The U.S. Department of Labor (DOL) is expected to issue a final rule regarding the overtime provisions in the Fair Labor Standards Act (FLSA) in late 2016 that will significantly expand the number of employees eligible to receive overtime pay. The proposed rule issued in July 2015 has already prompted health care employers to proactively evaluate their compensation and employee classification practices so as not to be caught flat-footed when final rule takes effect.
The FLSA requires certain employees to be paid overtime for any hours worked in excess of 40 in a workweek. Employers are not required to pay overtime to all employees. Among other categories, the FLSA exempts certain “white collar” workers (e.g., executive, administrative, professional). To be exempt, employees must satisfy a “salary test” and a “duties test” which require that the employee:
DOL also proposes to increase the salary threshold to meet the “highly compensated employee” exemption from $100,000 to $122,148, the 90th percentile for full-time salaried employees. All employees who earn less than $50,440 must be classified as non-exempt regardless of their job duties, and all employees who earn between $50,440 and $122,148 are potentially non-exempt, depending on their specific duties. DOL’s proposed rulemaking doesn’t make any changes to duties analyses for white collar exemptions.
Health care compensation analysts expect the rule change to impact mid-level administrative positions within hospitals and health systems especially: Lower-level white collar positions in support departments such as accounting, human resources and information technology are ones that are most often misclassified as exempt.
But it is important for physicians, physician assistants, nurses and other employed medical professionals to understand that they, too, may be entitled to overtime compensation, if they are made to work more than 40 hours per week and are paid a salary that is under the threshold, or are not paid a salary at all. This is the lesson that Righttime Medical Care, an operator of urgent care clinics in Maryland, learned to its dismay this past year when some of its current and former PAs and NPs sued it for unpaid overtime, and were subsequently granted class certification under the FLSA by the United States District Court.
The January 10, 2016 issue of the New York Times features a story about a nearly two-year-long battle that a group of hospitalists has waged against their employer’s decision to place them under the control of an outside management firm. It’s a story that traces the history of the role of hospitalists in the U.S. healthcare industry, and provides the backstory of the creation of one the first hospitalist unions in the country.
The hospital that is the subject of “Doctors Unionize to Resist the Medical Machine” is PeaceHealth Sacred Heart Medical Center in Springfield, Oregon. In the spring of 2014, its administration announced it would seek bids to outsource its 36 hospitalists to a management company that would become their employer.
The outsourcing of hospitalists has become relatively common in the last decade. The motivation for doing it are at least partly business-related: efficiency gains, cost savings and higher margins. But, as the article points out, it is also a response to growing payer pressure on hospitals to measure quality and keep people healthy after they are discharged. Meeting quality measures requires data collection and management—something many hospitals, especially smaller ones, aren’t equipped to do, but which many outsourcing companies are. According to the Society of Hospital Medicine, 25 to 30 percent of all hospitalists have worked for multistate management companies in recent years.
Although outsourced hospitalists tend to make as much or more money than hospitalists whom hospitals employ directly, their compensation is often more directly tied to the number of patients they see in a day. The cause of the hospitalist revolt at PeaceHealth Sacred Heart was the higher volume of patients that hospitalists would be expected to see under new management—from 15 to about 20 a day. The lead organizer of Sacred Heart’s hospitalists, Dr. Rajiv Alexander (who, according to the article, is known at Sacred Heart for his painstaking and often time-consuming diagnostic approach), was one of many at the hospital who viewed the prospect of higher volume as a threat to patient safety.
Some Sacred Heart hospitalists left for other jobs; but those who stayed formed a union, one of the first of its kind in the country. To everyone’s surprise, Sacred Heart’s administration agreed to abandon its outsourcing plan. Since then, the hospital and its remaining hospitalists have been involved in what the article describes as a “long, grinding negotiation . . . over the proper role of the hospital doctor” in the course of establishing a collective bargaining agreement.
Increasing hospital consolidation, more demanding payor expectations and declining reimbursements will continue to exert pressure on hospital-employed physicians, increasing their workloads and threatening their professional autonomy. All of this is a recipe for greater labor unrest.
Employed physicians should understand their rights under the National Labor Relations Act (NLRA). Under the NLRA, employees are not required to belong to a traditional labor organization in order to negotiate collectively with their employer. Two or more such employees may exercise their Section 7 rights by designating a representative and asking their employer to meet with that representative to discuss and negotiate wages and other terms and conditions of their employment. The NLRA protects employees, even in non-unionized workplaces, from retaliation by their employers for engaging in activities protected under that law. However, employees who are “supervisors” under the NLRA (basically, any individual who has the authority to recommend or perform certain supervisory functions in the employer’s interest—such as hiring, directing, promoting, disciplining, and laying employees off—and who uses independent judgment to do so) are not covered by the NLRA. More information about the NLRA and the kinds of activities it protects are available from the National Labor Relations Board, which administers and enforces the NLRA: www.nlrb.gov.