The U.S. Department of Labor’s Wage and Hour Division has appointed a strike force to investigate violations of federal minimum wage, overtime, recordkeeping and child labor law by residential care and group homes in North Carolina.  The announced strike force targeting violations in the Charlotte and Raleigh areas with the intention to expand the strike force actions statewide over the next 10 months highlights the growing risks that health and other caregivers face for wage and hour and other employment law violations. 

Group homes, including those providing adult resident care, family care, assisted housing and special care, employ more than 7,000 workers in North Carolina. Wage and Hour Division officials project the strike force investigations will affect more than 1,700 workers in the Charlotte area and more than 400 workers in the Raleigh-Cary area.

In cases where a staffing or other middle-layer management company provides services to a residential care facility, Wage and Hour Division investigators will focus on determining whether both companies may be held jointly liable for violations. With multi-establishment enterprises, investigators will be looking to enter into enterprise-wide agreements that affect all operations of the parent corporation.  

Misclassification of workers and inappropriate compensation time practices are common compliance concerns among employers generally and for health and caregiver industry employers particularly.  As in other industries, these employers often overestimate the scope and applicability of the exempt classification, misclassify workers as independent contractors who are actually common law employees, overestimate their ability to provide “comp time” in lieu of overtime, misapply “on-call” policies, or misunderstand other FLSA requirements. 

Wage & Hour Division Fact Sheets and other enforcement actions reflect that many health and other caregiver employers incur overtime and minimum wage violations because improperly classify workers as exempt or contractors, fail to properly count and pay for all hours that an employee works in accordance with the FLSA, fail to properly credit time spent traveling or on call, fail to credit time spent for required attendance at lectures, meetings, training programs, recordkeeping and similar activities, improperly deduct time for breaks, fail to properly credit on call time, and fail to pay for unauthorized hours worked. Enforcement of these requirements against health and other caregiver employers also is rising since the Wage & Hour Division has included employers in these industries among the industry groups targeted for special compliance monitoring under the FLSA and the highly-publicized implementation of updated FLSA regulations regarding the classification of workers a few years ago has peaked the interest of plaintiffs’ attorneys . 

These mistakes can be very costly.  Health industry and other employers that fail to properly pay employees under Federal and state wage and hour regulations face substantial risk. Violation of wage and hour mandates carries substantial civil – and in the case of willful violations, even criminal- liability exposure.  Civil awards commonly include back pay, punitive damages and attorneys’ fees.  As a consequence, health care and other employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws. 

Under the FLSA, an employer generally must pay an employee in accordance with the minimum wage and overtime requirements of the FSLA unless the employer can prove that the employee qualifies as “exempt” as a white collar employee under the DOL’s FLSA regulations.  The FLSA mandates that the base hourly rate of pay of each “non-exempt” employee of not less than the current Federally-established minimum wage for each of the up to initial 40 hours of work performed by the employee in any workweek.  Subject to certain limited exceptions, the FLSA’s overtime rules generally also mandate that “non-exempt” employees be paid overtime pay at a rate of not less than one and one-half times the regular rate of pay for hours in excess of 40 hours of work performed in a given work week.  The regulations also provide guidance for determining when leased, contract or other non-traditionally employed workers will be treated as employees, for determining when an employer must treat “on-call” time, travel time, meal and break times, and certain other  time periods as compensable hours worked by a non-exempt employee, when “comp time” in lieu of the payment of wages is permitted, various alternative methods for calculating overtime under certain special circumstances, and various other rules applicable to various special circumstances.  In addition to these federal wage and hour requirements, employers also generally must comply with various state-imposed minimum wage, overtime, compensable time, paid break, and other rules governing the calculation and payment of wages to employees employed within the particular state in which the employee renders the services.   

Under the FSLA and applicable state wage and hour laws, employers generally bear the burden of proving that they have properly paid their employees in accordance with the FLSA. Additionally, the FLSA and most applicable state wage and hour laws mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records.  Since the burden of proof of compliance generally rests upon the employer, health industry employers should take steps to ensure their ability to demonstrate that they have properly paid non-exempt employees in accordance with applicable FLSA and state wage and hour mandates and that employees not paid in accordance with these mandates qualify as exempt from coverage under the FLSA. 

To minimize exposure under the FLSA, health care employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws.  Steps advisable as part of this process include, but are not necessarily limited to:

• Conducting and audit of each worker current classified as exempt or a non-employee worker to assess its continued sustainability and to develop documentation justifying that characterization;
• Update policies and procedures;
• Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
• If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of appropriate corrective action after consultation with qualified legal counsel;
• Review of existing documentation and recordkeeping practices for hourly employees;
• Explore available options and alternatives for calculating required wage payments to non-exempt employees;
• Reengineer of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations;
• Confirm the adequacy of recordkeeping and other documentation;
• Audit and secure appropriate contractual assurance of the adequacy of wage and hour and other practices of staffing, leasing and other organizations providing supplemental workers to provide services; and
• Verify the appropriateness or worker classification and compliance practices of workers providing services through a staffing, leasing or other arrangement where the worker is not treated as an employee of the employer.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel prior to the commencement of their assessment and to conduct the assessment within the scope of attorney-client privilege to minimize risks that might arise out of communications made in the course of conducting this sensitive investigation. 

For assistance with assessing or defending your current worker classification, wage and hour or other health care and human resources policies and controls, please contact Cynthia Marcotte Stamer at cstamer@solutionslawyer.net, 972-419-7188..

For More Information or Assistance

The author of this update, attorney Cynthia Marcotte Stamer, has extensive experience advising and assisting health care providers and other health industry clients to respond to these and other health care industry enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management matters.

Board Certified in Labor and Employment Law, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 23 years experience advising physicians, hospitals and other health industry, assisted living, educational and other clients about human resources, employee benefits and compensation, regulatory compliance and enforcement, quality assurance, peer review, licensing and discipline, and other medical staff performance matters.  She continuously advises health industry clients about the use of technology, process and other mechanisms to promote compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, and other risk management and operational needs. As part of this experience, she has worked extensively with health care providers, payers, health care technology and consulting and other health industry clients, as well as other businesses, on privacy, data security, trade secret and related matters. A popular lecturer and widely published author on health industry concerns, Ms. Stamer also publishes and speaks extensively on health care compliance, staffing and human resources, compensation and benefits, technology, medical staff, public policy, reimbursement, privacy, technology, and other health and managed care industry regulatory, and other operations and risk management concerns for medical societies and staffs, hospitals, the HCCA, American Bar Association, American Health Lawyers Association and many other health industry groups and symposia.  Her highly popular and information packed programs include many highly regarded publications on HIPAA, FACTA, medical confidentiality, state identity theft and privacy and other many other related matters.  Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. To review some of her many publications and presentations, or for additional information about Ms. Stamer, her experience, involvements, programs or publications, see here.

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For More Information

We hope that this information is useful to you.  You can review other recent health care and internal controls resources and additional information about the health industry and other experience of Ms. Stamer here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources.  If you or someone else you know would like to receive future updates and notices about other upcoming Solutions Law Press events, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here. For important information concerning this communication click here. 

©2010 Cynthia Marcotte Stamer. Limited license to reprint granted to Solutions Law Press.  All other rights reserved.