The Department of Labor's 6 Most Targeted Compliance Areas for Healthcare Employers

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1 GE Healthcare The Department of Labor's 6 Most Targeted Compliance Areas for Healthcare Employers

2 Wage and Hour Compliance A Strategy for Healthcare Employers. by Stephanie Dodge Gournis Partner at DrinkerBiddle Wage and hour claims lead all other employer-related lawsuits in federal courts, with class action lawsuits having been filed against healthcare employers in nearly all 50 states. Moreover, the federal Department of Labor (DOL) has adopted an enforcement strategy of targeting for audit key industries considered most likely for wage and hour compliance violation. As a result, healthcare was the second most-targeted industry for compliance enforcement audit by the Department of Labor, Wage and Hour Division (WHD) in both 2014 and In fact, since 2009 the healthcare industry has seen almost a 50% increase in DOL-initiated lawsuits alleging violation of minimum wage and overtime requirements under the Fair Labor Standards Act ( FLSA ). And if President Obama s proposed FY 2017 Budget provides any indication, healthcare employers will face even more compliance scrutiny from the WHD in The President s Proposed FY 2017 Budget provides the WHD another $49 million in funding for hiring of 300 new investigators and training staff, as well as $2.2 million specifically targeted for improvements to the WHD s back wage collection and compliance programs, and another $63 million in funding to update computer systems used by the WHD to conduct data analytics and compliance reporting. 2 The DOL's 6 Most Targeted Compliance Areas for Healthcare Employers

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4 6 Most Targeted Compliance Areas. The DOL also has made clear it will continue its targeted enforcement in the healthcare industry, boasting in many of its publications We are looking in the right industries, and within these industries we are looking in the right places. The complex workforce dynamics within a 24/7 healthcare organization can make wage and hour compliance complicated. Combine a lack of knowledge about state and federal law requirements with the mentality that everyone is doing it, and it s easy to see how healthcare has landed in the spotlight of both the Department of Labor (DOL) and class action litigators. Top six wage and hour compliance areas under target by the DOL 1. Exemption Status The FLSA requires that covered employees be paid minimum wage for all hours worked and overtime at a rate of at least time and one-half the regular rate for all hours worked in excess of 40 hours in a workweek. To qualify for exemption from the FLSA s minimum wage and overtime provisions, an employee generally must be paid a minimum weekly salary (not subject to deduction) and regularly perform certain job duties qualifying for one of the FLSA s executive, professional or administrative white collar exemptions. On June 30, 2015, the DOL published a Notice of Proposed Rulemaking (NPRM) announcing it would be issuing new regulations which will more than double the $455 weekly minimum salary currently required for exemption status, and provide for an ongoing annual adjusted increase set at the 40th percentile of weekly earnings for full-time salaried workers. For 2016 the adjusted minimum weekly salary for exemption status is expected to be $970 (or $50,440 per year). The DOL expects its new regulations will issue and be effective by the end of This regulatory amendment is expected to result in more than 10.9 million workers being disqualified for FLSA minimum wage and overtime exemption. Healthcare employers can expect an increase in salaries and/or overtime costs to hit their 2016 budgets, and to see an increase in DOL exemption audits in 2017 (and beyond). 4 The DOL's 6 Most Targeted Compliance Areas for Healthcare Employers

5 Independent Contractors In recent years the DOL has asserted successful enforcement actions against numerous employers accused of misclassify workers as independent contractors. On July 15, 2015, the WHD Administrator issued a 15-page Administrator s Interpretation discussing the DOL s standards for determining independent contractor status. The Administrator s Interpretation made clear that no one factor will be considered determinative of independent contractor status, and the DOL will consider the economic realities to determine whether a worker is economically dependent on an employer in a particular case. As a general matter, however, the longer the contractor relationship and the greater control exercised by the employer, the more likely the DOL will determine an employment relationship to exist. The misclassification of an employee as an independent contractor can result in significant liability for back wages, unpaid overtime, unpaid taxes, state and federal tax fines, and possible liquidated damages and attorneys fees. Healthcare employers need regularly to audit their standards for determining (and tracking) independent contractor status to ensure compliance with DOL standards or face the likelihood of administrative audit and possible class action litigation. 3. Meal Periods The FLSA does not mandate meal periods but requires employees be paid for any break lasting less than thirty minutes. The law also requires that employees be completely relieved from duty during unpaid meal periods. A violation of federal law may occur when an employee is subject to an automatic meal period deduction, but does not otherwise receive a full 30-minute uninterrupted break. In general, an uninterrupted break means that the break must not be meaningfully interrupted by work which may include returning pages and calls, or answering questions from other staff, patients or family members. Healthcare employers continue to face class action litigation alleging unpaid overtime caused by meal periods missed as a result of automatic meal period deduction systems. We ve also seen a significant increase in new litigation claiming the use of smart-phones, patient call and other communications technologies (including Vocera devices) carried and/or used during meal periods result in uncompensated meal periods and restrictions on employees leaving hospital premises during breaks. Healthcare employers are well advised to review their policies and practices for meal period administration to identify and correct potential compliance vulnerabilities.

6 4. Off-the-Clock Work Healthcare employers historically have been held accountable for ensuring that non-exempt employees are paid for each hour of work, including time spent preparing for work before (or after) a shift, time spent attending required (or suggested) training, continuing education, or other work-related education classes, time spent changing into required safety equipment, for work-related travel time, time spent waiting to take an assignment or being immediately available to respond, and for any other time spent on the employer s behalf. With advances in communication systems that empower employees to stay connected 24/7, it is more likely than ever that off-the-clock work may occur. If non-exempt employees are returning pages, checking s or completing training modules at home without badging in (or otherwise recording their time), they are working off the clock. If left unaddressed, that leaves your organization vulnerable to claims of unpaid wages. Last year the DOL announced its intention to publish a Request for Information seeking information from interested parties as to how the use of smartphones and other electronic devices by employees outside of scheduled work hours may result in unpaid overtime for non-exempt employees. Healthcare employers can expect an increase in litigation and DOL-initiated audits targeting unrecorded work time through use of electronic devices in 2016 and beyond. 5. Rounding DOL regulations allow rounding to the nearest 5 minutes, nearest one-tenth or nearest quarter hour provided such rounding does not result in failure to compensate employees properly for all time actually worked over a period of time. An employer may violate the FLSA minimum wage and overtime when it only rounds downs and/or discipline employees for clocking in rounding situations. We have seen an increase in class action litigation alleging healthcare employees have been systematically disadvantaged by rounding policies that subject employees to discipline for taking advantage of healthcare rounding policies by clocking in early or late for work. Employers can expect increased scrutiny by the DOL and class action litigators regarding the day-to-day implementation of rounding policies that overwhelmingly favor employers and may result in unpaid overtime. 6. Joint Employer Status Two or more related employers that share common control of a single worker will be deemed individually and jointly liable for the payment of minimum wage and overtime on aggregated hours worked for the employers in a single workweek. Such common control may be found any time there is at least a 50% common ownership between employers and/ or when two (or more) employers are not completely disassociated with each other as it relates to a particular employee. The WHD has promised to focus its 2016 compliance efforts on achieving system-wide impacts on employers that go beyond a single investigated establishment. What that means for healthcare employers is that the WHD will increasingly direct the focus of its compliance audits on noncompliant pay practices and policies that extend beyond an individual facility, and to an entire healthcare system and their corporate affiliates. The WHD also can be expected to identify what it calls fissured employment relationships, whereby healthcare employers may be using independent contractors, contingent or contracted staffing, or otherwise are entering into affiliation relationships the involve the sharing of staffing in situations likely to result in noncompliant practices or unpaid overtime. Employers with staffing and/or affiliation agreements for provisional staffing, and healthcare systems employing staff at multiple corporate sites are at highest risk for noncompliance. Failure to understand the rules of joint employment may result in healthcare employers failing to appropriately pay employees for overtime earned under federal and/or state law. 6 The DOL's 6 Most Targeted Compliance Areas for Healthcare Employers

7 Wage and hour lawsuits in healthcare are an unpleasant fact of life that many organizations would like to ignore, but it s an issue that needs to be addressed head on. Gaining an awareness of the most targeted areas of enforcement outlined in this paper provides a strong foundation for achieving compliance with federal and state regulations. Developing a plan to address and avoid those issues builds upon that foundation. However, it s also important to enlist the help of experts either internal resources or outside counsel to ensure that many complexities involved with FLSA compliance are addressed correctly. While it can be tempting to keep wage and hour skeletons in the closet, that approach carries a high risk. We encourage you to invest the time and effort now to ensure that your organization is compliant so you can avoid costly litigation and damage to your organization s reputation.

8 About GE Healthcare GE Healthcare provides transformational medical technologies and services to meet the demand for increased access, enhanced quality and more affordable healthcare around the world. GE (NYSE: GE) works on things that matter - great people and technologies taking on tough challenges. From medical imaging, software & IT, patient monitoring and diagnostics to drug discovery, biopharmaceutical manufacturing technologies and performance improvement professionals deliver great healthcare to their patients. About the Author Stephanie Dodge Gournis is a partner in the firm s Labor & Employment Practice Group and hiring partner for the Chicago office. She also serves as a member of the firm's Women's Committee. Stephanie is engaged exclusively in the representation of management in all aspects of traditional labor and employment matters. Imagination at work GE Healthcare, LLC is a subsidiary of the General Electric Company. The GE brand, logo, and Lumination are trademarks of the General Electric Company GE Healthcare, LLC. The USG brand & Logix are trademarks of USG Interiors, LLC. Information provided is subject to change without notice. All values are design or typical values when measured under laboratory conditions. XXXXXXXXXX