By  L. Diane Tindall, Daniel Palmieri and Jenna Borders

PAY AND OVERTIME ISSUES FOR HEALTHCARE WORKERS

The Fair Labor Standards Act (FLSA) is the federal law that mandates the payment of a federal minimum wage and overtime pay to workers who do not fall within a specific FLSA exemption.  The most common of these exemptions under the FLSA are the so-called “white collar” exemptions for employees whose pay and duties reflect their exercise of real managerial or executive authority in the workplace and their ability to better influence their compensation.  In general, in order to be exempt from the minimum wage and overtime provisions under the white collar exemptions of the FLSA, an employee: (1) must be paid at least $455 per week (or $24,300 per year); must be paid on a “salary basis” (with some exceptions); and (3) must perform duties that are consistent with an executive, administrative or professional position (the “duties test”).  To be paid on a salary basis, an employee must receive the same pay each work week in which he or she performs any work (with a very few limited exceptions) without any deduction for the quantity or quality of work performed.

Under the duties test, an employee will be a “learned professional” who is exempt from the overtime provisions of the FLSA if his/her primary duty is the performance of work requiring advanced knowledge (defined as work that is predominantly intellectual in character and that includes work requiring the consistent exercise of discretion and judgment) in a field of science or learning “customarily acquired by a prolonged course of specialized intellectual instruction.”  Because many employees in the medical workplace perform duties that are professional in nature, issues can arise as to whether these workers fall within the white collar exemptions.  Federal Regulations address many of these issues.

This article will review the various job titles and duties performed by healthcare workers and the Department of Labor’s position as to whether these positions are exempt from minimum wage and overtime requirements of the FLSA.

  1. Physicians.  Federal Regulations state that “professional” employees who will qualify for the white collar exemption include any employee (1) who holds a valid license or certificate permitting the practice of medicine and is actually engaged in such practice, and (2) holds the requisite academic degree for the general practice of medicine.  In general, the exemption applies to physicians and practitioners of medical science and healing, including general practitioners, specialists, osteopaths, podiatrists, dentists and optometrists.  The Regulations also state that employees engaged in an internship or residency program, whether or not licensed to practice before starting the program, will qualify for the exemption if they enter such internship or residence program after earning the appropriate degree for the general practice of medicine.

Notably, the minimum salary requirement and salary basis test do not apply to covered physicians, interns and residents.

  1. Nurses.  A nurse who is registered by the appropriate state examining board generally will meet the duties test for an exempt white collar professional.  On the other hand, licensed practical nurses (“LPNs”), nurse aids and similar healthcare workers do not qualify for the exemption because their position does not require a specialized advanced academic degree.  The salary basis test will apply to nurses.  Therefore, a registered nurse who meets the duties test will only be considered exempt if she receives the minimum of $455 per week (or $24,300 per year) and is paid on a salary basis.
  2. Medical Technologists.  Registered or certified medical technologists who have successfully completed three academic years of pre-professional study in an accredited college or university plus a fourth year of professional course work in a school of medical technology approved by the Council of Medical Education of the American Medical Association will meet the duties test for exempt professional employees.  In contrast, operators of medical equipment who are not certified, such as X-ray technicians, are not exempt professionals.  Like nurses, to be exempt, registered or certified medical technologists must also receive the minimum salary and be paid on a salary basis.
  3. Dental Hygienists.  Dental hygienists who have completed four academic years of pre-professional and professional study in an accredited college or university approved by the Commission on Accreditation of Dental and Dental Auxiliary Educational Programs of the American Dental Association will meet the duties test for exempt professional employees.  To be exempt, an otherwise qualified dental hygienist must receive the minimum salary on a salary basis.
  4. Physician Assistants.  Physician assistants who have successfully completed four academic years of pre-professional and professional study, including graduation from a physician assistant program accredited by the Accreditation Review Commission on Education for the Physician Assistant and who are certified by the National Commission on Certification of Physician Assistants will generally meet the duties test for the professional exemption.  Physician assistants must receive the minimum salary on a salary basis in order to be exempt.
  1. Paramedics.  Non-managerial paramedics and emergency medical technicians do not qualify for the professional exemption because such workers do not perform work in a field of science or learning requiring knowledge “customarily acquired by a prolonged course of specialized intellectual instruction.”  Note that a paramedic may meet the duties test for an executive employee if his/her primary duty is the management of the enterprise or division thereof and he/she customarily and regularly directs the work of, and has hiring and firing authority over, two or more other employees.
  2. Pharmacists.  Pharmacists may or may not be exempt professionals under the duties test depending upon their specific responsibilities.  While many pharmacists complete a doctoral program before being licensed to practice, a pharmacist who simply selects a product, counts out pills and labels the bottle per the doctor’s instructions and preprinted warnings, is not performing work that requires a sufficient exercise of discretion and judgment.  In contrast, a pharmacist who spends significant time advising patients about the proper use of a drug, its side effects and potential drug interactions, and who must be aware of and alert doctors and patients to errors or problems, may be found to be exercising sufficient discretion and judgment to meet the exempt duties test.  A pharmacist who is the manager of a pharmacy or a pharmacy department may also be exempt under the executive white collar duties test.

COVENANTS NOT TO COMPETE FOR HEALTHCARE PROVIDERS

Non-competition agreements can be useful tools for employers to protect customer relationships and guard against unfair competition by former employees.  This is no less true in the healthcare field, where such restrictions are commonplace given the expense of recruiting physicians and the potential loss of patient base when they leave.  That said, non-competes are disfavored by North Carolina law and are subject to close scrutiny by courts.  This article highlights some important considerations for creating an enforceable physician non-compete.

As an initial matter, to be enforceable under North Carolina law, a non-compete must be (1) in writing, (2) made part of a contract of employment, (3) supported by valid consideration, (4) reasonable as to both time and territory, and (5) not against public policy.  The first criterion is self explanatory, and the second simply requires that the non-compete be connected to an employment relationship.  The final three criteria are the ones most likely to cause a non-compete to be found unenforceable.

The consideration requirement can be met in two basic ways.  The simplest is to have the employee sign the non-compete at the commencement of employment.  When this occurs, the new employment itself is consideration for the non-compete.  When the non-compete is not signed at the beginning of employment, or when the employer wishes to update a non-compete after employment has begun, then additional consideration is required—continued employment alone will not be enough.  For example, the employer might provide a raise or a cash bonus.  Importantly, this consideration must be something to which the employee was not already entitled.

The time and territory covered by a non-compete must be considered in tandem: a longer restriction in time will require a narrower geographic restriction and vice versa.  Restrictions of one to two years are generally enforceable, but no hard and fast rule applies, and the facts of each case must be considered.  With respect to the restricted territory, the non-compete should be no broader than necessary for the employer to protect its business.  In making this determination, courts will consider various factors, including the area(s) in which the employee worked, the employee’s role for the employer and knowledge of the employer’s operations, and the nature of the business.  For example, an enforceable restriction for a physician assistant who works at a single urgent care location might be limited to a reasonable radius around the worksite, while a physician who, in addition to practicing, also provides management oversight for a multi-site group might be restricted from her group’s entire service area.

Matters unique to the healthcare field arise with regard to the public policy issue.  While it’s clear that non-competes are not prohibited in the healthcare field, courts have held that a non-compete will not be enforced where doing so will create a substantial question of potential harm to the public health.  In making this determination, courts will consider a number of factors: the shortage of specialists in a given field in the restricted area; the impact of potentially creating a monopoly in the area, including the impact on fees in the future and the availability of a doctor at all times for emergencies; and the public interest in having a choice in the selection of a physician.  These factors are applied on a case-by-case basis.  Thus, for example, a physician non-compete has been found to violate public policy when enforcement would prohibit the sole endocrinologist in a county from practicing, or reduce the number of gastroenterologists in a city from two to one.  On the other hand, a prohibition on a family doctor from practicing in a metropolitan area would be much more likely to be upheld.

We often see “cost sharing” provisions in physician contracts in North Carolina.  A cost sharing provision is similar to a non-compete, but instead of expressly prohibiting competition within a specified area, the cost sharing provision imposes an agreed-upon financial price if the provider chooses to compete.  This approach has advantages and disadvantages for employers.  On the positive side, North Carolina courts have held that cost sharing provisions are not subject to the same kind of scrutiny that applies to true non-competes.  On the other hand, because a cost sharing provision is not a true non-compete, if the provider competes, the employer’s remedy is to sue for the monetary damages, but an injunction to stop the competition will generally be unavailable.  Additionally, employers must ensure that the cost sharing amount is a reasonable estimation of damages that might occur upon competition.  A cost sharing provision that is too punitive will be deemed an unlawful penalty and not be enforced.

HANDLING OF EMPLOYEE MEDICAL INFORMATION

Employers and employees alike commonly have concerns that certain employment practices regarding the confidentiality of employee medical information may violate the Health Insurance Portability and Accountability Act (HIPAA).  While HIPAA may be implicated, other laws, such as the Americans with Disabilities Act (ADA), are oftentimes more likely at issue in the employment context, particularly for employers who are not HIPAA-covered entities (e.g., health care providers, health plans and health care clearinghouses).

With respect to HIPAA, the HIPAA Privacy Rule generally does not apply to employment records, even if the information obtained in the records is health-related.  HIPAA also does not restrict requesting health-related information from an employee on an as-needed basis to determine employee eligibility for employer benefits or leave programs.  Rather, HIPAA applies to disclosures made by an employee’s health care provider and restricts the ability of the provider to make available such information without appropriate authorization.

The ADA, on the other hand, squarely applies to requests for employee medical information and provides standards for how such information may be used and maintained.  While ADA-related case law and guidance often refer to applicants and employees with disabilities, employers should keep in mind that the confidentiality obligations under the ADA are more broadly applicable to any employer-maintained employee medical information, regardless of whether the individual has a disability.  This article will briefly describe: (1) when the ADA permits inquiries related to employee medical conditions and disabilities; and (2) ADA standards related to securing employee medical information.

Under the ADA, employers are only permitted to make inquiries likely to elicit information about their employees’ disabilities or medical conditions or to require any procedure or test seeking information about an employee’s physical or mental impairments or health where “job-related and consistent with business necessity.”  The U.S. Equal Employment Opportunity Commission (EEOC), which enforces the ADA, broadly views an inquiry as “job-related and consistent with business necessity” where the employer “has a reasonable belief, based on objective evidence, that: (1) an employee’s ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition.”  While the foregoing standards appear relatively permissive, the EEOC as well as numerous courts have interpreted them to be much more narrow than apparent on their face, and employers are wise to seek counsel prior to requesting employee medical information or requiring medical examinations to ensure their actions are permitted under the circumstances.

Employers should also be aware that the above standard is eased somewhat in the period after an individual receives a conditional employment offer, but before the individual’s actual hire.  During this limited timeframe, an employer is permitted to make certain inquiries and conduct medical examinations, as long as it treats all conditional hires in the same job category in the same manner.  Prior to making an offer of employment, an employer is prohibited from making any disability-related inquiries and medical examinations.

Once employee medical information is obtained, whether as a result of an employer inquiry or due to voluntary disclosure by the employee, the information must be treated as a confidential medical record and maintained in a separate file (whether paper or electronic) with access rights restricted.  Disclosures should be permitted only in the following circumstances: supervisors and managers may be informed regarding necessary restrictions on the work or duties of the employee and necessary accommodations; first aid and safety personnel may be informed under appropriate circumstances where the disability might require emergency treatment; and government officials investigating ADA compliance may be provided relevant information on request.  Other disclosures may be permitted related to insurance and workers’ compensation coverage, but employers should in all cases proceed with caution when eliciting, using or disclosing employee medical information.

While beyond the scope of this article, employers should also familiarize themselves with other state and federal laws that govern the use and disclosure of employee health information, such as the Genetic Information Nondiscrimination Act, the Family and Medical Leave Act, and state confidentiality and nondiscrimination laws.   Employers who are also HIPAA-covered entities must distinguish between their obligations under HIPAA and other applicable laws and ensure compliance with each in the treatment of employee medical information and protected health information (PHI).

Finally, employers should consider developing policies and procedures for handling employee medical information and provide related training to any staff that may have a need to access employee medical information, such as any in-house medical personnel, members of Human Resources, leave administrators and managers.