credentialing, screening and background checks.
PHILADELPHIA HARRISBURG
www.kelleypartners.com
John A. Kane, a partner at Kelley Partners, Ltd., has been with the firm since September, 2006. Mr. Kane joined the firm after twenty-three years of service to the Commonwealth of Pennsylvania as the Chief Counsel to the Department of Public Welfare (now Department of Human Services). He serves as counsel to Pennsylvania based and multi-state behavioral health and developmental disability providers, a public behavioral health managed care organization community health centers, assisted living communities, personal care homes, health care consulting organizations and individual health care practitioners. His practice is focused on administrative agency and appellate litigation, regulatory compliance, risk management, audit reviews, provider reimbursement licensing disputes and contract negotiation and drafting. Mr. Kane is the recipient of Government Lawyer of the Year Award – 2000 awarded by the Pennsylvania Bar Association and the Bar Association's Award for Excellence in Health Care Law (2006). He also was awarded the American Associate of Public Welfare Attorneys’ Award in 2005. Mr. Kane graduated from Villanova University (B.A., 1973 cum laude) and Temple University School of Law (J.D., 1976) and is admitted to the Bar of the Supreme Court of Pennsylvania, the United States District Courts for the Eastern and Middle Districts of Pennsylvania, the United States Court of Appeals, Third Circuit and the United States Supreme Court. Mr. Kane is a member of the Pennsylvania Bar Association, American Health Lawyers Association and the American Association of Public Welfare Attorneys. He works out of Kelley Partners' Harrisburg Office.
PHILADELPHIA HARRISBURG
www.kelleypartners.com
1
I. INTRODUCTION
The recent legal developments relevant to Behavioral Health Providers are numerous and dramatic. In total, they provide a substantial risk to BH providers for the following reasons:
• The provision of BH care is a very “labor heavy” industry i.e. a high proportion of providers budget goes to paying employees;
• BH providers operate on very thin margins, thus a substantial change in labor costs can have devastating budgetary effects;
• BH providers cannot simply pass rising labor costs – imposed by external forces – on their “customers”; change in funding from government and other payers difficult to achieve;
• “Each BH employee holds the entire organization in hands”: This means a single employee who deals with vulnerable consumers every day can create civil and criminal liability to the organization, severe fraud and abuse issues, and catastrophic reputational harm;
This outline provides a summary of some of the most recent developments in employment law affecting behavioral health employers, excluding the Affordable Care Act, which warrants separate treatment. This approach is not an in-the-weeds look at legal developments regarding employment issues. Rather it is a compliance and governance perspective in assessing and managing risk:
• Compliance in that it calls for a systematic approach to preventing legal violations and addressing those that occur, often using internal audits as a method of avoiding or minimizing problems;
• Governance in that it calls for board, officers and senior management to oversee and direct compliance with these issues. Governance in this area does not require detailed knowledge of all employment issues, but rather a sufficient familiarity to empower leaders identify issues and ask the right questions.
II. FAIR LABOR STANDARDS ACT DEVELOPMENTS AFFECTING BEHAVIORAL
HEALTH The Fair Labor Standards Act (“FLSA”) is a federal law passed in 1938 to regulate minimum wages, overtime pay, equal pay and child labor standards in employment. The key aspects of the FLSA that are addressed as part of this outline, and which are of particular importance to behavioral healthcare providers, are the minimum wage and overtime requirements, with an emphasis on the overtime requirements. The U.S. Department of Labor (“DOL”) has promulgated two recent rules (one proposed and one final) dealing with exemptions to the minimum wage/overtime requirements that impact this industry. The first rule, which is final but is currently subject to a legal challenge, applies to individuals who provide “companionship services” or “live-in care” for the elderly, sick or disabled. The second rule, which is proposed but not finalized, substantially reduces the so-
As Privacy Officer, Mr. Kelley:
• Developed and updated privacy policies and procedures necessary for a complex and diverse provider of behavioral health to comply with HIPAA and other federal and state law applicable to services for mental health, substance abuse, intellectual disabilities, autism, juvenile justice and education;
• Oversaw and conducted investigations and conducted risk assessments regarding potential breaches of the HIPAA Privacy Rule and made required reports;
• Directed updated Security Risk Analysis and advised on information governance; • Responded to subpoenas and day-to-day requests for information insuring compliance
with state and federal privacy laws. Prior to going in-house at NHS, Mr. Kelley was a partner at Kelley Partners where he skillfully guided behavioral health, long term care and other healthcare providers through the regulatory maze unique to their industries. He represented providers in responded to federal and state False Claims Act and other fraud and abuse claims and investigations. He further advised on and litigated employment matters. Fluent in Spanish, Mr. Kelley lives with his wife Laura, daughter Sophia, and son Leo, in Philadelphia. He works out of Kelley Partners' Philadelphia Office.
PHILADELPHIA HARRISBURG
www.kelleypartners.com
2
called “white collar” exemptions by increasing the minimum salary required for employees to qualify. The DOL has further issued recent guidance on the distinction between “employees” who are covered by the FLSA’s requirements, and “independent contractors” who are not. BH providers should take note of all three of these issues as they will likely have significant impact on them over the next year and beyond.
A. FLSA “HIGH RISK” FOR BEHAVIORAL HEALTH
FLSA compliance is currently an area of High Risk for all employers and BH providers in particular:
1. BH providers operate on thin margins and a high percentage of their budgets are
dedicated to labor. Thus, a sudden spike in labor costs resulting from adverse FLSA events, such as broad FLSA liability or a reclassification of employees, can have devastating effects.
2. As reimbursement rates are often firmly set by government or other third party payers, BH providers cannot simply pass along increased labor costs to their customers.
3. Many direct care employees are not highly compensated due to industry underfunding.
4. Because BH providers provide “community based” care, rather than services in an institutional setting, their operations are often decentralized. This can lead to a diversification of HR practices key to FLSA, such as timekeeping, documentation, classifications. Also, workers are often “in the field” and more difficult to supervise, which complicates timekeeping and on-the-clock v. off-the-clock issues.
5. Many employees in the BH industry “wear many hats” – e.g. providing direct care while operating in a supervisory role – which complicates exemption classifications.
6. Many BH providers use compensation methods other than straight hourly rates, which complicates “regular rate” calculations and other FLSA determinations.
7. Narrowing of exemptions by the two new rules will hit BH providers particularly hard. BH providers employ many executive, administrative and professional employees who are compensated between $27K and $50K per year. The raising of the salary basis will clearly affect these employees. Providers will either have to raise their salaries, reclassify them as hourly, or redistribute some of their job duties e.g. use of part-time employees.
8. The narrowing of the home care exemption is targeted at the BH industry and will have a dramatic effect on those providers who rely on this exemption.
9. DOL’s new guidance on the distinction between employee and independent contractor creates potential exposure.
3
10. State local and other governmental minimum wage initiatives – e.g. Philadelphia, Obama’s 2014 executive order for federal contractors – which may raise hourly rates for BH employees also trigger higher OT rates through application of the FLSA.
11. FLSA provides for “collective actions”, similar to class actions. An employee can sue an employer not only for his or her own misclassification, missed overtime, but can assert claims on behalf of all “similarly situated” employees. This makes the pursuing of claims economically viable for employees and plaintiffs’ attorneys.
12. Availability of attorneys’ fees for prevailing plaintiffs in FLSA cases. 13. If past is prologue, the new focus on FLSA, through the promulgation of these new
rules and attention surrounding the DOL’s employee/independent contractor position, should in itself trigger a spike in FLSA claims. When the white-collar regulations were last revised in 2004, there was a significant spike in the number of new FLSA claims filed in court. From 2004 to 2007 the number of new FLSA claims increased 40%. FLSA collective action claims also increased dramatically from 2004 - 2007, when claims went from 1,094 cases filed to 2,167 cases filed in 2007.1
14. In the last several years plaintiffs’ attorneys and labor unions alike have become more educated in the FLSA and have increasingly come to rely upon it.
15. FLSA civil liability, unlike garden-variety employment liability, is often not covered by insurance. Standard business insurance policies for health care providers, which often include coverage for general, professional and employment practices liability, generally do not cover liability under the FLSA. Accordingly, employers are on the hook and usually have to pay out of pocket for legal and liability costs.
B. FLSA ISSUES COMMONLY FACED BY BEHAVIORAL HEALTH PROVIDERS
• “Off-the-clock” work. Specifically, “robo-docking” for meals, completing
documentation; • Portal-to-portal travel time; • On-call time; • Consistent timekeeping practices; • Independent contractor classifications; • Exemption classifications, particularly under white collar exemptions; • Regular rate calculations, especially with complex forms of compensation i.e. other
than straight hourly rate;
C. NARROWING OF “WHITE COLLAR” EXEMPTIONS
i. Background of White Collar Exemptions
1 Jocelyn Allison, Hotbed of FLSA Claims to Continue in Low Economy, Law360 (Nov. 13, 2008).
4
The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime “premium” pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. However, the FLSA provides exemptions for “white collar” employees. These include an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professionals, outside sales employees and certain computer employees. (29 U.S.C. §213 (a)). Currently (until the current proposed rule is finalized and takes effect), to qualify for exemption, employees generally must (1) meet certain tests regarding their job duties (“job duties” test) and (2) be paid on a salary basis at not less than $455 per week (“salary level” requirement). It should be noted that job titles do not determine exempt status. The DOL and courts will look behind titles and examine an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations. These exemptions are narrowly construed and the burden of proof falls on the employer to establish each element. 29 C.F.R. § 541.2
a. Executive Exemption
An employee qualifies for the executive exemption if the employer can demonstrate that all of the following conditions are met (pursuant to 29 CFR § 541.100(a):
• The employer pays the employee on a “salary basis”2 at a rate of at least $455 per week ($23,660 annualized equivalent);3
• The employee’s primary duty is managing the enterprise, or managing a customarily recognized department or subdivision thereof;
• The employee customarily and regularly directs the work of (i.e. supervise) at least two or more other full-time employees or their equivalent; and
• The employee has the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are at least given particular weight.
The term “management” includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting
2 A “salary basis” is the payment of a regular, predetermined amount to an employee each pay period that makes up all or part of the employee’s total compensation. The amount paid cannot vary because of variations in the quality or quantity of work performed. The employee must receive the full amount for any week in which the employee performs work, without considering the number of days or hours the employee worked. There are exceptions e.g. vacation and other leave, disciplinary actions, first and last weeks of employment. 3 Bona fide business owners – those who own at least 20% equity interest and who are actively engaged in management – qualify as an exempt executive without meeting the salary basis requirement.
5
their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures. See 29 CFR § 541.102
b. Administrative Exemption
An employee qualifies for the administrative exemption if the employer can demonstrate that all of the following conditions are met (pursuant to 29 CFR § 541.200(a)):
• The employer pays the employee on a “salary basis” or “fee basis” at a rate of at least $455 per week ($23,660 annualized equivalent);
• The employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
c. Professional Exemption
An employee qualifies for the learned professional4 employee exemption, if the employer can demonstrate that all of the following conditions are met (pursuant to 29 CFR § 541.300 and 541.301):
• The employer must pay the employee on a “salary basis” or “fee basis” at a rate of at least $455 per week ($23,660 annualized equivalent);
• The employee’s primary duty is the performance of work requiring advanced knowledge, The advanced knowledge is in a field of science or learning; and
• The advanced knowledge is customarily acquired by a prolonged course of specialized intellectual instruction.
“Work requiring advanced knowledge” is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment. 29 CFR §541.301(c)
4 The FLSA also recognizes an exemption for creative professionals, who must meet the salary basis and have as their primary duty the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
6
“Fields of Science or Learning” include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other occupations that have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where the knowledge could be of a fairly advanced type, but is not in a field of science or learning. 29 CFR §541.301(c) “Customarily Acquired by a Prolonged Course of Specialized Intellectual Instruction” This phrase restricts learned professional exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The DOL considers best evidence of meeting this requirement to be having the appropriate academic degree. In order to be “specialized”, however, the degrees must ordinarily be advanced. Thus, simply mandating a two- or four-year degree in any subject as a prerequisite for a job will not satisfy the professional exemption, according to Federal interpretations. Department of Labor Field Operations Handbook Section 22d02(d) (revised Nov. 29, 2010). On the other hand, the word “customarily” means the exemption may be available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. This exemption does not apply to occupations in which most employees acquire their skill by experience rather than by advanced specialized intellectual instruction.
d. Computer Employee Exemption
To qualify for the computer employee exemption, the following tests must be met:
• The employee must be compensated either on a “salary” or “fee basis” at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
• The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
• The employee’s primary duty must consist of: 1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; 2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; 3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
7
4) A combination of the aforementioned duties, the performance of which requires the same level of skills.
e. Outside Sales Exemption
To qualify for the outside sales employee exemption, all of the following tests must be met:
• The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
• The employee must be customarily and regularly engaged away from the employer’s place or places of business.
f. Highly Compensated Employees
There is a separate exemption for “highly compensated employees” (“HCEs”) Currently, employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption. The proposed DOL rule also affects this exemption, raising the minimum total annual compensation.
ii. DOL Proposed Rule
The FLSA specifically empowers the Secretary of Labor to define the scope of the white collar exemptions, which means that the Secretary’s regulations on this issue have the force and effect of statutory law. The most recent revision of the white collar exemption regulations went into effect in 2004. In April 2015, President Obama directed Labor Secretary of Labor Thomas Perez to reform the current white collar exemptions by increasing the number of persons entitled to overtime under the FLSA, which sets minimum wages and requires the payment of overtime to employees who work more than 40 hours in a workweek unless the position held by the employee satisfies an exemption. On July 6th the DOL published its much anticipated proposed rule, allowing for 60-days for public comment consistent with federal law. The proposed rule does the following:
• Salary level raised. The proposed rule would raise the minimum salary level to qualify for a white collar exemption from $455/week ($23,600 annually) to an amount equal to the 40th percentile of earnings for full-time salaried workers, which is projected to be $970 per week or $50,440 per year in 2016, more than double the current threshold.
8
• Highly Compensated Employees Update. The proposed rule would also raise the minimum total annual compensation required for HCEs to qualify under the HCE exemption from $100,000 to an amount equal to the 90th percentile of earnings for full-time salaried workers. This figure corresponded to $122,148 in 2013.
• Automatic Updates to Salary Level. DOL firmly proposes that the
regulations should provide a methodology by which the salary level would be updated automatically so that salary levels change consistently and gradually, rather than requiring the issuing of new regulations to make the change. (The last change to the salary level was made in 2004.) In the proposed rule, the DOL did not signal that it was set on a single formula. Rather, DOL sought comments on two methods under consideration: (1) a “fixed percentile” approach tied to the 40th percentile of earnings for full-time salaried workers (and tied to the 90th percentile of such earnings for highly compensated employee compensation), or (2) an alternative approach based on changes to the Consumer Price Index.
• Inclusion of Incentive Payments. The proposed rule notes that the DOL is
considering, and requested comment on, allowing nondiscretionary bonuses, incentive payments, and commissions to partially satisfy the standard weekly salary level requirement. The DOL is not considering including in the salary requirement discretionary bonuses, board or lodging, medical or life insurance payments, retirement plan contributions, or other fringe benefits.
• No Change to the Job Duties Test . . . for Now. The proposed rule does
not change the job-duties test. The DOL appears to stress the salary level as the primary method of preventing, in its view, too many workers from being swept into the white collar exemptions. However, the DOL did request comment as to whether it should change the job duties test and what, if at all, those changes should be. Precisely, the DOL requested comment on whether it should impose a limitation on the specific amount of time an employee can spend on non-exempt activities while still qualifying for the exemption. The DOL repeatedly mentions the 50% test that California imposes under its state version of the FLSA as a potential model.
• Note on the California Duties Test. The California model would likely be
much more costly for most employers, particularly behavioral health providers, because there are many behavioral health employees whose primary duties are exempt, but spend a majority of their time performing nonexempt work. For example, a supervisor in a group home may spend a majority of his or her time performing nonexempt direct care.
9
Effects. The projected impact of the proposed revisions, according to DOL, is that 4.6 million currently exempt employees will automatically and immediately switch to nonexempt status, to the tune of about $1.5 billion in additional overtime compensation in the first year, and an average of about $1.2 billion in new overtime in each of the following nine years. DOL also projects that businesses will incur another $600 million in the first year for “direct employer costs” and other losses associated with coming into compliance with the new regulations, and roughly $200 million in additional compliance costs in each of the following nine years. The DOL further estimates that the proposed rule would affect 3.41 million healthcare workers, approximately 15.9% of all of those currently under the white collar exemptions. Comments. The Comment period to the proposed rule closed on September 4. During the period the DOL received nearly 250,000 Comments, a great many opposed. Several behavioral health providers submitted comments, including Tom Powell, for Rhode Island-based behavioral health provider, The Kent Center. Mr. Powell noted:
“The way behavioral health providers’ payment rates are set places us in the unfortunate position of being unable to support this proposal as it is written . . . . The untenable financial pressure resulting from the proposed changes would force us into disastrous service reductions and program closures ...” (See attachment for complete copy)
D. RULE NARROWING HOME CARE EXCEPTION
By a recent Final Rule, the DOL has dramatically narrowed an exemption applying to domestic care workers, including workers who provide “companionship services”. This rule directly impacts behavioral health providers. The rule is currently subject to a legal challenge that may be heard by the U.S. Supreme Court.
i. Background of exemption
The FLSA has long exempted certain categories of “domestic service” workers (workers providing services in a household) from one or both of those protections. The exemptions include one for persons who provide “companionship services” and another for persons who live in the home where they work. In the 1974 amendments to the FLSA Congress specifically exempted defined categories of domestic-service workers from certain FLSA protections. They are:
• “Companionship Services”. The amendments provided that the FLSA’s minimum-wage and overtime requirements shall not apply with respect to “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” 29 U.S.C.§ 213(a)(15),
10
• “Live-in Domestic-Service”. The amendments also provided that the FLSA’ shall not apply with respect to “any employee who is employed in domestic service in a household and who resides in such household.” 29 U.S.C. § 213(b)(21),
In 1975, the DOL promulgated implementing regulations.
• First, the regulations defined “companionship services” as “those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs.” 29 C.F.R. § 552.6 (2014). Moreover, “[s]uch services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services.”
• Second, the regulations specifically applied exemption for live-in workers included individuals “who [were] employed by an employer other than the family or household using their services.” 29 C.F.R. § 552.109(a), (c) (2014).
ii. Calls for Change
Increasingly over the past several years there had been calls, by labor unions, advocates and others, to narrow the exemptions significantly.
• The New York Times published at least three editorials calling for the change.
• Labor advocates had been pushing for the DOL to change the regulations since the Supreme Court’s 2007 opinion ruling against home health care worker Evelyn Coke under the FLSA.
• These calls for change point out that the world of providing care in the home has changed dramatically since the 1970s. Many individuals with significant care needs who received such care in an institutional setting, now receive the care in their homes.
• It has been estimated that the home care industry is the fastest-growing sector of the American economy.5
• According to the DOL there are an estimated 1.9 million direct care workers in the U.S., with nearly all currently employed by home care agencies, according to the DOL.
• It has also been estimated that “personal care aides” and “home health aides”, are the nation’s second and third fastest-growing occupations.
o These occupations are each projected to grow by 50 percent between 2012 and 2022, a rate of nearly five times that for all occupations.
5 Claire Zillman, “The Worst Paying Fastest-Growing Job in America,” Fortune Magazine, September 15, 2014, available at http://fortune.com/2014/09/15/home-care-workers/, citing a report by PHI, available at https://fortunedotcom.files.wordpress.com/2014/09/phi-facts-5.pdf.
11
o This growth is expected to result in over a million new jobs in home care over the decade following 2014.6
• The DOL estimates that home care aides work an average of 8.8 hours of overtime per week.
• Approximately 90 percent of direct care workers are women, and nearly 50 percent are minorities.
• Fifteen states already extend state minimum wage and overtime protections to home care workers, and another six states and the District of Columbia mandate just state minimum wages for these workers. NOTE: Pennsylvania is not among these states.
iii. DOL Action: The New Rule
In December 2011, President Barack Obama vowed to update the exemption in order to raise the pay of home care workers by bringing them under the protections of the FLSA. “They work hard and play by the rules and they should see that work and responsibility rewarded.” He noted that the law puts these workers in the same category as “baby sitters.” 7 In September, 2013 the DOL delivered on President Obama’s pledge by adopting the new final rule. In announcing the new Rule, Labor Secretary Thomas E. Perez stated: “[m]any American families rely on the vital services provided by direct care workers. Because of their hard work, countless Americans are able to live independently, go to work and participate more fully in their communities. Today we are taking an important step toward guaranteeing that these professionals receive the wage protections they deserve while protecting the right of individuals to live at home.”8 The DOL said the changes to the rules were necessary because the home health care industry has changed and grown dramatically since Congress created the exemption while extending the FLSA to cover domestic service workers. The Rule, which stated that it was to take effect on January 1, 2015 do two important things9:
1) First, it specifically excludes workers providing companionship services and live-in domestic services who are employed by a third-party
6 PHI report, p.1. 7 See video of President Obama’s speech at https://www.youtube.com/watch?v=96mmOuNeWj4&feature=player_embedded 8 DOL Wage and Hour Division Press Release, 9/17/13, http://www.dol.gov/opa/media/press/whd/WHD20131922.htm 9 The final rule also changes recordkeeping requirements
12
providers or agencies i.e. as opposed to employed directly by the care recipient or family. (revising 29 CFR § 109.552)
2) Second, the rule narrows the definition of “companionship services” in 2 primary respects:
o It limits the time that a worker can provide “care” to no more than 20% of the total hours worked in a week. The rule defines “care” as assistance with “activities of daily living” like dressing, feeding, and bathing, and “instrumental activities of daily living.” So if an employee provides assistance activities of daily living for more than 20% of the hours in a week, he or she is not providing “companionship services” and cannot qualify for the exemption.
o It also excludes the performance of “medically related services”, i.e. services that typically require and are performed by trained personnel, such as registered nurses, licensed practical nurses, or certified nursing assistants, regardless of the actual training or occupational title of the individual providing the services.
Bottom line. These amendments effectively end the availability of the “companionship services” and “live-in domestic-services” exemptions for behavioral health providers, as neither of these exemptions remain available for third-party employers.
iv. Effect
According to the DOL, these changes will bring nearly 2 million new workers under the FLSA's ambit. The DOL also estimates that the narrowing of these home care exemptions will provide stability and decrease staff turnover in these positions, which should also improve quality of care. On the other hand, the industry experts have warned that many of these services are funded by Medicaid and other vulnerable government-funded programs. Providers of such in-home care cannot simply pass increased labor costs along to providers. Accordingly, if these costs are not borne by taxpayers, the new requirements will fall squarely on providers. It should also be noted that this comes at a time where the Affordable Care Act’s Employer Shared Responsibility requirements go into effect.
v. Legal Challenge
Judge Leon’s Opinions Trade associations representing home care employers challenged the Final Rule in the case of Home Care Association of America v. Weil, claiming that DOL exceeded its statutory authority under the FLSA.
13
In December, 2014 and January, 2015, U.S. District Court Judge, Richard J. Leon, issued two opinions vacating the rule’s provisions: (1) excluding third-party employers from availing themselves of the “companionship services” and “live-in domestic services” exemptions; and (2) narrowing the definition of “companionship services”.
• Judge Leon noted that although Congress granted the DOL authority in defining the domestic service exemptions, the DOL’s rule contravened the clear language of the statute and congressional intent.
• Regarding the third-party employer exclusion, he noted that the statute indicates that the exemptions would be available to “any employee” who provides companionship services or live-in domestic services.
• Regarding the definition of “companionship services” the Judge reasoned that the provision of “care” – i.e. assistance with “activities of daily living” – is core to the statutory exemption. Accordingly, per Judge Leon, the DOL’s limitation of such activity to 20% of the work week defies logic. The Judge noted that the DOL’s authority to define the term “does not grant it a blank check to do so in a way that contradicts the [FLSA] itself.”
The DOL appealed Judge Leon’s decisions to the D.C. Circuit Court, the federal appeals court sitting in the District of Columbia. D.C. Circuit Opinion In August 2015, a panel of the D.C. Circuit Court handed down a decision reversing Judge Leon’s order vacating the third-party employer exclusion. The Court noted that “[t]he [DOL’s] decision to extend the FLSA’s protections to those employees [employed by third-party employers] is grounded in a reasonable interpretation of the statute and is neither arbitrary nor capricious.” Because the effect of the Circuit Court’s decision was to exclude the third-party employers from availing themselves the exemption, the Court noted it now lacked jurisdiction to address the trade association’s challenge that the DOL’s narrowed definition of companionship services conflicts with the FLSA. Status of Final Rule
• The plaintiff group in Weil indicated that it will appeal the D.C. Circuit Court’s decision.
• Since Judge Leon’s opinions in December and January, the DOL has not been able to implement the Rule.
• Based upon the Circuit Court’s decision, the DOL requested that the Circuit Court expedite a mandate permitting the DOL to implement the Rule.
14
• The plaintiff group, on the other hand, has requested that the Circuit Court delay its mandate pending the Supreme Court’s opportunity to consider the appeal.
• The DOL has further vowed to not bring enforcement actions against any employer over violations of FLSA based upon the Rule obligations until 30 days after the mandate issues. The mandate is currently scheduled to be issued on October 13th.
• Accordingly, pending any intervening action, providers should likely use November 12th as a working compliance date.
vi. DOL’S GUIDANCE ON EMPLOYEES v. INDEPENDENT CONTRACTORS UNDER FLSA
On July 15, 2015, right on the heels of the publication of the Final Rule on white collar FLSA exemptions, the DOL issued an Administrative Interpretation (“AI”) on the definition of employee, to be distinguished from independent contractor, under the FLSA.10 In it, the DOL:
• boldly notes that “most workers are employees under the FLSA” • makes clear that it believes that misclassifications of employees as
independent contractors is pervasive and on the rise; and • provides guidance to employers for properly classifying employees
consistent with the DOL’s interpretations.
a. Background
Definition of Employee. The FLSA does not define employee in great detail. Rather, it equates “employ” to “to suffer or permit to work”. This phrase has triggered much by way of judicial interpretation. Economic Realities Test. Courts have arrived on the “economic realities” test, discussed below, in determining whether a worker is an employee under the FLSA and thus entitled to its protections. This test involves an evaluation of six different factors to assess whether the worker is economically dependent upon the business of the employer or is really in business for him or herself, and thus an independent contractor. Those factors are:
1. the extent to which the work performed is an integral part of the employer’s business;
2. the worker’s opportunity for profit or loss depending on his or her managerial skill;
10 United States Department of Labor, Administrator’s Interpretation No. 2015-1 at p. 1 (July 15, 2015)(Subject: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors).
15
3. the extent of the relative investments of the employer and the worker; 4. whether the work performed requires special skills and initiative; 5. the permanency of the relationship; and 6. the degree of control exercised or retained by the employer.
b. Administrative Interpretation Points
• The AI does nothing to change the application of the Economic Realities
Test as applied by the courts over years. Instead, it explains and analyzes each factor, providing citations to the seminal cases and examples of common misclassifications in various industries.
• It further offers various examples of what it believes to be common
misclassification issues.
• Although the AI does not represent any ostensible change in policy on behalf of the DOL, its tone is clear that the DOL will interpret the definition of employee broadly, sweeping in many workers that employers may heretofore view as independent contractors. The DOL’s interpretations would appear to require substantial evidence under each factor for them to weigh in favor of a determination that a worker is an independent contractor.
• The AI further cited to several examples in the healthcare industry which
may have particular applicability in the behavioral health industry.
• It should be noted that although agency interpretations such as this AI are not binding, courts often defer to agency interpretations in absence of clear law to the contrary. Accordingly, plaintiff’s lawyers will likely cite to this AI.
• Employers should take note that the DOL’s definition of employee under
its Economic Realities test under the FLSA is broader than the “Control” test that the IRS employs. Accordingly, just because a worker might be considered an independent contractor for tax/withholding purposes, he/she may still be entitled to minimum wage / overtime.
c. Conclusion
• BH providers need to perform an assessment regarding how these
exemption changes will affect them and the budget impact; • Minimize the impact by determining whether to raise salaries to meet the
salary level, reclassify employees as hourly, redistribute job duties to avoid overtime or use part-time workers;
• Conduct an FLSA compliance audit – consider conducting this under privilege – focusing on classifications and proper timekeeping;
16
• Consider implementing a time record’s certification that employees must complete on a periodic basis.
III. FTC AND EEOC: SCREENING ISSUES FOR BEHAVIORAL HEALTH
PROVIDERS
Behavioral health providers are acutely aware of the significance of employee background checks. The employee screening requirements imposed by law are rigorous and complex. The recent passing of the sweeping Act 168 underscores this focus and complexity. Laws contributing to the screening legal regime for behavioral health providers include: the Child Protective Services Law, the Older Adult Protective Services Law and the Public School Code. Behavioral health employers have ratcheted up their employee screening procedures and criteria in recent years as a result of recent legislation (Act 168 included) and increased civil liability. Accordingly, BH providers, at this stage, should be aware that these screening issues are not just HR matters but represent significant compliance and enterprise risk concerns. Specifically, the use of an employee who lacks appropriate qualifications or credentials, or has a criminal or child abuse history that would render him or her ineligible for a position, or who is excluded from participation in a state or federal healthcare program, could result in the following:
• Significant repayment issues, including potential false claims act liability; • Civil liability for negligent hiring or retention; • Adverse licensure action (revocation, issuance of provisional) • Devastating reputational harm to providers who rely on positive reputation for public
and stakeholder relationships Accordingly, providers’ senior management, from a governance perspective, must make sure that there are appropriate screening systems in place including through the use of systematic internal audits or reviews by compliance, audit or other organizational departments. However, while providers must clearly exercise vigilance to prevent the hiring of prohibited or unqualified employees, they must temper this and keep in mind employee protections. There have been recent legal developments regarding the improper screening.
A. Employee screening: Issues beyond Act 168
There are several sources of legal protections for prospective employees as part of the screening process. They include:
a) state law limiting consideration of criminal records; b) constitutional due process; c) race discrimination claims under federal and state antidiscrimination laws; and d) Philadelphia and Pittsburgh’s Ban the Box ordinances; and
17
e) The Fair Credit Reporting Act.11
B. The Pennsylvania Criminal History Record Information Act
The Pennsylvania Criminal History Record Information Act, prohibits employers from considering certain criminal history in hiring decisions. 18 Pa.C.S.A. § 9125 provides:
Felony and misdemeanor convictions may be considered by the employer only to the extent to which they relate to the applicant's suitability for employment in the position for which he has applied.
Remedies. A claim may be brought directly under the Criminal History Record Information Act (CHRIA), 8 of which Section 9125 is a part. CHRIA contains a provision providing for civil actions for actual damages, attorney’s fees and costs, and punitive damages between $1,000 and $10,000 for willful violations. An attorney may also seek to assert a wrongful termination claim under PA law. Such claims are available for employment actions that violate public policy. Arrests, summary convictions and juvenile adjudications. One PA case has interpreted this law as meaning that employers may only consider felony and misdemeanor convictions. Cisco v. United Parcel Services, Inc., 476 A.2d 1340 (Pa. Super. 1984). The corollary to this would suggest that PA law prohibits employers from considering arrest history (without convictions), juvenile adjudications and summary offense convictions. Suitability. There is no clear guidance on the meaning of “suitability.” Employers would be advised to employ a rational, written policy or protocol that avoids blanket rules and instead employs an individual assessment for each prospective employee. Employers should also take into account due process and federal discrimination law in establishing this policy or protocol.
C. Due Process
Child Protective Services Law. The CPSL sets forth that covered employers are prohibited from hiring:
individuals with founded child abuse reports within last five years or with convictions for homicide, aggravated assault, kidnapping, rape, various sex crimes, prostitution felonies, concealing death of child, endangering welfare of child, or pornography ever, or for drug felonies within the last five years.
In 2004, the CPSL’s lifetime prohibition on the employment of people with aggravated assault convictions was determined to violate the Pennsylvania Constitution. Warren County Human Services v. State Civil Service Commission, 844 A.2d 70 (Pa. Cwlth. Ct.),
11 See Community Legal Services, “Legal Remedies and Limitations on the Employment of People with Criminal Records in Pennsylvania,” August, 2015.
18
appeal denied, 863 A.2d 1152 (Pa. 2004).12 The legislature has not yet modified the statute to make it constitutional by putting time limits on the lifetime disqualifications. Consequently, the Pennsylvania Department of Public Welfare has an interim policy13 permitting employers required to comply with the CPSL to hire persons with convictions of the enumerated crimes if the following requirements are met.
• The individual has a minimum five year aggregate work history in child care services since the conviction.
• The individual’s work history in care dependent services may not include any incidents of misconduct.
Older Adult Protective Services Act. The OAPSA prohibits covered employers are prohibited from:
May not hire individuals convicted of homicide, aggravated assault, kidnapping, rape, robbery, burglary, arson, theft (including two misdemeanors), various sex crimes, concealing death of child, endangering welfare of child, pornography, felony drugs ever.14
In Nixon v. Commonwealth, 839 A.2d 277 (Pa. 2003), the Pennsylvania Supreme Court held that the lifetime criminal records ban of OAPSA violated the Pennsylvania Constitution as applied to petitioners because it did not provide an opportunity for them to prove their suitability for employment. The Pennsylvania Department of Aging has an interim policy15 permitting the employment of individuals who can demonstrate rehabilitation as follows:
• A minimum five-year aggregate work history in care-dependent services, without incident, from either the date of conviction or release from incarceration, whichever is later.
• Such “care-dependent services” include healthcare, eldercare, childcare, mental health, mental retardation, or care of the disabled.
• Providers must reasonably investigate the character of an individual with a previously disqualifying criminal offense by means of interviews, references and evidence of work history.
• Providers that hire such an individual are required to obtain specific employer-provided documentation of that individual’s employment in care dependent services and retain it in the individual’s personnel file.16
12 See CLS “Legal Remedies,” n.1. 13 Department of Human Services, Office of Children, Youth and Families Bulletin No. 3490-08-03 (June 27, 2008), available at http://www.pccyfs.org/dpw_ocyfs/Implementation_Act179(2006)_Act73(2007)_amending_CPSL.pdf . 14 35 P.S. § 10225.503(a). 15 http://www.portal.state.pa.us/portal/server.pt/document/1224959/nixon-interim_policy_20081%5B1%5D_pdf. 16 The Public School Code also has a lifetime ban on hiring individuals with homicide convictions; again, the Commonwealth Court found this ban to violate the PA Constitution in Johnson v. Allegheny Intermediate Unit, 59 A.3d 10 (Pa. Cmwlth. Ct. 2012)(en banc). See also CLS, “Legal Remedies,” n.1.
19
D. Discrimination
Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment on the basis of race. This prohibition even extends to conduct taken by an employer without discriminatory intent where it has a disparate impact on racial minorities. Pursuant to this “disparate impact” theory, racially neutral employment practices can violate Title VII if they (1) disproportionately harm minority applicants and (2) are not driven by business necessity. Case law. Courts historically have applied scrutiny to the “business necessity” prong, especially where the employers have applied blanket disqualifications of applicants based upon criminal history.17 In El v. Southeastern Pennsylvania Transportation Authority, 479 F.3d 232 (3d. Cir. 2007). In El, the Third Circuit, which has particular bearing on Pennsylvania, indicated that employers must base their screening policies on empirical evidence to establish that a person with a criminal record presents more than a minimal risk.18 EEOC Guidance. In 2012 the Equal Employment Opportunity Commission issued guidance on the applicability of the disparate impact theory to employers’ criminal history screening.19 In the Guidance the EEOC affirms its position that decisions by employers to disqualify prospective employees based on criminal history, as a rule, poses a disparate racial impact. The Guidance’s notable points are:
• Blanket disqualifications based on criminal history are prohibited; • Disqualifications based on arrests are prohibited; • Employers should perform case-by-case assessments on the risk that the fact of a
particular conviction will pose on the particular position, considering 1) The nature and gravity of the offense/conduct; 2) The time that has passed since the offense and/or the sentence completion; 3) The nature of the job held or sought.
The EEOC has also cautioned against employer screening practices that have a disparate impact on other protected classes including women, individuals with disabilities, and those over 40 years of age.
E. Fair Credit Reporting Act and the Fair Trade Commission
All background checks that are conducted with the use of a third party contractors are “credit reports” under the meaning of the Fair Credit Reporting Act. As such, the FCRA requires these employers to:
17 See CLS “Legal Remedies,” n.1. 18 Id. 19 “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (Apr. 25, 2012), available at http://www.eeoc.gov/laws/guidance/enforcement_guidance.cfm .
20
1) make certain disclosures to the employee or prospective employee being screened;
2) obtain appropriate FCRA consents from the current or prospective employee; and
3) provide current or prospective employees with an opportunity to respond before taking adverse action based upon a report; and
4) provide the current or prospective employee with certain information upon taking an adverse action based upon a report.
Failure to comply with these requirements is widespread, including among large corporations, and has led to a multitude of lawsuits. A major factor triggering these suits is that these FCRA screening violations lend themselves to class actions. Employers onboarding and screening practices tend to be uniform and increasingly conducted by third-party vendors. If the appropriate consents and disclosures are not in place for one employee, there is a good chance that they have not been in place for other applicant or employee. This class action remedy for FCRA screening violations posits FCRA liability as a substantial organizational risk and places a premium on compliance. Damages. Under the FCRA a plaintiff can obtain attorneys’ fees and, if intent or recklessness is shown, punitive damages. Notable class actions include:
• In March, 2015 Food Lion LLC paid nearly $3 million to settle a class action based on FCRA screening violations;
• In September, 2015 Uber was hit with a proposed FCRA screening class action in Federal Court in New Jersey; this is not the first FCRA screening suit that Uber has faced recently;
• Kohl’s was named in a FCRA screening class action in California in June, 2015; • Home Depot, Universal Theme Parks, Hertz, Avis and Michaels Stores are also
among large companies that have been subject to class action suits; * The success that plaintiffs have had in class action suits against large companies under the FCRA, likely means that smaller and midsize employers will soon become targets. Where Employers Mess Up and Practical Guidance To avoid/mitigate liability Employers should consider the following:
• Do not rely on third party agency to be FCA compliant; • Audit the third party agent’s forms and practices to ensure they are FCRA
compliant; • Employers should further not simply rely on indemnification provisions in
contracts with such agencies; • Use stand-alone disclosure forms rather than coupling FCRA disclosures on the
same form with other disclosures;
21
• If the employer uses the report in any way to make an employment decision, the employer must follow all the disclosure requirements;
• Don’t be hasty in taking adverse action; make sure the employee or applicant has had sufficient opportunity to respond to the information provided;
• If an employer is concerned about its FCRA compliance, it should consider conducting a privileged audit.
Notably, the EEOC and FTC have published a joint guidance for conducting background checks of employees and applicants.20
F. “Ban the Box” Ordinances
On April 13, 2011, the City of Philadelphia enacted Chapter 9-3500 of the Philadelphia Code, the “Fair Criminal Record Screening Standards Ordinance” also known as the “ban the box” law.
• Applies to private employers that employ ten or more persons within the City of Philadelphia (also applies to the City itself)
• The ordinance establishes two key employer prohibitions: o May not “knowingly and intentionally make any inquiry about or … take
any adverse action against any person on the basis of any arrest or criminal accusation made against such person, which is not then pending against that person and which did not result in a conviction.”
o May not ask job applicants to disclose criminal convictions during the application process, or before the conclusion of the first interview.
• Employers are exempted from the ordinance if their actions are authorized by any other applicable law.
• Does not provide for a private right of action; complaints can be filed with the Philadelphia Commission on Human Relations, which is responsible for enforcement of the ordinance.
• PCHR may impose fines for violations
In 2012, Pittsburgh passed two Ban the Box ordinances; one applying to city employment and one that applies to city contractors.
IV. RECENT NLRA DEVELOPMENTS AFFECTING BEHAVIORAL HEALTH
PROVIDERS
A. NLRB’s New “Quickie” Election Procedures
The NLRB has recently dramatically overhauled procedures for union elections, installing what is known as the “quickie” or “ambush” election rule.
20 Equal Employment Opportunity Commission and Federal Trade Commission, Background Checks What Employers Need to Know.
22
Shortened election period. As the moniker suggests, the procedural change would severely compress the time period between the filing of an election petition and the secret ballot vote. The new procedures became effective in April, 2015. Currently, the median time period between the filing of a petition and an election is 38 days. Significantly, the NLRB conducts over 95 percent of union elections within two months. Under the new regime, elections could potentially be held within 2 weeks (as little as 13 days) from the date the union files a petition. Employer opposition. Employers tend to oppose the changes strenuously as they believe that they are disadvantaged by the shortened election period. Unions petitioning for election would have already, the reasoning goes, have had an opportunity to conduct an informational campaign aimed at the prospective bargaining unit. Employers, on the other hand, would only have the opportunity to commence their educational campaign upon receipt of the petition. Additionally, the shortened timeframe provides less time for employers to prepare employee information that must be turned over to unions in short order (e.g. names and contact information of employees in the putative bargaining unit), which may lead to unfair labor practice charges. Bottom line. This is of particular significance to behavioral health providers, as unions have targeted the industry for organization in recent years. Providers should assess existing risks and prepare for the potential of receiving a petition.
B. NLRB General Counsel Guidance on Employer Handbooks
In March, 2015 the NLRB’s issued a memorandum offering guidance on how to craft employee handbook rules that won't be deemed unlawful by the NLRB, responding to queries from labor law practitioners about what he called an “evolving area of labor law.” Many Handbooks Violate Section 7 Rights
1) In the memorandum the NLRB GC, Richard Griffin, noted that the NLRB had been receiving a substantial number of valid and supported unfair labor practice charges regarding employee handbooks.
2) Language in these handbooks tend to either prohibit or “chill” the employees’ rights under Section 7 of the NLRA to engage in protected, “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
3) These “Section 7” rights apply to the union and non-union setting alike. 4) They do not only protect employees attempts to form a union; Protected,
concerted activity consists of two or more employees acting together with a goal of improving their terms and conditions of employment.
5) Mr. Griffin states: “I am publishing this report to offer guidance on my views of this evolving area of labor law, with the hope that it will help employers to review their handbooks and other rules, and conform them, if necessary, to ensure that they are lawful.”
23
The Memorandum provides examples of handbook language on a series of substantive points that the NLRB believes to be both impermissible and permissible under Section 7. These issues go to:
• Rules regarding employee confidentiality; • Employee conduct toward the company and supervisors (including disparagement
and insubordination); • Employee conduct toward fellow employees; • Employee interaction with third parties; • Restrictions on use of company logos, copyrights, trademarks; • Restrictions on photography and recordings; • Restrictions on employees leaving the workplace; and • Employer conflicts of interest.
Controversial NLRB positions. Many of these issues are the subject of recent controversial opinions issued or positions espoused by the NLRB, which are affirmed throughout the memorandum. These recent opinions and positions have addressed employees’ use of social media and confidentiality of internal company investigations. Notable cases addressing social media and confidentiality include: • Costco Wholesale Corporation, 358 NLRB No. 106 (Sept. 7, 2012) Costco had the
following policy: “Employees should be aware that statements posted electronically (such as [to] online message boards or discussion groups) that damage the Company, defame any individual or damage any person's reputation, or violate the policies outlined in the [Company] Employee Agreement, may be subject to discipline, up to and including termination of employment.” Costco’s policies also contained prohibitions on employees discussing or sharing “private matters”, “confidential information” and “sensitive information” including about other employees. The Board concluded that these policies would have a reasonable tendency to prohibit Section 7 activity, including discussions of the terms and conditions of employment.
• Karl Knauz Motors Inc. 358 NLRB No. 164 (Sept. 28, 2012). The NLRB ordered an employer to rescind its social media policy, which contained a provision requiring employees to be “courteous, polite, and friendly” to customers and fellow employees and that “[n]o one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.” The board reasoned that the prohibition could reasonably be construed to bar discussions of the terms and conditions of employment, which is protected under Section 7.
• Triple Play Sports Bar and Grille, 361 NLRB No. 31 (Aug. 22, 2014). Employees of
a bar engaged with non-employees on a Facebook discussion regarding the employer’s alleged failure to withhold employment taxes properly. The discussion
24
was generated by a posting of a former employee charging the owner with incompetence, and subsequent comments included profanity and a suggestion that the owner “pocketed” the money. One employee “liked” the original post and another referred to the owner as an “***hole”. The bar fired both employees. The Board found that both employees were engaged in protected, concerted activity under Section 7, which was not lost despite the alleged disloyalty or defamation. The Board also found that the bar’s policy prohibiting employees from engaging in “inappropriate discussions” was sufficiently imprecise to be understood by employees to include Section 7 activity.
• Banner Health System d/b/a Banner Estrella Medical Center, 358 NLRB No. 93 (July
30, 2012). The NLRB held that an employer’s “blanket” rule requiring employees participating in internal investigations to maintain the confidentiality of the investigation violated workers’ Section 7 rights. According to the NLRB, the employer must demonstrate, on a case-by-case basis, more than a general confidentiality concern. Rather, it must demonstrate a legitimate and substantial business justification for the restriction t. Specifically, the employer has to assess under the circumstances whether any witnesses need protection, or there is a danger of fabrication of testimony, destruction of evidence or a cover up.
Bottom line. Employers should review their handbook along with the memorandum for potential risk areas. Employers should further be careful about prohibiting, restricting or disciplining employees for communications with other employees and third parties in traditional or new forms of media. The NLRB is clearly asserting a broad construction of Section 7 rights and has otherwise been very active in regulating the non-union workplace.
C. NLRB Expands “Joint Employer” Standard
In an opinion issued late August, 2015, the NLRB also redefined its test for determining joint-employer status.21 It did in a contentions 3-2 decision falling on political party lines.
• The core test for determining whether an employer is a joint employer for National Labor Relations Act purposes is whether it “shares or codetermines those matters governing the essential terms and conditions of employment.”
• Traditionally, to qualify as a joint employer the putative employer would have to exercise “direct and immediate” control over the terms and conditions of a worker’s employment.
• This standard is now relaxed; “indirect” or “reserved” could now suffice. • This is significant for the following scenarios:
21 See Browning-Ferris Industries of California, Inc.
25
o Staffing agencies. An organization that uses staffing agencies could be found to be the joint employer of a staffing agency’s employees (the case before the NLRB, Browning-Ferris Industries dealt with a staffing agency); the board noted the recent trend toward the use of contingency workers.
o Franchises. Businesses built on the franchise model will, no doubt, be targeted for joint employer status - e.g. McDonalds;
• This applies to issues under the NLRA such as: o Union organization; o Collective bargaining; o Unfair trade practices (including Section 7 rights in the non-union setting)
Bottom line. Behavioral health employers that routinely use staffing agencies to fill positions on an ongoing basis should be mindful of the level of control they exercise over such workers, as such can trigger joint employer liability under the NLRA.
V. Act 102
Act 102 states that a health care facility may not require an employee to work in excess of an agreed to, predetermined and regularly scheduled work shift. A health care facility is prohibited from retaliating against an employee who does not agree to work overtime unless there is an unforeseeable emergent circumstance or overtime is needed to complete an on-going patient care procedure already in progress and the employee’s absence could have an adverse effect on the patient.
• The Act authorized the PA Department of Labor and Industry (“L&I”) to assess fines of not less than $100 and not more than $1000 for violations.
• It took effect July 1, 2009 but was largely ignored until April of this year when the Pennsylvania Auditor General issued a scathing report, criticizing L&I for its lax enforcement. (see handout)
• Act 102 covers hourly, nonsupervisory employees that are involved in direct patient care or clinical care services.
o Direct patient care services are not defined in Act 102, but the Act defines clinical care services as including the diagnostic, treatment, or rehabilitative services provided in a health care facility.
o Employees are defined as an individual employed by a “health care facility”, the Commonwealth, or a political subdivision or an individual employed through a personnel agency that contracts with a health care facility.
o Act 102 does not cover a physician, physician assistant or dentist; employees not involved in direct patient care and clinical care services; or individuals not employed by a health care facility.
o Statute defines “clinical care services”: The diagnostic, treatment or rehabilitative services provided in a health care facility, including the following: radiology and diagnostic imaging, such as
26
magnetic resonance imaging and positron emission tomography; radiation therapy; phlebotomy; electrocardiogram and electroencephalography; and laboratory medical services.
• Applies to “health care facilities”:
A facility which provides clinically related health services, regardless of whether the operation is for profit or nonprofit and regardless of whether operation is by the private sector or by State or local government.
• “Health care facility” includes: o A general or special hospital, a psychiatric hospital, a rehabilitation hospital, a
hospice, an ambulatory surgical facility, a long-term care nursing facility, a cancer treatment center using radiation therapy on an ambulatory basis, and an inpatient drug and alcohol treatment facility.
o A facility which provides clinically related health services and which is operated by the Department of Corrections, the Department of Health, the Department of Military and Veterans Affairs or the Department of Public Welfare.
o A mental retardation facility operated by the Department of Public Welfare. • “Health care facility” does not include:
o An office used primarily for private or group practice by a health care practitioner.
o A facility providing treatment solely on the basis of prayer or spiritual means in accordance with the tenets of a church or a religious denomination.
o A facility conducted by a religious organization for the purpose of providing health care services exclusively to clergy or other individuals in a religious profession who are members of the religious denomination conducting the facility.
Note: Definition of “Health care facility” is silent on many BH facilities; BH providers will have to glean from examples and take position and wait for enforcement
• Act 102 does not prohibit overtime for on-call time if unforeseeable emergent
circumstances arise or the employee must complete a procedure already in progress and whose absence would negatively affect the patient.
o On-call time is permitted so long as the employer does not use it to substitute mandatory overtime or as a loophole in the Act.
o On-call time is defined as time that an employee is not physically present at the facility but is available; or is available to return to the facility on short notice if necessary.
o Unforeseeable emergent circumstances are defined as an unforeseeable declared national or state emergency; an unusual event which is unpredictable or unavoidable which requires an increased need for health care services such as an act of terrorism, a natural disaster, or a widespread disease outbreak; unexpected absences of a scheduled shift which could affect patient safety. Employers must
27
exhaust all other options before resorting to overtime and must provide the employee with 1 hour to arrange for the care of a dependent.
• Employees may agree to overtime but an employer may not retaliate against an employee who refuses overtime except in the case of an unforeseeable emergent circumstance or the employee is involved in a patient procedure already in progress.
• Under the Act, any employee who works 12 consecutive hours will have 10 consecutive hours of off-duty time immediately following the overtime. The employee may waive the off-duty time.
• Health care facilities should document the policies it uses pertaining to overtime, call out policies, on call time, emergencies, etc. which should be distributed to all employees. A health care facility should document when overtime occurs, the circumstances around the overtime, and whether the overtime was mandatory or voluntary.
• The Performance Audit (“Audit”) published in April 2015 by the Pennsylvania Auditor General severely criticized two aspects of L&I’s enforcement of Act 102.
o The first finding in the Audit was that L&I failed to promulgate regulations in a timely manner. The Act mandated the promulgation of regulations within 18 months of enactment. L&I promulgated the regulations four years past the deadline. During that time, it relied heavily on internal policies and procedures. The lack of regulations lead to inconsistent interpretations of the Act and little guidance in the enforcement of the Act.
o The second finding in the Audit was that L&I failed to effectively and consistently ensure all Act 102 complaints were recorded, investigated, and resolved. One of the more troubling findings was eight percent of the cases received, L&I closed the cases simply due to a lack of human resources to investigate the allegations. Additionally, there was a lack of contact with the complainant and healthcare facilities, investigators failed to ask the complainant about identity disclosure, a failure to complete investigative reports and issue closure letters, and finally a lack of timeliness in complaint response and ultimate resolution.
• Following the publication of the Audit, L&I acknowledged there has been a lack of enforcement and has embraced and implemented the recommendations given by the Auditor General.
VI. MISCELLANEOUS ISSUES
A. Leave under the ADA. Courts have clearly recognized that granting temporarily leave for a disability (e.g. surgery) could constitute a “reasonable accommodation” under the Americans with Disabilities Act; Confusion often arises with the interplay of the Family and Medical Leave Act and leave as a reasonable accommodation under the ADA; When an employee requests leave when FMLA leave is exhausted, or requests leave without following FMLA procedures, employers must separately analyze whether that request is a request for an accommodation under the ADA.
28
B. Interactive Process and Individual Assessments under the ADA
In any case where an employee requests an accommodation for a disability, the employer has the duty, assuming a disability exists and the person is otherwise qualified for the position, to engage in the “interactive process” to find an appropriate accommodation; Employers should avoid rejecting a requested accommodation out of hand, as such is disfavored by courts;
C. Intermittent FMLA or modified work schedule
This is very difficult issue for employers; When an employee requests intermittent leave under the FMLA, or a modified work schedule or days off as an accommodation for a disability, the employer should not react hastily; Employers should require procedural compliance by employees for intermittent FMLA and document the exact nature of the leave; it should be defined in scope and length
D. Upshot
All of the above matters behoove employers to review job descriptions and draft them with sufficient detail – this will define the essential job functions which an employee must be able to perform in order to qualify for the position.
E. Wrongful discharge and whistleblower suits.
• Most Pennsylvania employers are primarily only concerned with the major state and federal discrimination statutes because PA is an employment “at will” state,
• BH providers, however, often have to face claims of wrongful discharge or claims under the PA Whistleblower Law
• “Wrongful discharge” requires a termination against public policy
F. Poisonous employment environments BH providers can often have “rogue” programs Often stemming from poor employment relations, including inattentive management, factionalization, etc. these environments can lead to the following even in otherwise healthy, compliant providers:
• Discrimination and harassment claims; • Compliance violations; • OSHA complaints; • Qui tam claims under the false claims act; • Complaints to payers, regulators and law enforcement; • Disappearing of client and business records; • Quality of care deficiencies; • Licensure and criminal investigations and civil liability.
September 4, 2015
Mary Ziegler, Director Division of Regulations, Legislation, and InterpretationWage and Hour DivisionU.S. Department of LaborRoom S–3502200 Constitution Avenue NWWashington, DC 20210
RE: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees (RIN 1235–AA11)
Dear Director Ziegler:
The Kent Center for Human & Organizational Development (TKC) welcomes the opportunity to provide comments on the Wage and Hour Division of the Department of Labor’s (DOL) notice of proposed rulemaking to update and revise the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees. The Kent Center, as it is known locally, was established in 1976 and is a community behavioral health and substance abuse organization. Our mission is to improve the quality of life for adults, teens, children and families through a wide range of community-based and outpatient programs.
We thank DOL for your attention to the important issue of raising wages for lower-paid American workers, and we strongly regret that we are unable to support the proposed rule in its current form. As written, the rule would have a potentially devastating effect on health care organizations—like ours—serving low-income individuals with serious and persistent mental illnesses and addictions. This would result in the need for service cutbacks and program closures.
Many of the people we serve are low-income and uninsured whose cost of care is covered primarily by Medicaid or state and local general funds. Medicaid reimbursement rates and grant funding levels are set by states, counties, or other third party entities—often at levels so low, we are forced to cobble together funding from multiple sources simply to keep our doors open and continue serving community members in need. Some states have not raised their Medicaid payment rates in 20 years; others are actively working to reduce provider payments in order to achieve balanced state budgets. Meanwhile, states have slashed more than $4.5 billion from mental health and substance use disorder services during the recession, cuts that continue to have devastating ripple effects throughout the health care system. The situation has only worsened under the extreme spending caps imposed by the 2011 Budget Control Act, which threaten continued reductions to mental health and addiction services at a time when our nation’s behavioral health needs are escalating.
As a result of this harsh funding environment, provider organizations like ours have limited ability to raise new revenue in response to increased costs of doing business. DOL’s proposal to double the overtime pay exemption threshold would place a massive new burden on organizations already struggling to stay in business. Moreover, linking the threshold to inflation would force employers into
perennially chasing a rising salary target—without any ability to raise state-determined payment rates or otherwise ensure revenue increases to offset these changes. Provider organizations will be squeezed more tightly with every year that goes by; many will be forced to close programs and lay off staff, resulting in fewer clients served and reduced access to critical mental health and addiction services for individuals in need.
The combination of funding cut and rising medical insurance premiums The Kent Center has been force to cut over one hundred positions and has not been able to give any type of wage increase to our staff since 2007.
Although I believe that the changes you are proposing are long overdue, I believe that a graduated
or step increase in the propose rate change may be more palatable. The implementation of this type of
increase over the next several years would allow employers to better budget for salary increases or
overtime. Under your current proposal the immediate effect on The Kent Center will be approximately
$300,000.
The staff being effected are primarily master’s degree level clinicians, many have a Rhode Island State license or are working towards licensing and provide important clinical counseling and support to our clients. Considering their current caseloads many work over forty hours per week. If they were reclassified to non-exempt we would need to reduce their caseload in order to stay within forty hours per week, because we would not have the money to pay overtime. We also do not have the funding to hire new staff to cover the clients that will now not be served.
Again, all of our staff are deserving of more money, and because our reimbursement rates cannot support this substantial increase today, we would need some type of waiver or moratorium for a period of time to implement.
The Kent Center agrees that modernizing and updating the FLSA exemption regulations is long overdue; yet, the way behavioral health providers’ payment rates are set places us in the unfortunate position of being unable to support this proposal as it is written today. The untenable financial pressure resulting from the proposed changes would force us into disastrous service reductions and program closures as I stated above.
We strongly urge DOL to re-examine the proposed new salary threshold, taking into account the unique pressures on health care providers and regional variations in cost of living. Additionally, we request that any changes to the primary duties test be published in a future notice of proposed rulemaking, to allow the public time to comment before changes are finalized.
Thank you for your consideration of these concerns.
Sincerely,
Tom Powell, MBA, CCPDirector of Human ResourcesThe Kent Center
