Mid-Atlantic Health Law TOPICS

The federal Fair Labor Standards Act (FLSA) is an employment law that many health care employers learn about the hard way.

The FLSA requires all employers to pay all non-exempt employees at least the federal minimum wage of $7.25 an hour and overtime at one and one-half times their regular rate of pay for time worked beyond 40 hours per week. Employers must also maintain accurate time and payroll records. Additionally, employers are subject to state wage and hour laws, which for the most part track the FLSA, but in some instances may even be more restrictive.

Most wage and hour violations occur because employers fail to account properly for all hours worked, or misclassify employees as being exempt. Such failures often result in employers paying insufficient (or no) overtime wages. Because wage and hour violations are often systemic and affect large groups of similarly misclassified or underpaid employees, they are often the subject of class action suits. Large employers such as hospitals, nursing homes and residential care facilities are among those most at risk for liability.

A. Accounting for Hours

For example, in December 2009, the Department of Labor (DOL) announced that it had recovered more than $1.7 million on behalf of 4,000 employees at seven related St. Louis area health care facilities. Like many employers, the St. Louis company's timekeeping system automatically deducted time for meal periods whether or not an employee performed some work during the break. Unless an employee is completely relieved from all duties during the meal period, however, the FLSA requires that the time be counted as hours worked.

As a result, an employer that incorrectly makes such automatic deductions may incur liability for unpaid overtime. Break time violations have similarly been the source of lawsuits brought directly by employees against health care providers.

Health care employers also face wage and hour liability for work performed by employees either before they clock-in for their shifts, or after they clock-out, on the job site or for work performed at home or while otherwise "outside" work. Supervisors often know about such "off-the-clock" work, but are unaware of the wage and hour implications. Because such work is usually in addition to an employee's regular hours, it often involves overtime that entitles the employee to additional pay.

B. Misclassification

Perhaps the most difficult area for employers is the misclassification of non-exempt employees. In particular, health care employers often misclassify LPNs, counselors, technicians and other medical staff as exempt employees. In many cases, such employees do not meet the requirements of an exempt employee under the FLSA (generally, executive, administrative and professional salaried employees), and the employer may, therefore, be liable for any overtime such employees work.

Even employees, who may properly be classified as exempt, must be paid appropriately to preserve the exemption. This is an especially difficult issue with physician "extenders," such as physician assistants and nurse practitioners.

One recent case concerned a group of nurse practitioners (NPs) and physician assistants (PAs) who worked for their employer in hospital emergency rooms across twenty Western states. The NPs and PAs, who were paid on a straight hourly basis for all hours worked, including overtime, sued under the FLSA. The court found that the NPs and PAs must receive a guaranteed salary to qualify for the FLSA's professional employees exemption. As a result, the exemption that might otherwise have applied was defeated because the employees were paid on an hourly basis, and, therefore, the employees were entitled to overtime.

Another area of wage and hour peril for health care employers is misclassifying employees as independent contractors, a strategy some employers utilize to avoid the expenses associated with having employees. If individuals are found to be employees, however, the tactic may backfire. Offending employers may be liable for substantial overtime violations, and may also be subject to liability under the unemployment, workers compensation, employee benefits and tax laws.

Notably, the Obama administration recently allotted $25 million dollars of the DOL's proposed FY 2011 budget for combating the misclassification of independent contractors. There are also plans to introduce legislation that will increase the penalties for misclassification.

C. Collective Actions

Lawsuits under the FLSA can be brought as "collective actions" on behalf of large groups of employees. In collective actions, employees receive notice of their right to "opt-in" to the suit, as opposed to traditional "class actions" where all potential class members are considered to be plaintiffs unless they affirmatively "opt-out" of the case.

On the one hand, collective actions often result in smaller classes because many potential collective action members ignore the notice they receive. On the other hand, the initial showing to conditionally certify a collective action is much easier to meet, requiring only minimal evidence that the employees who file the suit and the proposed group of "opt-in" plaintiffs are "similarly situated" to each other.

D. Damages

Damages under the FLSA usually involve an award of the unpaid wages, as well as liquidated damages in an equal amount, plus the plaintiffs' attorney's fees and costs of suit. Claims of large groups of employees may involve millions of dollars in unpaid wages. Even individual wage and hour claims can be costly, however, and attorney's fees often exceed the amount of wages at issue.

As a result, whether potential claims are large or small, health care employers are well advised to pay attention to wage and hour issues before, rather than after, a plaintiff's lawyer brings the matter to their attention.