Old law-New problem

The courts are becoming cluttered with wage and hour lawsuits. Fair Labor Standards Act (FLSA) cases are emerging as a leader in employment lawsuits filed in the U.S. District Courts. Except for new regulations issued a few years ago governing exemptions from overtime, this law has remained essentially unchanged for more than 50 years, but it is giving rise to a whole new battery of legal actions on behalf of employees against their employers.

The U.S. Department of Labor, more specifically its Wage and Hour Division, which has jurisdiction for enforcing the FLSA, for its part, is in the process of beefing up its investigatory staff by adding 250 new field agents.

Healthcare is the target

Healthcare has become the target industry for the surge in FLSA claims and it is particularly vulnerable to those violations. For the most part, facilities have to be staffed 24/7/365 and care for individuals who have needs that cannot be neglected or delayed. As a consequence, “overtime” and “extra” work are part and parcel of normal operational requirements.

Furthermore, supervision tends to be much more decentralized than in other fields and history teaches that most FLSA violations occur because of acts and omissions “on the floor,” not from actions in payroll, human resources, or the executive suite. The plaintiffs’ bar is acutely aware of this vulnerability. Law firms such as Thomas and Sullivan in the Northeast and mid-Atlantic, and Morgan & Morgan in Florida and the Southeast, are very active in “drumming up” FLSA cases. Morgan & Morgan floods the airwaves on radio and TV with “solicitations” for overtime cases and is, in part, responsible for Florida leading the nation in FLSA cases filed. The Thomas firm has been directly reaching out to nurses and, to date, has filed several large wage and hour lawsuit cases in New York, Massachusetts, Pennsylvania, and Illinois. In Pennsylvania, several legal actions have been instituted claiming that “8 and 80” overtime schedules pursuant to Section 7(j) of the FLSA are illegal in Pennsylvania because there is no such counterpart under Pennsylvania’s wage and hour statute. This is only the tip of the iceberg. California, for example, has always been a hotbed for wage and hour litigation and now the focus is shifting to healthcare from other industries.

Take no solace

Long-term care (LTC) employers should take no solace in the fact that the higher profile cases currently being filed involve acute care hospitals. It was only about 10 years ago that “nursing homes” and other “group homes” were singled out by the U.S. Department of Labor for an unprecedented compliance audit based upon a belief that FLSA violations were widespread in the industry. Bottom line, following the audit, the Department of Labor’s Wage and Hour Division concluded that there indeed were excessive violations and that it needed to step up enforcement in long-term care. LTC employers remain on the radar screen of not only the Department of Labor, but of the attorneys representing employees.

The most frequent violation of the FLSA is in the miscalculation of “regular rate,” but it is probably the least consequential in terms of liability. Overtime compensation must be calculated based on the employee’s regular rate of pay, which may differ from his or her base rate because of other forms of compensation which must be included in the rate and which can vary from work week to work week. The most expensive violations commonly involve misclassification of individuals as exempt from overtime compensation pursuant to the Section 541 Regulations of the FLSA dealing with “executive,” “administrative,” and “professional” employees. Such individuals, to be exempt, must be paid on a salary basis in the amount of at least $455 per week; must, with very few exceptions, be paid that entire salary in any work week in which they perform any work; and must satisfy the specific duties requirements set forth in the regulations for the particular exemption sought to be advantaged. Most of the lawsuits being filed involve, in some form, the failure to pay the employee for “overtime” work performed in excess of the FLSA limits. Section 7 of the FLSA requires that an employee not otherwise exempt must be paid time-and-one-half of his/her regular rate of pay for all hours worked in excess of 40 in a defined work week. There is no daily overtime pay requirement.

Most FLSA violations occur because of acts and omissions “on the floor,” not from actions in payroll, HR, or the executive suite.

However, Section 7(j) allows healthcare employers to calculate overtime based on a 14-day period instead of one week in order to accommodate scheduling in a 24/7 operation. Employers taking advantage of Section 7(j) are required to pay overtime for all hours worked in excess of 80 in the two-week pay period and also, as a requirement of having this advantage, for all hours worked in excess of eight in any one workday. The FLSA overtime provisions are most frequently violated when employees perform work during their lunch periods and/or when they perform work-related tasks before or after their scheduled shifts.

Get familiar

All LTC employers should take steps to minimize the likelihood that they will be swept up in the surge. First and foremost, supervisors must be trained in the details and requirements of the FLSA and any state-specific counterpart laws. As noted above, most FLSA overtime pay violations can be traced to an act or omission of a frontline supervisor and are not attributable to someone in an executive office. Next, each employer should conduct, or have conducted, a vulnerability audit of its FLSA compliance. The audit should involve someone well-versed in the FLSA and should include a review of all wage-related policies, practices and procedures, time recording and timekeeping practices, payroll practices, and procedures and recordkeeping history. The professional conducting the audit should review each of the classifications of employees treated as exempt from overtime pay with particular attention to their duties and “salary basis” as measured under FSLA’s new Section 541 regulations. If the employer compensates any employees on an 8 and 80 pay plan pursuant to Section 7(j), the auditor should study not only whether the plan is administered correctly, but whether any such employees should not be on that system for overtime pay.

Scrutinize

Finally, practices and policies for part-time employees should be scrutinized to ensure that the LTC employer is not exposing itself unnecessarily to potential FLSA liability for these employees.

The flood of FLSA lawsuits will not go away any time soon. Healthcare employers are particularly vulnerable to these lawsuits and this has not gone unnoticed by plaintiff lawyers and the Department of Labor. The Department of Labor under the Obama administration is committed to more aggressive enforcement of the FLSA. Individual claims are easily turned into collective actions-meaning that a claim on behalf of a single employee or former employee can easily be turned into a claim on behalf of all employees similarly situated. However, this law is relatively straightforward and LTC employers can, and should, take steps to make themselves less vulnerable and to minimize the chance that they will be sued or, if sued, found liable.

John E. Lyncheski, Esq., FACHCA, is a Director/Shareholder in the Pittsburgh-based firm of Cohen & Grigsby P.C. He chairs the firm’s healthcare group and the firm’s Florida labor and employment practice. Mr. Lyncheski is a Fellow in the American College of Healthcare Administrators (ACHCA), is on the Board of Directors of the American Health Lawyers Association, the Florida Assisted Living Association, and the Florida Chapter of the ACHCA, among others. Contact him at

jlyncheski@cohenlaw.com. Long-Term Living 2010 September;59(9):32-33