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Home Care Nurse Receiving Combination Fee and Per Hour Compensation Is Not Exempt from Overtime Pay

  • April 12, 2002

A federal appeals court has ruled that a home health care nurse who was paid a set fee for home patient visits plus an hourly rate for other work she performed in connection with her job was not an exempt professional for purposes of overtime pay under the federal wage and hour law. Affirming the judgment of the federal trial court, the appeals court found a hospital's compensation plan combining fee basis with hourly pay destroyed the nurse's exempt status and entitled her to overtime for hours worked over 40 in one week.

When she first began working for the university in 1995, the nurse was paid between $30 and $42 per visit, plus $10 for completing certain admissions paperwork. In addition, she received $17 per hour for time spent completing other necessary documentation for each visit plus hourly compensation for certain home visits that lasted more than two hours. In 1996, the hospital eliminated the additional hourly pay for completing documentation, and subsequently reduced its per-visit pay rates. The nurse was required to complete 25 home health visits per week, periodically to perform on-call services at a rate of $3 per hour, and to attend staff meetings and in-service training at an hourly pay rate of $17.65.

Alleging that the 25 home visits per week regularly required 60 hours of work for which she did not receive overtime pay, the nurse quit her job and filed a complaint against the hospital for violations of the Fair Labor Standards Act. Although the hospital argued that the nurse was an "exempt" professional employee compensated on a fee basis, the federal trial court found the additional hourly pay destroyed her professional status exemption. That court awarded her overtime pay, plus interest and attorneys fees, but denied liquidated damages for the hospital's intentional actions in violation of the FLSA. The federal appeals court not only affirmed the district court's award but also ruled the nurse was entitled to liquidated damages for the hospital's intentional failure to comply with the law. An employer is liable for liquidated damages, generally an amount equal to the unpaid overtime, unless it can show it acted in good faith and reasonably believed its pay practices were not in violation of the law. The hospital had offered no evidence to show that it met this burden, the appeals court said and ordered a deter mination of the appropriate amount of liquidated damages. [Elwell v. University Hosps. Home Care Servs., (6th Cir., No. 00-3061, 1/11/02).

Editor's Note: The Department of Labor's regulations governing the salary or fee basis test for professional exemptions under the FLSA have not changed in more than 45 years. To qualify for the professional exemption, an employer must be able to show an employee has advanced knowledge in a field of science or learning, that the work requires consistent exercise of discretion and judgment, and that the individual is paid on a salary or fee basis at the rate of at least $250 per week. Fee arrangements are characterized by the payment of an agreed sum for a single job regardless of the time required for its completion. Payments based on the number of hours or days worked and not on the accomplishment of a single task are not considered payments on a fee basis (29 C.F.R.ß541.313(b)).

The professional exemption is easily destroyed under the restrictive regulations. Where, as here, an employee is compensated based on a combination of fees plus hourly payments, the exemption will most likely not apply since part of the pay is tied to hours worked. Health care employers using compensation plans that include an element of pay based on hours worked should examine those programs to determine whether the exempt status of professional staff may be in jeopardy. There is likely to be more than one employee affected, and the loss of exempt status with resulting overtime liability is an increasingly common ground for class action wage and hour lawsuits.

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