Wage + Hour Compliance in Healthcare: Particular Problems, Practical Solutions

Transcript

Justin Barnes
Office Managing Principal, Atlanta 

Hi, everyone. Thank you for listening. My name is Justin Barnes. I'm a principal with Jackson Lewis in the Atlanta office, and I also co-lead the firm's Wage and Hour group. I'm joined today by another fantastic wage and hour lawyer, Andrew Bellwoar, in our Washington, D.C. Region office. We're going to talk about some unique wage and hour issues that come up in the healthcare industry and the questions we get asked most often in that context. To kick things off, Andrew, what are some of the issues that you most often get asked about in the healthcare industry in the wage and hour context?

Andrew Bellwoar
Associate, Washington, D.C.

Thanks, Justin. It's great to be talking with you today. I've been lucky enough to work with you a bunch of times, so it's nice to do a podcast like this to talk about some of the common issues.

One issue we get a lot, especially from healthcare providers, is employee classification. This can come in a couple of different forms, but starting from the default, people are typically classified as non-exempt employees. For any hours they work over 40 in a week, they get overtime, and otherwise they have to be paid the minimum wage. 

On the employer side, sometimes you want to find more creative ways to compensate your employees. This can relate to either independent contractor classification instead of employee classification, or an exempt employee who is not entitled to overtime. For independent contractors, this can get very complicated very quickly. A lot of times, we'll get questions, Justin, and I'm sure you've gotten ones like this, where somebody says, "We want to label somebody as an independent contractor," or, "They've requested to be an independent contractor. That's all we need, right?" Unfortunately, no. There's a bit more analysis that goes into it: the level of control, the duration and type of relationship, and a whole bunch of other things that can really affect whether somebody is properly classified as an independent contractor.

It's pretty easy to look at somebody like a plumber coming in for a one-off instance at a hospital to fix a leak. That's a pretty easy classification as either a vendor or an independent contractor. But if you have somebody like a locum tenens provider or a traveling nurse, they may not be there five days a week or 40-plus hours a week. If the hospital or healthcare provider has enough control, or there are other factors that go into it, they can quickly be seen as somebody who should be an employee. That can open you up to a whole bunch of different issues, including back wages, tax issues, and a host of other things. 

Justin, have you seen that come up, or are there other nuances there?

Barnes

That comes up especially in the context of healthcare providers like doctors. Often, if a doctor has their own practice, they will be affiliated with a hospital. It's an arm's-length transaction between the doctor's company and the hospital, with the company sometimes providing services to the hospital.

Where it can become a much grayer area is when all the other people who work at the doctor's practice are also being paid as contractors by the hospital. Maybe the doctor's practice becomes 100% affiliated with the hospital, and they are only doing work for the hospital rather than holding themselves out as a separate practice.

That can quickly bleed into an assumption that all providers, including nurses and anyone else, should be treated as independent contractors. The issue is when that very common relationship between doctors who are affiliated with hospitals starts bleeding over and affecting all the other relationships the hospital system may have with other providers.

Bellwoar

You see that a lot, and people ask about that specific example a lot. Traveling nurses, as we talked about a little earlier, are another common example. It's pretty easy when you have somebody with a six-month duration who comes in and provides a very specific service and is not acting in the same way typical employees with indefinite relationships would.

But if you start giving them performance reviews, requiring them to show up to mandatory meetings at the beginning of the day, or giving them an indefinite duration for how long they're going to work for you, that starts blurring the lines and might expose you to more risk than you are comfortable with.

Barnes

In particular, sometimes healthcare systems, especially larger healthcare systems, try to supplement their workforce with contractors. You may have 100 registered nurses (RNs) whom you treat as employees, but you need another 30 for a temporary period of time.

Sometimes healthcare systems will try to supplement that workforce with contractors, and that can be a red flag.

Bellwoar

Relatedly, but on the other end of the spectrum, if you have somebody who is a bona fide employee and everybody agrees they are an employee, sometimes they may not need to be paid overtime if they're working 40 hours in a week or more. That's if they qualify for one of the exemptions under the Fair Labor Standards Act (FLSA) or different state wage and hour laws.

You see this a lot with doctors. Most people are pretty clear that a doctor is in an exempt position. But if you start looking at physician assistants, nurse practitioners, or even a pretty senior RN, they may have a huge knowledge base, a lot of experience, and may be seen by the average person as a learned professional in their field. That doesn't necessarily mean they qualify for an exemption under the wage and hour laws.

Sometimes trying to get creative with that will work, but there are a lot of different factors that go into it, and it can open you up to trouble if you misclassify the employee.

Barnes

One issue I often see in this context, or get asked about, is this: "This person is an RN, so that means they qualify for the professional exemption." But you have to keep in mind that just because someone is an RN, has a law degree, or is an M.D., you still have to look at what they're actually doing.

Are they actually performing the exempt duties required to satisfy the exemption? It's not just whether they have the degree or licensure that would commonly qualify them.

Bellwoar

You add an extra layer of complication to both of these classification questions when you start thinking about the state wage and hour laws. They can have different structures for how they organize their laws and different exemptions. Some things that might be true under federal law aren't true under state law, and some things true under state law wouldn't be true under federal law.

Justin and I do this work every day. Justin's probably a little more knowledgeable than I am on this, but we still do it day in and day out, and we still find ourselves talking to people on the ground in jurisdictions where we might not practice very much. If you're an employer just wandering into this without doing it day to day, it really makes sense to talk to an attorney who does this more frequently to make sure you're doing it the right way.

Barnes

We do this day in and day out, but these are still complicated issues that even we have to research and examine based on the current state of the law. They are not static. They're changing all the time, especially as it relates to the state law nuances Andrew mentioned.

Bellwoar

Especially for independent contractor issues, not only do you have state laws changing, but even federal law has been changing at a rapid pace recently. Making sure you're on top of it, aware of these changes, and talking to attorneys to ensure you're continually doing it the right way is important because it can get out of hand and expensive very quickly. What are some of the other issues you've seen, Justin, other than these classification questions?

Barnes

Two issues I still see quite often relate more to non-exempt employees, meaning employees we know are entitled to minimum wage and overtime and are paid on an hourly basis. The two issues are rounding and automatic meal break deductions.

Rounding was a common practice in the 1950s and 1960s, before computer time clocks. It was okay, and it is still technically okay under the law to round time. The reason it was initially used was that, with old-school time cards and punch clocks, employees would punch their time cards, and those time cards would be turned in to a payroll office. Payroll clerks would literally read the timestamps, add up the time, and calculate the pay.

The U.S. Department of Labor (DOL) said in its regulations that it's okay to round time to the nearest quarter hour as long as, on the whole, it doesn't benefit the company more than it benefits the employee. You can imagine someone with a stack of time cards this high going through them. It was easier to say, "Okay, this is 8:30, this is 8:45, and this is 9:00," rather than calculate down to the minute.

The problem is that as timekeeping technology has progressed, there really is no need to round these days because computers will do the math for you. You don't have to read time cards manually anymore. While DOL regulations still say rounding is not per se unlawful, the problem is that it most often ends up benefiting the employer more than the employee when you actually do the math. People tend to get to work early, especially if you have a very strict attendance policy. Those types of attendance policies combined with rounding almost always mean the rounding favors the employer.

In my experience, there are very few scenarios where rounding is actually needed. That's not to say it's never okay, because as long as it's neutral, it's perfectly fine. I've seen plenty of situations where clients have had rounding policies that ended up being neutral. But it's a common practice that has been around for decades, and employers need to look at it again to ensure it's truly a neutral policy.

The other issue is automatic meal break deductions. These policies are still very common in healthcare, where employees automatically have a half hour or an hour deducted from their pay on the assumption that they took a meal break of that length.

Again, there's nothing unlawful about that policy as long as people are actually taking the breaks and have a way to report if they missed a break. While we suggest that automatic meal break deductions are not the best policy because they carry additional compliance requirements, they are not unlawful.

If you're going to have an automatic meal break deduction policy, it's key to make sure there is a system for employees to report when they miss those breaks and that the employees actually get paid when they miss them. There should also be solid recordkeeping to ensure you have records of employees affirming that they took their break or, if they didn't, saying so and getting paid for missing it.

Rounding and automatic meal break deductions are policies that have been around for decades and that employers in this industry are still using. Again, neither is per se unlawful under federal law, but you need good systems in place to ensure compliance. You also need to keep state law nuances in mind because some states have stricter rules.

Bellwoar

The recordkeeping point is especially important. Talking about old-school punch cards and everybody going through line by line to figure out pay seems like a blast from the past. But it's surprising, even today, how many employers are still using that exact type of system. Then you start looking at meal breaks and the paper forms employees have to turn in if they miss a break.

I'm curious about your thoughts on this. It seems like asking for trouble whenever you have that much paper being shuffled around.

Barnes

It's asking for trouble in paper form, for sure, unless you have a dedicated local person who will ensure all those forms are kept in a file cabinet for three years. Whenever I get an automatic meal break deduction case or claim, or a DOL audit looking into those issues, the first thing I ask for is those forms. We need them.

Electronic recordkeeping is ideal, especially if you have an electronic attestation where, at the end of the day, when an employee clocks out, they can either affirm, "Yes, I took my meal break," or say, "No, I didn't take my meal break," and the system will automatically pay them for that time. Those electronic attestations are ideal.

But if you're old-school and want to use paper, that is perfectly fine as long as you're prepared to send me boxes and boxes of completed forms from the last three years if you get sued. 

Bellwoar

I know you love getting those boxes of paper.

Barnes

They're great. Paralegals especially love it when those boxes come in. Andrew, are there any other issues that come to mind in this industry?

Bellwoar

One of the other major issues we find, and one that rounds out the most common issues, is travel time. There are a couple of different questions that come up, but ultimately it comes down to: Do I need to pay my employees if they're traveling?

As with a lot of these issues, it's very context-dependent. The typical commute at the beginning of the day or back home at the end of the day does not have to be compensated most of the time. But say you have a doctor or nurse who, as part of their daily activity, is traveling from appointment to appointment and driving for 20, 30, or 40 minutes between appointments. Do you have to pay them? In most circumstances, you probably do.

There's something called a continuous workday. Once you start actually doing your job, if you continue to do things that are part of that work, even with a slight break here or there, most of the time it will continue to be compensable time.

There are some exceptions, such as split shifts, where there's a legitimate break from the work you're doing between one portion of the day and another. But if the employee is doing work in between, or if directives are coming in and they're expected to be on call during that time, all of that adds complications.

At the bottom, these employees are sometimes in their cars. If it's related to work, chances are there's some amount of time you have to pay them for.

Barnes

What's interesting, or further complicating, is that you mentioned the initial commute at the beginning of the day and the final commute back home at the end of the day are typically not compensable under the law. But we saw an opinion letter from the Department of Labor earlier this year explaining that is the case. You don't have to pay for that commute time unless someone has already started their workday before driving in or continues their workday after driving home.

That's why it's important to make sure employees are not checking emails or doing other administrative tasks before they drive into the office. Depending on what they're doing, how much time they're spending doing it, and whether the employer knew or should have known about it, that could end up making their entire drive to or from work compensable.

Bellwoar

That's a good point, Justin. Especially taking the example I gave earlier about the physician or nurse traveling from appointment to appointment, if they're filling out forms or charts before traveling or at the end of their day, that complicates things a lot. Exactly as you said, you may end up having to compensate for that time.

Another issue that comes up related to travel time is training. If you have something that an employee is doing voluntarily on their own time, it's a pretty easy case to say it's not compensable. But if it's related to the work or occurs during the normal workweek, that can complicate matters to the point that it might be compensable.

As with a lot of these issues, it's very detail-specific and decided case by case. That's why it's important to talk about these issues with your attorney or in-house team and make sure you're not getting it wrong one way or the other and that everything is compliant. Otherwise, it can become a big issue pretty quickly.

Barnes

That's why it's important to listen to podcasts like this.

Bellwoar

Exactly. That does it for the major issues I've heard. Justin, what about you? Any last ones?

Barnes

No, that covers it. There are plenty of other wage and hour pitfalls in this industry, but those are the ones we hear come up most often. We appreciate everyone listening, and stay tuned for further developments.