Pay practice violations: DOL looks at meal breaks, other overtime issues

Hospitals and health systems might want to double-check that they are appropriately paying employee overtime to avoid the potential interest of either the federal government or labor attorneys with an eye to class-action lawsuits. The U.S. Depart­ment of Labor's (DOL) Wage and Hour Division has increased its investigation staff by one-third, adding 250 new investigators to help ferret out violations of the Fair Labor Standards Act (FSLA) and ensure workers receive "every penny they earn," Kenneth Stripling, a Birmingham, Ala.-based DOL official, told the New York Times.

Overtime pay actually represents a higher percentage of gross earnings in the healthcare industry (1.2 percent) compared to other service-based industries (0.9 percent), according to John Bishow, a research economist in the DOL's Bureau of Labor Statistics, in the July issue of Compensation and Working Conditions Online. However, "pay practices--including the use of supplemental pay--in the healthcare industry are of particular interest now because, even in the midst of difficult economic times, this industry exhibits positive job growth while other industries continue to shed jobs," he noted.

In 2009, the DOL won an FLSA settlement from Boston-based Partners HealthCare System, which paid 700 employees more than $2.7 million in overtime back wages for failing to aggregate the hours of employees who worked at more than one Partners facility. Also last year, SSM Health Care in St. Louis paid more than $1.7 million in back wages to 4,007 employees for automatically deducting time for meal periods regardless of whether workers were fully relieved of their duties.

This past February, the DOL announced an initiative to boost FLSA compliance in New York's healthcare industry, noting in a press release that "less than 36 percent of healthcare employers investigated by the division's Albany office during the last five years were in compliance with the FLSA. A total of $2,202,723 in back wages was found to be due to 4,702 employees, for an average of $468 per employee."

Also this year, New Liberty Hospital in Liberty, Mo., paid $282,166 in overtime back wages for 1,032 nursing, security and maintenance employees after DOL investigators found that the hospital didn't count time worked before or after a shift unless it amounted to a full 12 minutes, as well as automatically deducting 30 minutes for security workers' lunches whether or not the employees took them.

On the class-action front, Kaiser Permanente, based in Oakland, Calif., has agreed to pay a $7.25 million settlement to registered nurses and other medical workers who claim Kaiser improperly classified them as exempt, denying them overtime pay, reports the Times. Other health systems across the country, including Kaleida Health in Buffalo, N.Y., and the University of Pittsburgh Medical Center, also remain embroiled in wage-related class-action lawsuits.

All of this activity prompted the national law firm of Drinker Biddle & Reath to issue a Labor & Employment Client Alert in March advising hospitals that FLSA noncompliance could result in potential liability of "hundreds of thousands of dollars or more in back pay and penalties" from either a DOL audit or a class-action lawsuit. According to Drinker Biddle, FLSA violations could include: time systems that automatically deduct all meal breaks; not paying employees for work before and after shifts, training session attendance, or off-premises work (e.g., answering email); not ensuring customized payroll software is compliant with state and federal laws; not including incentive pay, bonuses, and shift differential in overtime calculations; improperly classifying workers as exempt; and improperly putting employee hours that bridge workdays or workweeks into the wrong pay period.

To learn more:
- read this New York Times article
- visit the DOL's Wage and Hour Division website
- take a look at this Compensation and Working Conditions Online article
- read these DOL press releases: Partners release, SSM release, New York initiative release, Alabama/Mississippi initiative release, New Liberty release, Davis Life Care release
- review this Drinker Biddle alert