Hospital Impact: Employment law changes pose challenges for providers

Gavel in front of two law books

Picture of Keith DennenProviding excellent, compassionate, compliant patient care isn’t enough for healthcare organizations to remain viable today. As employers, these organizations must also comply with labor and employment laws, as they would any other health-facing legal mandate.

Like healthcare law, employment law is rarely stagnant. In fact, two recent changes to federal employment laws have significantly altered the compliance landscape, and may force health organizations to change the way they do business entirely. As such, administrators and executives must stay abreast of legal developments and align with the letter of the law--or risk future fines, penalties and lawsuits.

The Department of Labor’s new rule on overtime payment

In May of 2016, the U.S. Department of Labor (DOL) issued its final rule updating requirements for employees to qualify for exemption from the overtime requirements outlined under the Fair Labor Standards Act. The final rule does not go into effect until December 1, 2016, but its impact will be significant--thereby requiring healthcare organizations to prepare for the pending changes now.

Under the DOL’s current rule, the minimum salary level that a salaried employee must be paid to qualify for the executive, administrative, professional overtime exemption is $23,600 or $455 per week. Under the new rule, an employee will need to make $47,476 annually or $913 per week to qualify for the exemption, effectively doubling the threshold for which employers must pay time-and-a-half for hours worked over 40-hours in a workweek.

What’s more, beginning in January of 2020, the salary level will update automatically every three years to the 40th percentile of full-time salaried workers in the lowest-wage Census region.

The new rule is unlikely to impact the payment structure of many direct care providers, like nurses and home health aides, since they are not considered executive, administrative or professional employee, according to the DOL’s duties test. However, it could very well change how an organization manages its operational support staff, including office managers, receptionists, billing specialists and marketing staff.

To ensure a smooth and cost-effective transition to the forthcoming requirements, healthcare organizations can prepare by taking the following steps:

  • Set up comprehensive time-tracking tools. It is imperative that organizations have reliable time tracking tools and protocols in place well before December 1, 2016 (This includes policies for any work performed at home or off site). Companies will need to pay employees appropriately for overtime, and also maintain accurate records to dispute any wrongful suits that might arise from employees claiming to be due overtime pay.
  • Evaluate your burden for overtime. Start by converting existing salaries into hourly rates and examine average numbers of overtime hours worked in a given week. Pay special attention to employees whose salaries are less than $47,476 to get an idea of the impact that the new rule could have on your organization’s finances, should those employees be paid overtime on a regular basis.
  • Adjust as needed. Once you have an idea of the financial burden you might incur under the law, consider making adjustments to current work schedules and staffing. To ensure compensations rates remain the same, companies might discourage or prohibit 40-plus workweeks, or reduce pay to accommodate projected overtime hours. Of course, it’s wise to run these changes by your legal team and employment law counselors to make certain that any changes are compliant with the law.

The Affordable Care Act’s Section 1557

Another recent adjustment that will impact healthcare organizations is a change to the nondiscrimination provision (Section 1557) of the Affordable Care Act. Like the DOL, the Department of Justice (DOJ) recently issued a final rule for changes to this part of the law.

Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age or disability in the provision of services for any health program or activity that receives federal financial assistance. Under the new rule, the DOJ expanded the non-discrimination laws by recognizing four new bases for discrimination applicable to healthcare providers. Those are:

  • Gender identification discrimination: You cannot discriminate based on an individual’s “internal sense of gender, which may be different from that individual’s sex assigned at birth.” This includes transgender individuals.
  • Sex stereotype discrimination: You cannot discriminate based on notions of gender, such as hairstyle, voice, mannerisms or body characteristics that are stereotypically attributable to one gender and not the other.
  • Association discrimination: You cannot discriminate because of one person’s association with a person who is in a protected class.
  • Limited English proficiency: You cannot discriminate based on one’s English proficiency, or lack thereof.

While the DOJ expressly stated that these regulations did not apply to the employer-employee relationship, according to the DOJ, these classes are already protected under current federal law. This makes it almost certain that other agencies and courts will use these regulations when evaluating claims of alleged discrimination. 

Any good healthcare organization would never actively promote discrimination in its policies, but discriminatory acts still occur and can significantly affect an organization’s good standing and federal financial assistance.

To navigate this change, healthcare organizations should amend policies in employee handbooks to reflect the classifications and require employees to read and acknowledge the changes. It’s also wise to hold a special training session for staff and managers to thoroughly outline what these new protected classes are and how to properly identify and report discrimination. Finally, should any alleged discriminatory act occur, it’s crucial that organizations be diligent in addressing the matter and in seeking legal counsel for next steps.

These newly issued rules from the DOL and DOJ will certainly not be the last employment law changes affecting the healthcare industry in the coming years. Healthcare providers will need to comply with the new rules, and be aware that any legal action taken against them by an employee could be a costly one.

Keith Dennen is a member attorney with the Nashville office of Dickinson Wright, PLLC. He focuses his practice in employment law and healthcare law.