Yesterday, a lawsuit was filed in the District Court of Delaware, alleging that Univita laid-off roughly 1,000 workers without giving them 60 days advance written notice, in violation of the Worker Adjustment and Retaining Notification Act (the “WARN Act”), 29 U.S.C. § 2101, et seq. The action seeks — on behalf of plaintiff and other similarly situated employees — a judgment for unpaid wages, salary, commissions, bonuses, accrued holiday pay, accrued vacation pay, pension and 401(k) contributions and other COBRA benefits, for 60 days, which “would have been covered and paid under the then-applicable employee benefit plans had that coverage continued for that period, all determined in accordance with the WARN Act.”
It’s a lawsuit to keep your eye on. You can view the complaint via the hyperlink above.
The leading industry journal, HME News, ran a story on Friday about the aftershocks felt, statewide, from Univita losing its Medicaid contracts with the State of Florida. The article has insights from providers working in, and observers of, the Statewide Medicaid Managed Care (SMMC) Program.1For instance, the article quotes a former Univita employee, who said Univita should have been forced to choose between being the administrator, overseeing a network of providers, and being a provider within those networks. The fact that they were allowed to be both “wasn’t illegal,” according to the former employee, but it “allowed for questionable business decisions”. It’s a fascinating read. The article also quotes KTL partner Daniel Leyton, about the uncertainty facing all actors in the industry (from providers to MCO Plans to Florida’s Agency for Health Care Administration) as they navigate the new landscape:
Until AHCA puts a “workable” plan in place, it’s “chaos on the ground,” says attorney Dan Leyton, a partner with Kravitz, Talamo & Leyton in Hialeah.
“I really don’t know how things are going to operate over the next few weeks as this all shakes out,” he said. “I have yet to hear that anybody has a well-thought out plan for how things are going to work in the future.”
All providers and plans in Florida will be closely watching this story, which will continue to unfold over the coming weeks. We’ll keep you posted.
References [ + ]
|1.||↑||For instance, the article quotes a former Univita employee, who said Univita should have been forced to choose between being the administrator, overseeing a network of providers, and being a provider within those networks. The fact that they were allowed to be both “wasn’t illegal,” according to the former employee, but it “allowed for questionable business decisions”.|
A big announcement, moments ago, from AHCA.
From: “State of Florida Agency for Health Care Administration”
Date: July 28, 2015 (at 4:40:32 PM EDT)
Subject: Univita Termination with All Statewide Medicaid Managed Care Plans
This past week, the International Foundation of Employee Benefit Plans (IFEBP) held its 60th Annual Conference in Boston, Massachusetts. The Annual Conference brings together roughly 5,000 persons involved in the administration and service of “employee benefit plans.” That term, of course, covers a lot of ground, e.g., single-employer to multi-employer plans; private to public sector plans; and pension to health-and-welfare plans. Persons attending the Annual Conference include fund trustees, administrators, business managers, fund attorneys, fund accountants, fund actuaries, and investment managers and consultants, among others. Conference courses and panels cover a wide range of topics, from the practical impact of the new Affordable Care Act (“ACA” or “Obamacare”) to pharmacy benefit management to guarding against fraud, waste and abuse in a fund’s health plans to crucial updates on labor and employment law and the areas of highest concern to the Department of Labor.
Below, I’ll share a few of the interesting factoids and tidbits that piqued my interest in various conference-classes.
This is just the tip of the iceberg; the Annual Conference is an invaluable educational tool for those who work with benefit plans. And Boston hosting the conference gave me easy access to Finale, the spot for amazing late-night desserts on Columbus Avenue. See the picture of their dessert-case below. Yes, I basically ate my way through every Boston restaurant last week. Yes, I’m heading to the gym now. No, I did not bankrupt the “All You Can Eat” Seafood place.
References [ + ]
|1.||↑||AICPA’s auditing standards define segregation-of-duties as “[a]ssigning different people the responsibilities of authorizing transactions, recording transactions and maintaining custody of assets [which] is intended to reduce the opportunities to allow any person to be in a position to both perpetrate and conceal errors or fraud in the normal course of his or her duties.”|
|2.||↑||A defined contribution plan is “[a] retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee.” The amount contributed is fixed, but the benefit is not. Investopedia|
Traditionally, home care workers for the elderly and disabled have been “exempt employees,” who were not covered by the Fair Labor Standard Act. In late 2013, the Department of Labor announced changes to the so-called “companionship exemption.” Under the new rule, “direct care workers employed by third-party employers, such as home care agencies, will receive [the FLSA’s] minimum wage and overtime protection[s].” The new rule will affect roughly two million workers, and it’s scheduled to take effect on 01.01.15 — which is right around the corner.
Earlier today, at the urging of disability rights groups and home health agencies, the DOL announced that it will delay enforcement of the new rule for a six month period. So the rule itself will still go into effect on 01.01.15, but the DOL won’t enforce it until after 06.30.15. And from 07.01.15 through 12.31.15, the DOL will exercise discretion in deciding whether to bring enforcement actions, taking into consideration the extent to which a home health agency has made good-faith efforts to bring its programs into line with the Final Rule. This afternoon, the DOL issued a statement explaining its “time limited non-enforcement policy.”
The Department recognizes . . . that the implementation of the Final Rule raises sensitive issues. In particular, the Department has been committed to assisting the regulated community in considering methods of complying with the FLSA in a manner that avoids harmful impacts on the individuals who rely on home care. Additionally, the Department has historically provided compliance assistance prior to the enforcement of new regulations, and it will continue to focus on such assistance during the initial stages of implementing the Home Care Final Rule. Given the unique effects of this rule, the Department has been committed to providing extensive compliance assistance, reaching out to all 50 states individually and providing other varied technical assistance to States and other stakeholders. Therefore, the Department is announcing that between January 1, 2015 and June 30, 2015, it will not bring enforcement actions against any employer as to violations of FLSA obligations resulting from the Final Rule. . . . This initial non-enforcement policy will apply to all employers. During this six-month period, the Department will concentrate its resources on continuing to provide intensive technical assistance to the regulated community, in particular State agencies administering home care programs, regarding the Final Rule and the application of the FLSA to home care arrangements. Although the Department will not conduct formal investigations of potential FLSA violations during this time, any information received during this time period suggesting non-compliance with FLSA requirements will be used as an opportunity to provide additional technical assistance to States and other potential employers in order to facilitate efficient and effective implementation of the Final Rule.
Make no mistake, this is big news. This short six-month window affords home care companies a final opportunity to update their practices, in anticipation of a rule the DOL will undoubtedly be rigorously enforcing. If your company would be affected by the Final Rule and you haven’t yet prepared for it, now’s the time.
Beginning yesterday and running through 10.27.14, Florida’s Agency for Health Care Administration is inviting interested parties to comment on a proposed change to Fla. Admin. Code 59A-33.002, which regulates how health care clinics are licensed. One significant purpose of the proposed revisions is to “remov[e] the surety bond option as an alternative to financials.” That is, under the existing rule, health care clinic owners applying for an initial, change-of-ownership, or renewal license have to demonstrate a financial ability to operate for the first year of licensure. But some of that showing may be satisfied by the owners posting a surety bond:
This proof shall include evidence that the applicant has sufficient assets, credit, and projected revenues to cover liabilities and expenses. The applicant must submit a projected income and expense statement and projected balance sheet that have been prepared according to generally accepted accounting principals and signed by a certified public accountant. As a convenience, the applicant may submit the required information on AHCA Form 3110-0013, July 2006, Schedule 2, Projected Income and Expense, and Schedule 3, Projected Balance Sheet, which form is incorporated by reference. As an alternative, and not in addition to providing a projected income and expense statement and projected balance sheet, the applicant may submit a surety bond in the amount of $500,000 payable to the Agency for Health Care Administration. For a Surety Bond the applicant must submit AHCA Form 3110-0013, Health Care Clinic surety bond, July 2006, which is incorporated by reference.
No more, under the proposed rule, which strikes-out all of that language. In its place, the proposed rule simply states that “[p]roof of financial ability to operate must be demonstrated for initial licensure and change of ownership applications as required in Section 408.801(8), F.S. and Rule 59A-35.062, F.A.C.
A colleague of mine stressed to me yesterday how significant a rule-change this would be for many license applicants. If this proposed rule may affect you, now is the time to let the Agency know. The page linked above invites you to either make a “one-time comment” or even engage in a back-and-forth discussion with the Agency about the proposed rule. If you would like to discuss the potential rule’s impact on you, or want assistance in commenting on it, please don’t hesitate to contact our Firm lawyers.
In our last post, we discussed the Wage and Hour Division’s continuing crackdown on “fissured industries,” i.e., industries that use techniques to make the employment relationship between the lead company and its low-wage workers more remote and less transparent. One such technique is classifying personnel as independent contractors, rather than as employees. But that’s not to say that all independent contractor relationships in the healthcare industry are a sham. Far from it.
Last Tuesday, the Eighth Circuit issued Alexander v. Avera St. Luke’s Hospital, which provides a useful reminder about the value and vitality of independent contractor relationships in the healthcare field. Now, to be clear, this case involved a physician, not the type of vulnerable worker that the WHD believes is victimized by fissured employment relationships. But the case still carries valuable lessons for would-be employers.
In Alexander, a physician entered into a series of contracts with Avera St. Luke’s Hospital, to act as the Medical Director of its Department of Clinical and Anatomical Pathology. These contracts — including the last one, signed in 2008 and called a “Pathology Services Agreement” — identified Dr. Alexander as an independent contractor. But when the hospital terminated the arrangement in 2011, Dr. Alexander sued. Dr. Alexander alleged he was really an Avera employee, and that he was fired after suffering a series of serious health complications over the prior few years. The District Court ruled in the hospital’s favor, after concluding that Dr. Alexander was, in fact, an independent contractor, and therefore ineligible to sue under various federal anti-discrimination statutes. The Eighth Circuit just affirmed the District Court’s ruling.
As the Court pointed out, no one factor determines whether someone is deemed an employee or a contractor. But the Court mentioned a number of data-points that helped persuade it that the district court got it right.
Given these factors, the Eighth Circuit agreed that Dr. Alexander was, in fact, an independent contractor. As a result, the Court found that Dr. Alexander could not sue for discriminatory treatment under the Americans With Disabilities Act, the Age Discrimination in Employment Act, the Family Medical Leave Act and South Dakota’s anti-discrimination statutes (The ADA, ADEA and FMLA “limit[ ] its protections to ’employees.’ Independent contractors are not covered.”).
Certainly, there were factors supporting Dr. Alexander’s argument, such as the fact that the hospital provided all necessary equipment, facilities, and non-medical assistants, and that it billed the patients and paid Dr. Alexander in equal monthly installments. But it isn’t unusual to have contradictory factors in these cases. That’s why courts view these matters in their totality and test them against economic-reality. When that occurs, a court may find that a valid independent contracting relationship exists in the healthcare context.
The Department of Labor’s Wage and Hour Division just released aggregate data concerning its enforcement of federal wage-and-hour laws for 2009 — 2013. Among the most interesting tidbits is the WHD’s continuing focus on the healthcare industry. The number of cases brought by the WHD against health care companies to recover back-wages for employees have steadily risen, from 1,194 in 2010, to 1,502 in 2011, to basically holding steady at 1,463 in 2012, to 1,622 in 2013. And the amounts recovered by the WHD have been eye-opening, topping 10 million in each of FY2010 to FY2013.
Why the focus on healthcare companies? It’s largely based on the DOL’s focus on “fissure industries,” which are, according to the WHD, “those sectors that increasingly rely on a wide variety of organizational methods that have redefined employment relationships.” These new organizational methods include subcontracting, third-party management, franchising, independent contracting, as well as “other contractual forms that alter who is the employer of record or make the worker-employer relationship tenuous and less transparent.” Healthcare companies, like home health agencies, have liberally used these methods — especially independent contracting relationships with their nurses and therapists — for years, and the DOL has taken notice.
The federal government wants to put an end to misclassification of workers as independent contractors and has the health care industry in its sights. Earlier this year, the United States Department of Labor (DOL) and the Treasury Department announced an interagency “Mislcassification Initiative.” The Initiative involves millions of dollars, new personnel, targeted audits, and even training of OSHA investigators to spot misclassification problems and “rewards” for states that are the most successful in finding and correcting misclassification. The DOL is planning on an additional 4,700 investigations targeting problem industries. Home health care is specifically listed as one of those “problem industries.” All employers in the health care industry should be on guard.
There is little reason to believe the WHD will stop focusing on healthcare companies any time soon, especially now that David Weil is the WHD’s new Administrator. Dr. Weil has written extensively about the impact of fissured workplaces on the US’s regulatory systems. For instance, he’s argued that “[t]he direct, two-party relationship assumed in federal and state legislation and embodied in traditional approaches to enforcement no longer describes the employment situation on the ground [for low-wage workers].” In key business sectors — like healthcare — Dr. Weil sees the employment relationship becoming “fissured,” i.e., the businesses that really occupy the market “have become separated from the actual employment of the workers who provide goods or services.”
Dr. Weil argues that this fissuring has major implications for the enforcement of US employment laws.
The fundamental changes in employment relationships require a revised approach to enforcement, one that is built on an understanding of how major sectors of the economy employing large numbers of vulnerable workers operate and then using those insights to guide enforcement strategy. Just as the forces driving compliance with labour standards have changed, so must the strategies that agencies employ to improve conditions.
Put differently, if you operate a home health agency and your nurses or therapists are technically independent contractors, but they walk-and-talk like your employees, you are not beyond the reach of Dr. Weil’s WHD. Indeed, you may be in the agency’s cross-hairs. Now is the time to carefully examine your practices, to better prepare you in the event of an agency audit or other enforcement action. What Benjamin Franklin said long ago is still true today: “An ounce of prevention is worth a pound of cure.”