A number of plaintiffs’ law firms have set up websites devoted to hospital overtime and class action lawsuits, and at least one firm has sent personalized letters to employees of no less than 20 hospitals in the New York City area alone, asking for consent to file wage-hour actions on their behalf. This follows on the heels of the United States Department of Labor’s (DOL) announcement that it was launching a mass wage-hour probe of New York’s broadly-defined healthcare industry. See our March 12th client alert titled, USDOL Targets NYS Healthcare Industry For FLSA Compliance.

The collective and class action lawsuits bedeviling the healthcare industry are not limited to the inadvertent misclassification of workers as exempt from overtime. Rather, these suits raise a host of issues pertaining to “off-the-clock” work and other alleged improper payroll practices that implicate scores of non-exempt workers.

While the healthcare industry is now in the “cross-hairs” of wage-hour litigation, many of the issues impacting healthcare today are relevant to businesses of all sizes in a myriad of different industries. While this Client Alert will focus on payroll practice issues relevant to hospitals, nursing homes, and home health agencies, the issues are common to most employers, and human resources professionals may want to proactively review their payroll and classification practices to ensure FLSA compliance.

Some key areas of risk include:

  • Exempt/Non-Exempt Misclassification – The U.S. Supreme Court has held that exemptions from overtime are narrowly construed and that the employer has the burden of proving exemption. Employers must take care not to overlook even “high-level” employees or employees with “exempt-sounding” titles (e.g., Administrator, Coordinator, Analyst, Specialist). The determination of exempt or non-exempt status requires a close examination of each employee’s job duties measured against the applicable regulations, case law, and DOL Opinion Letters. Also, employers should check their benefit plans for protective language in the event employees or independent contractors are misclassified.
  • Volunteers – Federal law prohibits private sector, for-profit employers from engaging volunteers of any kind. Likewise, not-for-profit employers are generally prohibited from accepting services from volunteers (with only very minor exceptions). While historically, the DOL has taken a non-enforcement position on the subject of volunteers with private not-for-profit employers so long as a number of strict criteria are met (e.g., individuals donate their services for public service, religious or humanitarian objectives without contemplation of pay, the services are different from those of any employee, and do not impair an employee’s job opportunities), this position does not have any effect on an individual’s right to bring a private lawsuit seeking compensation for “volunteer” hours. Healthcare and other employers should look closely at any “volunteers” to ensure that they are not performing duties that might give rise to a claim for compensation as an “employee.”
  • Interns – Millions of students and recent graduates participate in internships each year, the vast majority of which are unpaid. Where educational or training programs are academically-oriented and designed to provide students with professional experience in the furtherance of their education, it is the DOL’s position that students will not be considered employees provided that six strict criteria are met (including that the training must be similar to that which would be given in a vocational school, the interns do not displace regular employees, and the employer derives no immediate advantage from the activities of the interns). Employers need to conduct a thorough analysis of the duties performed by interns to ensure that the interns’ time is not compensable under federal law. In light of the recent economic downturn, the media has reported that many private sector employers have created internships, many of which include workers who are no longer students and, accordingly, such companies act at their peril.
  • Working Through Break Time or Off-The-Clock – Employees sometimes work through meal and rest periods, come in early, and stay late. Employers must prohibit off-the-clock work, and employees must be able to record time-worked accurately, notwithstanding their “formal” schedules and timekeeping technology limitations. Timekeeping systems and practices which automatically deduct break and meal times need to be monitored and reviewed to ensure compliance with federal and state legal requirements.
  • Donning, Doffing, and Travel Time – Healthcare employees are often required to wear protective clothing, and may be required to travel to perform their duties (particularly those who perform home health care). Others spend time booting-up or off computers. Such activities may be compensable under the FLSA and, therefore, employers should review their policies, practices, and timekeeping mechanisms to ensure donning, doffing, and travel time are compensated when appropriate.
  • Joint Employer Issues – Healthcare employers often engage doctors, researchers, and other employees who, in turn, have their own employees and staff. To avoid potential liability for the wages of these individuals, it is crucial for employers to have written policies, procedures, and practices in place indicating who is, and who is not, an employee, and under what conditions departments can engage temporary staff, including independent contractors. Employers that hire temporary employees from multiple agencies must be doubly careful, as one individual can be referred by multiple referring agencies for multiple positions. In 2008, the Second Circuit Court of Appeals found that a nursing assistant who was placed at one hospital by three referral agencies was entitled to overtime from the hospital as a joint-employer, even though she never worked more than 40 hours per week for any one referral agency.
  • Bargaining Unit Employees – Employers in the healthcare industry often believe that they are immune from wage/hour issues because many of their employees are unionized. This is simply not the case. Collective bargaining agreements are often silent on many wage and hour issues (like donning, doffing, and travel time), and whether or not employees are members of a bargaining unit, they have at least the same rights regarding hours, wages, and overtime as any non-bargaining unit employee.
  • The 8/80 Paradigm – Pursuant to Section 207(j) of the FLSA, as an alternative to the standard “overtime after 40 hours in one week,” hospitals, nursing homes, homes for the aged, and certain other medical institutions who provide residential care can pay overtime on a bi-weekly basis (a) for time worked over eight-hours daily and (b) for time worked in excess of 80-hours over a 14-day period. Under this “8/80” paradigm, if, for example, an employee works eight hours a day for six consecutive days the first week, but only 32 hours the next week, the employer is not required to pay any overtime – despite the fact that the employee worked 48 hours in the first week. While the 8/80 paradigm can be a cost-saver, healthcare employers must beware that there are strict limitations that must be followed, and some states prohibit it entirely.