Human Resources Insights for Health Care – Hall Render Podcast

In this podcast, we talk about EEOC guidance a variety of accommodation and non-discrimination law, and how they apply during the COVID-19 pandemic.

Attorney, Hall Render

Attorney, Hall Render

Mary Kate Liffrig: Hello and welcome to Hall Render’s HR Insights for Healthcare Podcast, covering labor and employment law cases and trends, for professionals working within the healthcare industry. I’m Mary Kate Liffrig.

Dana Stutzman: And, I’m Dana Stutzman.

Mary Kate Liffrig: Dana and I are attorneys with Hall Render, the largest healthcare focused law firm in the country. We both practice employment law and regularly advise healthcare clients on a variety of labor and employment law topics. Please remember, the views expressed in this podcast are those of the participants only and do not constitute legal advice.

Mary Kate Liffrig: So, Dana and I are here today to talk about COVID-19 and specifically some of the workplace nondiscrimination questions that can arise during the COVID-19 pandemic. So Dana, just to start us off, do you want to give us a real quick background on the nondiscrimination laws that we’re going to be talking about today?

Dana Stutzman: Sure, happy to explain. And actually, I think even before I start off with the start off, I first want full disclosure, we are podcast recording this while sheltering in place from our respective homes. So it’s entirely possible that this podcast could get interrupted with spouses, pets, children, screaming, doors slamming, what have you. If that happens, we’re going to continue to roll with it. We hope you bear with us. Our marketing folks will, I’m sure, try to do their best to edit out the distractions but there may be some things that slip through the cracks. So, hope that that doesn’t put anybody off out there.

Dana Stutzman: But, back to the subject at hand, there are a handful of federal laws that prohibit discrimination, based on a number of different protected characteristics. The Equal Employment Opportunity Commission, also known as the EEOC, is a federal agency that enforces those laws. And during the pandemic, EEOC, along with a lot of other regulatory agencies, has been very active in terms of providing and updating its regulatory guidance during the pandemic. Sometimes it’s on a weekly basis, sometimes it’s even on a daily basis.

Dana Stutzman: So in terms of the EEOC, they’ve provided guidance to remind employers that the nondiscrimination rules still apply, even in a pandemic. Which means and I’d say viewed from 50,000 foot level, employers need to watch out for disability discrimination, which is covered by the ADA, asking questions about employees’ family members’ health because that implicates both the ADA and the Genetic Information Nondiscrimination Act, otherwise known as GINA. Employers need to be mindful and watch out for pregnancy discrimination, which falls under Title VII.

Dana Stutzman: You need to be careful about race based stereotyping. For example, some of the race based stereotyping, that’s been in the news as of more recently, is some of the anti-Asian activities because the origin of the COVID-19 is from China. So some race based stereotyping was occurring along those lines. And then finally, the other area to watch out for is age discrimination because age is a characteristic under the federal age law, otherwise known as the Age Discrimination in Employment Act or ADEA, for short.

Mary Kate Liffrig: Yeah. And so, the EEOC has provided several forms of guidance for employers to help employers interpret these various nondiscrimination laws, as they particularly apply in this unprecedented COVID-19 situation. Specifically, the EEOC has issued a guidance document. They issued a pandemic preparedness document back in 2009, which they then updated in March 2020, as a result of the COVID-19 pandemic. And then, on March 27th the EEOC posted an outreach webinar responding to employer questions related to COVID-19.

Mary Kate Liffrig: And, the EEOC has also issued technical assistance, which they’ve updated pretty frequently over the last several weeks to add additional information for employers. And so, we’ll post links to all of those documents in our show notes, if we can figure out how. So Dana and I thought we could walk through some of the questions that the EEOC has answered in their guidance. And, we can’t hit on everything and the time we’ve got but we’ll try and hit the highlights.

Dana Stutzman: Right. And before we get rolling, I think it’s important to note that the public health situation with COVID-19 continues to evolve and as that situation evolves, EEOC guidance is going to continue to evolve, as well. As I said before, it sometimes is getting updated on a weekly basis or even more frequently than that.

Dana Stutzman: The EEOC has stated many times that the laws it is enforcing, do not hinder employers from following COVID-19 guidance from the CDC and from state or local public health authorities. So it’s actually kind of a lot for employers to juggle all at once. Do the best you can. Try and keep up with the guidance that’s being issued by the CDC, by state authorities, local authorities, in terms of how to maintain workplace safety.

Dana Stutzman: And then also, at the same time, try your best to keep up with EEOC guidance, in terms of how to comply with equal employment laws during the COVID-19 pandemic. For what it’s worth and just for frame of reference, the content that we’re sharing today is up to date, as of the date that we’re recording this podcast, April, 27 2020.

Mary Kate Liffrig: Thanks Dana. And, we also want to note that we’re just talking today about the federal equal employment laws, not talking about state and local laws. We’re not going to hit on the federal wage and hour issues or federal leave laws, like the FMLA or paid leave laws created by the Family’s First Coronavirus Response Act. We’re not hitting on things like OSHA, right now we’re really just talking about the ADA, ADEA, Title VII, including the PDA and GINA. So I think that’s all of the introductory information here. So without further ado, Dana, do you want to kick us off on some of these FAQs, that EEOC has issued?

Dana Stutzman: Sure. Yeah, happy to. So one question that the EEOC has addressed and they’ve actually addressed it in a couple of different places, is whether the COVID-19 pandemic permits an employer to take the temperature of employees who are coming into the workplace. And, if there’s anything else an employer could do at the current time, to determine if employees physically coming into the workplace have COVID-19 or symptoms associated with the disease.

Dana Stutzman: Short answer, yes. You can ask all employees. And again, I’m emphasizing all. You can ask all employees, who are physically entering the workplace, if they… Excuse me, if they have COVID-19, if they have symptoms of COVID-19 and if they’ve been tested for COVID-19. Quick side note, that comment about you can ask them specifically if they have COVID-19, that was something that was specifically addressed in the EEOC webinar. It was previously unclear under some of the pandemic guidance, if that was an okay question to ask. So in the webinar, that was one helpful nugget that the EEOC address directly. Yes, it is okay to ask your employees, when they’re physically entering, do you have COVID-19. So helpful information there.

Dana Stutzman: Along those lines, employees with symptoms may be prohibited from the workplace because, according to the EEOC, they pose a direct threat to the health and safety of others. However, one practical point to watch out for employers, you are not allowed to ask similar questions of employees that are teleworking because they are not physically interacting with other employees. So it would not be okay to run through those of questions with a respect to your workforce that is sheltering in place, working from home.

Dana Stutzman: Also, I think I did comment and highlight the fact that we’re talking about all employees who are physically entering the workplace. Meaning, don’t be selective of a particular subset like older employees or pregnant employees or employees of a particular national origin. That would not be a good thing. It looks like you’re starting to single out and discriminate for whatever reason. So okay to ask, make sure you do it to all employees who are physically entering the workplace.

Dana Stutzman: One other comment I mentioned above, it’s okay to ask if they have symptoms of COVID-19 and I think effective right around today, April 27, the CDC updated the list of symptoms that go along with COVID-19. Here they are, fever, cough, shortness of breath or difficulty breathing, chills, repeated shaking with chills, muscle pain, headache, sore throat and last but not least, new loss of taste or smell. So that’s the latest and greatest COVID-19 symptoms, as per CDC guidelines on or around April 27, 2020.

Dana Stutzman: Another point, the EEOC has also explained more recently that it is okay for employers to administer a COVID-19 test. On that one though, be careful because there are certain caveats and conditions that employers need to follow before you can do that. So on that point there, I would recommend reaching out to counsel before you decided to go down that path.

Dana Stutzman: Also, you can ask your employees if they have been in contact with anyone that has been diagnosed with or has symptoms of COVID. And in a nutshell, that’s how you ask the question, that’s how you find out about COVID in the employees household. Meaning, and this is what the EEOC has said, it is not okay to say to an employee, does anyone in your family have COVID? Because that question gets cross wise with the GINA law, you need to ask it more broadly. Which again the question is, have you been in contact with anyone that has been diagnosed with or has symptoms of COVID? There you’re not asking specific about family diagnoses, so the EEOC says, “If you’re asking broadly, that part’s okay.”

Mary Kate Liffrig: And so, so it sounds like we’ve got pretty broad authority to ask questions and perform some testing, as it relates to allowing employees back into the workplace. And so, the follow-up on that is, is the question, okay, well happens if the employee doesn’t comply? And, EEOC has addressed that, as well. They’ve said that the ADA allows an employer to bar an employee from physical presence in the workplace if the employee refuses to answer questions about whether they have COVID-19 or symptoms associated with COVID-19 or if they’ve been tested for COVID-19. As well as, the ability to bar an employee’s presence if they refuse to have their temperature taken.

Mary Kate Liffrig: That said, from a very practical perspective, the EEOC also suggests that employers perhaps ask their employees for the reason for their refusal. Right? If they’re coming into the workplace and they’re saying, “No, I’m not going to answer these questions about whether I’ve been tested.” Sometimes employees are reluctant to provide medical information to their employers because they fear the employer may widely spread their personal medical information in the workplace. And, we don’t have time to get into the nitty gritty of the ADA’s confidentiality requirements. But generally speaking, the ADA prohibits broad disclosures. And so, the EEOC recommends asking an employee about why they don’t want to comply because that may give you an opportunity to reassure your employees that you’ll be appropriately maintaining confidentiality and hopefully that will increase compliance.

Dana Stutzman: Okay, my turn. Another question the EEOC has addressed is, whether an employer can exclude individuals from the workplace if they do not have any symptoms of the disease? Sometimes referred to as asymptomatic. But instead, because the CDC has identified them because of their belonging to a protected class, as being at a higher risk of severe illness, if they contract COVID-19.

Dana Stutzman: Practically speaking, this can come up in three distinct contexts. One of which, has to do with employees age 65 years or older. Second context, would be with respect to employees with underlying health conditions. The third context, is with respect to pregnant employees. Okay? So the answer in short is, that employers cannot discriminate against workers based on their belonging to a protected class.

Dana Stutzman: In other words, no stereotyping. What that means is that you cannot base employment decisions including decisions about layoff and furlough on an employee’s age, disability or pregnancy. So for example, the CDC says the employees a 65 and older are at heightened risk for COVID. Can I, as the employer, proactively try to mitigate that risk and protect those employees for their own good, by singling them out for furlough? Answer, no, I cannot.

Dana Stutzman: Another example, CDC has a list of people who are at higher risk for severe illness, if they contract COVID. That list includes a recommendation to monitor women who are pregnant. Can I then, as the employer, try to get out in front of that potential risk and single out pregnant employees or asymptomatic, meaning they have no symptoms, can I single them out for furlough or for layoff status to protect them? Again, answer, no, I can’t. The Title VII protections guard against pregnancy discrimination and the EEOC has stated that, that would be a form of pregnancy discrimination.

Mary Kate Liffrig: Yeah, that’s right. Now, the flip side of that question is, whether an employee can request an accommodation because they’re at a higher risk of complications, as a result of COVID-19? And, this can also come up in a series of distinct contexts. And so, let’s first talk about employees who have a disability, as defined by the ADA, and who asked for an accommodation because COVID-19 puts them at a higher risk of complications.

Mary Kate Liffrig: Under the ADA, an employer is required to provide reasonable accommodation to an employee or an applicant with a disability, unless doing so would pose an undue hardship. And, the EEOC has indicated that a request for an accommodation because of a current disability, whether that disability is exacerbated by the COVID-19 situation or if that individual is at a higher risk of developing complications from COVID-19, those requests should be viewed as a request for a reasonable accommodation under the ADA.

Mary Kate Liffrig: And, as with any other request for an accommodation under the ADA, the employer can verify the existence of a disability, if it’s not already known and can discuss both why an accommodation is needed and the type of accommodation that would meet the employee’s health concerns. And, we can request documentation to support those pieces of information. So although this is a totally unique situation that we’re all going through with COVID-19, really the way we handle a request for an accommodation under the ADA, does not change.

Mary Kate Liffrig: So again, we’re going to be going through the reasonable accommodation process, that good faith interactive process and then the employer can also consider whether a reasonable accommodation would pose an undue hardship. An employer does not have to provide a particular, excuse me, a particular reasonable accommodation if it poses an undue hardship. Which means, it would pose a significant difficulty or expense to the employer.

Mary Kate Liffrig: And, the EEOC has specifically recognized that in some instances an accommodation that would not have posed an undue hardship prior to the pandemic, may pose one now. And, we don’t have time to get into the weeds here but the EEOC has provided some detailed information about the interactive process during the COVID-19 situation. And also, what constitutes an undue hardship in light of the COVID-19 situation. And, one thing to keep in mind about the ADA is, that it applies to everyone, even your essential workers or your critical infrastructure workers. And so, if you receive a request for a reasonable accommodation under the ADA from your critical workers, from your essential employees, you’ve got to treat those requests just like you would any other employee.

Mary Kate Liffrig: So while your employers do have an obligation to accommodate employees and applicants with disabilities, the ADA doesn’t cover family members disabilities. And, this is one of the other areas where this is questioned about whether or not an employer… I’m sorry, an employee can request an accommodation because they’re at a higher risk, this is the other area that can come up. That’s when an employee is requesting an accommodation because his or her spouse is at a greater risk or a child is at a greater risk of complications if they contract COVID-19. So in that situation, under the ADA the employee is the only one who has a right to a reasonable accommodation for their own disability.

Mary Kate Liffrig: And, in these examples, the employee does not have a disability and so the employee would not be entitled to an accommodation under the ADA in these situations. Now that said, the EEOC cautioned in its webinar that employers should consider if it’s treating the employee differently from other employees, with a similar need, before it responds to this type of a request. And we should also note, that there are other laws that may require a leave to care for a sick family member, such as the FMLA or the Emergency Paid Sick Leave Act or state or local laws. Very much fact specific and not one of the laws that we’re covering today but just a note so we don’t forget that there are other laws that apply in this potential situation.

Dana Stutzman: So to piggyback on Mary Kate’s comments, requests for accommodation from an employee because of their age or their pregnancy, are also typically not covered by the ADA. Those are issues that have frequently been coming up in the workplace during the COVID pandemic. Happily, thankfully, the EEOC hit both of those questions head on during its webinar.

Dana Stutzman: So the question was whether employers are required to grant a request to tele work from an employee who is 60 or older because the CDC says that older people are more likely to experience severe symptoms, if they get COVID-19. So again, as an employer, are you required to grant a tele work accommodation request from an employee, who’s age 60, just because he or she is more likely to experience severe symptoms if they get COVID-19. Answer, no. You’re not required to do so because under the ADEA, Age Discrimination and Employment Act, there’s no accommodation obligation that exists. So by extension, no need to accommodate based on the age component alone.

Dana Stutzman: Caveat, employers need to take note that you should be ensuring that differential treatment is not given to other employees who make a similar request. Well, what do I mean by that? For example, if you have an employee with asthma, who is otherwise asymptomatic, has no symptoms, and they come to you and they ask for accommodation because they are concerned that they are going to be at higher risk by coming into the workplace. If that employee is allowed to tele work, due to potential health concerns, then in that scenario, you as the employer would need to grant the 60 year old or 65 year olds work from home requests. Otherwise, you’re being discriminatory in your employment practices because you’re treating the older worker less favorably, than the otherwise perfectly healthy asthma employee who had a tele work request.

Dana Stutzman: So keep that in mind. Now, let’s switch over to the pregnant employee scenario. This again, is an issue that comes up a fair amount during the pandemic. Question is, whether the employer has to grant a pregnant employee’s request to tele work because the CDC says that there is a higher risk if she contracts COVID-19. Answer again, is no. You don’t have to grant that accommodation. As before however, there’s a caveat. Employers need to treat pregnant workers the same as other workers who are similar in their ability or inability to work. And that may mean, that if you’re providing accommodations for others, similar in their ability or inability to work, you would need to do the same for the pregnant workers.

Dana Stutzman: So go back to my asthma employee example. If you were to grant a tele work request from an asymptomatic, asthma employee, who’s otherwise healthy, then you would want to grant the pregnant employees who request, as well. Also, with respect to pregnant workers, note that if the pregnant worker has an underlying disability, something more than just an otherwise normal straight forward pregnancy. If the pregnant employee has a disability, as defined by the ADA, then that disability should be accommodated, a good faith interactive process should be initiated and accommodations may need to be granted, in that case.

Dana Stutzman: Changing gears ever so slightly, a lot of employers have transitioned to allowing employees to tele work, as much as possible, during the pandemic. Right? States across the country are shelter in place, for the most part, vast majority of the workplace has gone to work from home methodology. It means, everybody or nearly everybody is teleworking right now.

Dana Stutzman: There’s been a handful of questions that have arisen, as they relate to tele work. Again, the EEOC provided helpful guidance in this area, so I’ll address these questions using three examples. Example one, you’re an employer and some or all of your workforce is teleworking. One of your teleworking employees already had an accommodation in place, when he was physically working in the workplace. Question is, whether you need to make that same accommodation in the tele work environment? Answer, follow the tried and true, good faith interactive process. Brainstorm, deliberate, determine if there is a reasonable accommodation that could be provided to the employee, who is working from home. Meaning, the employer and employee should discuss what accommodations are needed and why and whether the same or different combinations will suffice, in the tele work environment.

Dana Stutzman: For example, if the employee has vision issues and needed a large computer monitor, while working in the workplace, the accommodation discussion in the tele work environment would sensor on what kind of monitor does the employee have at home? If the employee has a large monitor at home, is able to view and see the monitor, then in that case, no accommodation would be needed. If the employee, in contrast, doesn’t have a monitor, has a small monitor, only has a laptop with a teeny tiny screen, then in that scenario, yes, the employer and the employee would want to brainstorm, go through the interactive process to make arrangements to get the large monitor to the employee’s home office. So, that’s kind of how the tele work accommodation process would work in that scenario.

Dana Stutzman: So moving on, example two of three. Example two and this is a hot topic or at least as far as hot topics go in an EEOC accommodation, pandemic environment. Assume as an employer, that you went to a tele work environment for your workforce during COVID-19. After the shelter in place, work from home, social distancing stuff is lifted and the tele work is no longer necessary, does the employer automatically have to grant tele work, as a reasonable accommodation, to every employee with a disability who wishes to continue the teleworking arrangement? Here the answer, thankfully, is no.

Dana Stutzman: Straight from the EEOC webinar, an employer does not have to eliminate an essential function of the job just because they did during this public health crisis. Therefore, an employer may determine that teleworking is not a reasonable accommodation after the COVID-19 pandemics subsides. And, when the EEOC makes reference to employers not having to eliminate an the essential function of the job, they are most likely referring to regular, in person attendance on the job. So side note, having that kind of verbiage in your position description would be helpful and it will be helpful in a post COVID environment.

Dana Stutzman: Last example, number three of three. Assume that, prior to COVID, an employee with a disability had requested tele work as a reasonable accommodation. At the time, the employer denied the request because of concerns that the employee would not be able to perform the essential functions remotely. In the past, meaning before COVID, the employee continued to come to the workplace. But, after the COVID-19 crisis has subsided and temporary tele work ends, the employee renews his reasonable accommodation request for tele work. Can the employer refuse the request? Answer, it depends. It’s a maybe.

Dana Stutzman: What the EEOC has said is, that as with all ADA reasonable accommodations, the employer and employee should continue to have an open communication regarding the employee’s needs. EEOC went on to say that, the employer may want to consider this COVID tele work period as a “trial run” for future reasonable accommodations. So, I’m going to read a little bit between the lines. If the employee was able to carry out the essential job functions, while teleworking during COVID, I think the employer would have a really tough time denying the request in a post COVID environment.

Dana Stutzman: Keep in mind however, that in this example, the reason the employer had previously denied to tele work request was because of concerns that the employee wouldn’t be able to perform essential job functions remotely. So there was some question as to whether or not that was able to happen. Certainly, if the job requires in person, regular tenants at the workplace, that would put the employer on firmer footing to deny that tele work request in a post COVID environment.

Mary Kate Liffrig: Great. And then, switching gears again here, it’s also against the federal EEO laws to harass or otherwise discriminate against employees based on race, national origin, color, sex, religion, age, disability or genetic information. I know we’ve already talked a little bit about nondiscrimination but just a reminder, employers need to be aware of and need to reduce and address workplace harassment, that may arise as a result of the COVID-19 pandemic.

Dana Stutzman: So just a few closing remarks from me, COVID-19, the effect on the workplace, effect across the country unlike anything I’ve ever seen before. Significant amount of fear, anxiety in the workplace, especially in the healthcare industry. So as employers are navigating these unchartered waters, look to the guidance that’s issued on a regular basis by the regulatory agencies, including the EEOC, lean on your attorneys and do the best you can because we’re all in some way, shape or form trying to navigate our way through a lot of uncertainty and unknown. So with that, that’s all that I have for purposes of today’s podcast.

Mary Kate Liffrig: Great. Well, Dana, thanks for joining us and listeners, thanks for joining us. As a reminder, for more healthcare employment law content, please visit our website at hallrender.com and please subscribe to our podcast.

Mary Kate Liffrig: Hall Render’s attorneys and professionals continue to maintain the most up to date information and resources, which are available at our COVID-19 resource page and that’s hallrender.com/coronavirus. Or, through our 24/7 COVID-19 hotline and the phone number for that hotline is on our website. Or of course, you can contact your regular Hall Render attorney.

Mary Kate Liffrig: If you’d like to be added to our monthly newsletter, feel free to send me an email at [email protected]. That’s [email protected]. And finally, please understand that our podcast is for informational purposes only and for ethical reasons, Hall Render attorneys cannot answer specific questions, that would be legal advice outside of an attorney client relationship.

In this episode, we discuss health care noncompetes and how courts have handled noncompete disputes. We also discuss potentail noncompete legislation in Indiana.

Attorney with Hall Render.

Attorney with Hall Render.

Mary Kate Liffrig: Hi, and welcome to Hall Render’s HR Insights for Healthcare Podcast, covering labor and employment law cases and trends for professionals working within the healthcare industry. I’m Mary Kate Liffrig.

Dana Stutzman: And I am Dana Stutzman.

Mary Kate Liffrig: Dana and I are attorneys with Hall Render, the largest healthcare focused law firm in the country. We both practice employment law and regularly advise healthcare clients on a variety of labor and employment law topics. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice.

Mary Kate Liffrig: Dana and I are here today to talk about healthcare provider noncompetes. I’ll be asking most of the questions today, and Dana will be the one responding. So, before we dive into the substantive portion of our podcast, Dana, can you just tell us a little bit about this part of your practice?

Dana Stutzman: Sure. And thanks for having me on the podcast. I appreciate it. In broad strokes, work in private practice for the Hall Render law firm in healthcare employment, and that consists primarily of two parts. On the front end, there is what I would consider the day-to-day consulting stuff, meaning a hospital or a physician practice group calls in, they have an issue. Maybe, it has to deal with a employee with a drug issue or a pregnant nurse or what have you. So, we’ll talk through options and strategy and consult on the front end. And then on the back end, once the dispute gets into either administrative charge in front of the EEOC or it gets into state court or federal court, that’s the second half of my practice where we’ll actually get into the trenches. We’re going to court and “fight” the good fight so to speak.

Dana Stutzman: So, as it relates to this part in this podcast, dealing with noncompetes and restrictive covenants, part of the consulting that I do deals with, on the front end, drafting and negotiating restrictive covenants and noncompetes with physicians. Nine times out of 10, the drafting that I’m doing is at the request of the healthcare employer. So, easy example would be, for example, a hospital that wants to bring on a physician. That’s kind of the front end contract work that I’ll do as it relates to the noncompetes.

Dana Stutzman: And then on the back end, if the relationship ends and there is a contractual restrictive covenant or a noncompete in place and the hospital or the physician practice group needs to or wants to try and enforce it, then I’ll get involved on the back end as well. Sometimes, those things can get amicably resolved through back and forth negotiations, but sometimes, unfortunately, a lawsuit actually has to get filed, meaning the employer, hospital, district practice group, they actually have to go on the offensive to try and enforce the terms and conditions of the contract and the noncompete. So, that’s kind of in a nutshell how my practice kind of flows and in particular, how the noncompete portion fits into that puzzle.

Mary Kate Liffrig: Great. Well, thank you for that context. So, you had proposed this topic today to talking about healthcare provider noncompetes. What prompted you to want to podcast on this particular topic? Is it just a worthwhile subject, or is there an update you want to report on?

Dana Stutzman: So, the short answer is yes as to both. In my home state of Indiana, there’s actually proposed legislation both in the House of Representatives and in the Senate that would make some pretty substantial changes to the legal landscape in terms of physician noncompetes and physician restrictive covenants. It’s new to the state. And so, it’s still in the works because those things that by legislature, if the laws are passed and become law, then a healthcare employer’s ability to put restrictive covenants and noncompetes into healthcare provider contracts is going to be limited. And depending on which legislation actually becomes law, it could be outright prohibited. So, that’s currently kind of in the pipeline in the works. So, that was one of the reasons why I wanted to bring up this topic.

Dana Stutzman: But then also just taking a step back, it’s a worthwhile topic to podcast about because so many of our healthcare clients invest a lot of time, money, training, and effort to try and help build up the client base, build up the physician’s practice, and that’s a protectable interest, which is something we’ll talk about in a little bit. So, just I think having a good framework, a view from 50,000 feet, would be helpful for that. So, those are the two reasons why I had asked if we could kind of put this into the queue for a podcast topic.

Mary Kate Liffrig: Yeah, perfect.

Dana Stutzman: It is probably a bit premature to comment on the Indiana legislation at this point. It’s very fluid. It’s in flux, and I think the dust won’t settle on that until the legislature closes out its session in about mid-March I believe. So, I thought, again, we could just talk more generally about healthcare noncompetes in this podcast. And then once the dust settles from a legislative standpoint in Indiana, we can do a follow-up podcast to talk more specifically about Indiana legislation, what that means, and then also provide some context in terms of what some of the other states are doing across the country.

Mary Kate Liffrig: Sounds like a plan. So, from a substantive perspective, let’s start with, could you walk us through in broad strokes what a healthcare noncompete dispute even looks like?

Dana Stutzman: Sure. And I kind of use this same example with some of the Indiana legislation that was pending, had a chance to talk with the house committee that was listening and reviewing the proposed legislation. And the example short story that I gave is this one, here. So, you have typically a dispute, it looks like this. The employment agreement is entered into between the employer, for example, a physician practice group or a hospital. And the employee typically is the physician, right?

Dana Stutzman: That contract that the parties agreed to contains salary information, benefit information, start date, but also frequently will contain noncompete provisions. More generically, I’ll sometimes use them interchangeably when I say noncompete and restrictive covenant provisions. They’re similar but not exactly the same, so for purpose of the podcast, I’ll use them kind of back and forth interchangeably.

Dana Stutzman: But noncompete specifically talks to a restriction on the ability to compete. They’re also often go hand in hand with that non-solicitation provisions, meaning you, physician, cannot solicit our patients or our clients after you leave. And also, you cannot solicit our employees after you leave. So, those are additional restrictive covenants that would be kind of tucked into an overall restrictive covenant provision of a contract. And then there’s also confidentiality provisions in there as well that say you’re not going to take our confidential patient information, our addresses, and that kind of stuff.

Dana Stutzman: So, those things often will get incorporated into a contract. Employer, employee, everybody’s aware that the restrictions are in the contract, right? It’s not like they’re printed off in invisible ink or anything like that. Contract gets signed. Physician will then work for some period of time. Maybe, it’s a matter of months. Maybe, it’s a matter of years or multiples of years. In that timeframe, the physician will accept the salary that’s promised, the benefits it’s promised, CME dollars, additional training. Perhaps, there’s tuition assistance or loan forgiveness type of benefits that are provided. So, the physician receives those benefits and then for whatever reason, will decide to quit their practice at that particular employer and move on.

Dana Stutzman: Again, in this example, I’m talking about what happens at that point is that the physician will open up shop within the restricted area or the physician will go to work for a competitor, a competing hospital, a competing physician practice group within the restricted area. And sometimes, the physician will go so far as to solicit former colleagues and patients to try and jump ship and come over to wherever the physician ultimately lands. At that point, the employer, again, hospital, physician practice group, cry foul because the physician is in breach and is violating the terms of the contract and is infringing on what the courts will call the employer’s goodwill, right, and we’ll talk about that in a minute.

Dana Stutzman: And so sometimes, when that happens, the contract has a buyout clause that says, “Well, physician, if you want to ‘buy’ your way out of this noncompete clause, then you have to pay us, the employer, a certain amount of money,” right? In those instances, if it turns into a lawsuit, it’s because the physician is arguably in violation of the restrictions in the contract and is also refusing to pay the buyout clause, right? So, that’s kind of in a nutshell what a typical physician noncompete dispute and lawsuit looks like.

Mary Kate Liffrig: So, in that situation, what would a court do, right? There’s an allegation of a breach of a contract. What are courts looking at, and what are they doing in this situation?

Dana Stutzman: Sure, that’s a good question. And what I’ll say is in the absence of legislation, meaning if you happen to be in a state like currently Indiana is, and there are lots of other states across the country that are like Indiana, meaning there is no legislation, there are no laws on the books that talk about what is okay and what’s not okay to include in a physician noncompete or a physician restrictive covenant, in the absence of legislation, there are, in my experience and in my view, like five main points, five main takeaways that kind of illustrate how the courts have handled a situation like the one that I just kind of spelled out for you, right?

Dana Stutzman: So, point number one, restrictive covenants in the employment context, meaning it’s a contractual arrangement between employer and employee as opposed to business to business, but in the employment context, restrictive covenants are viewed as restraints of trade. And they’re disfavored under the law because they’re viewed as restraints of trade.

Dana Stutzman: So, right out of the gates, the employer has a pretty heavy lift, a kind of a high hurdle to clear because the default view by the courts is, “We don’t like these restrictive covenants. We, the courts, are going to narrowly construe the terms and conditions of the restrictive covenant agreement.” And so, if it’s overbroad, it’s going to be a problem and it’s going to get shot down, right? So, that’s point number one, meaning disfavored under the law, courts narrowly construe.

Dana Stutzman: Second point is that when dealing with these disputes, courts have adopted a reasonableness standard. And they will look at these cases, these physician restrictive covenants and physician noncompete cases, on a case-by-case basis. So usually, what the courts look at is in order for a restrictive covenant to be reasonable and enforceable, the time limitations have to be reasonable. The geographic limitations have to be reasonable, and the activity restrictions have to be reasonable. And they have to be narrowly tailored to the facts of the situation.

Dana Stutzman: And so, again, when I talk about time limitations, simply put, I mean, how long has a restriction in place? Is it one year, two years, 10 years? Geographic limitations, oftentimes, it’s the scenario would be, “Physician, you cannot provide competing services within a geographic radius of 10 miles or 15 miles from where you practiced for us,” right? So, that’s a geographic restriction. An activity restriction, as the name implies, restricts the physician’s activities. What type of services is the physician restricted or prohibited from providing?

Mary Kate Liffrig: Gotcha. And so, just to put this in practice, can you give me an example of an unreasonable or an overbroad noncompete?

Dana Stutzman: Sure. And again, in states, and the vast majority of states are like Indiana and there are no legislative controls in place, and so, it’s just a function of case law, right? And so, an easy example, one that comes to mind is there was a case several years back where it was a physician practice group. They employed an eye doctor to provide, as one might expect, eye doctor type services. But the activity restriction in the doctor’s restrictive covenant prohibited him post-employment from providing medical services of any kind or character.

Dana Stutzman: And so, in that instance, the court said, “That’s unreasonable, unenforceable, because it’s overly broad.” The activity restrictions that the employer was trying to enforce were too broad because the eye doctor did not provide garden variety healthcare services or medical services for the employer. All that the eye doctor provided was eye doctor services. So, in that instance, court struck it down. It said, “It’s too broad. It exceeds the protectable interest that the employer has. Therefore, we’re not going to force this,” right? So, that’s one example of an overbroad noncompete.

Dana Stutzman: Other examples in terms of time limitations, broad strokes, one year most likely, okay. 18 months, most likely okay. Two years, probably okay. You get out above and beyond that, and you start to kind of getting into a more of a murky area of the law, right? So, if there was one that said, “For 20 years, you can’t do the type of stuff that you’re doing for us,” well, I have a pretty high degree of confidence that that would be struck down in terms of a time limitations being overbroad, right?

Dana Stutzman: And same thing from a geographic limitation, in the physician context, if you have a geographic restriction that says, “You won’t practice anywhere in the entire continent of North America,” well, most courts I think would find that to be an unreasonable restriction, especially in the instance where the employer, hospital, physician practice group, only has a market of central Indiana or Southern Michigan or something like that. So, does that help? Does that answer the question?

Mary Kate Liffrig: Yeah, it does. Thank you. And I interrupted. I think you were listing out of your five main points. Maybe, you were on point three.

Dana Stutzman: Three, that’s right. That’s right. Thank you. So, point three is, again, we’re just talking about kind of the main points that kind of come out of these court decisions, right? So, point three is that courts have recognized that hospitals, employers, physician practice groups, do have legitimate business and “goodwill interests” worthy of contractual protections afforded by these physician restrictive covenants and noncompetes.

Mary Kate Liffrig: For context, is it these legitimate business and goodwill interests that are driving the reasonable restrictions, like the time limitations and the geographic limitations, is that what essentially establishes those restrictions?

Dana Stutzman: Yeah, absolutely. Right, and so, that’s what a court will look at is, what kind of market share does the employer have? What services is the physician employed to provide? And then as a result of that, what’s a reasonable geographic scope that’s worthy of protection, right? And so, there’s this, at its core, an underlying tension between the employer and the physician employee on the key question of, well, whose practice is it anyway, right?

Dana Stutzman: And so, what the doctors will say is that it’s their practice. It’s their patients. They’re the ones that did the training. They went to medical school. They did the residency. They did the fellowship. They put in all the hard work, study time, and effort, and those are their patients that they treat. Therefore, it’s their practice.

Dana Stutzman: That is in tension and some conflict with the position that the healthcare employers take because they say, “Well, not so fast. If I’m the hospital for this practice group, it’s our practice. It’s our patient base as well. After all, we bought the land. We bought the bricks. We built the facilities. We bought the fancy laser machines. We provide the staffing. We provide the tools. We invested in your training. We invested in your advertising, the billboards, your CME. We paid off your loans. Those are all things that we did to help build up the practice. But for our investment in you as a provider, you wouldn’t have a practice to speak of, so to speak.”

Dana Stutzman: And again, very simplified examples of what I’m talking about. But at its core, that’s kind of where this tension is, right? And so the docs say, “My practice, my patients.” Healthcare employers say, “It’s our practice. It’s our patients because we’re the ones that are investing the money in infrastructure to build this up.”

Mary Kate Liffrig: Interesting. So, what have court said on that question?

Dana Stutzman: For the most part, the courts and the judges have agreed with the employers, meaning the hospitals’ and the physician practice groups’ arguments on that front. And what I mean by that is, is the courts have said that yeah, when you have a hospital that invests money in advertising, in training, in building facilities so that the physician has a place to practice, those investments are in fact worthy of protection. That is the goodwill, right? Those patient lists, the electronic medical records, the data, those are all worthy of protection. And so, as long as the restrictive covenant is narrowly tailored to protect those goodwill interests, then the courts will uphold it, right? So, I think that was point three talking about legitimate business interests that the employers can protect by way of these restrictive covenants.

Dana Stutzman: The fourth point out of five, the fourth point is that courts have also recognized that money is not always going to be the thing that cures all evils, meaning money is not always going to be an adequate remedy in a physician noncompete dispute. And when the money isn’t enough to make the employer “whole”, then the courts will issue the injunction, right? And all that an injunction is, is a court, basically, it’s a full stop order. Court says, “In an order to the practitioner physician, thou shalt not practice within so many miles of the hospital and for so many months,” right? So, that’s what an injunction basically means.

Mary Kate Liffrig: Can you give us an example of when money wouldn’t be enough to make someone whole?

Dana Stutzman: Sure. Yeah. This is a key point, especially if you are an administrator at a hospital or administrator of a physician practice group. This is the key point, and this is a subtle one because a lot of times, especially an example where an employment contract has a buyout clause that a physician, if you pay X number of dollars, we will let you out of this contract or we will let you out of the restrictive covenant, the tough spot that the employer finds itself in is in the instance where there’s a buyout physician leaves practice, and let’s hypothetically say, opens up shop right across the street. Employer sends a letter. It says, “You’re in violation. You need to stop. And also, you have a buyout, and you need to pay us.”

Dana Stutzman: Well, in those situations, a lot of times, the doctor continues to operate across the street and is unwilling to pay the money. So, employer is left with really no recourse other than to go into court and try and get an injunction to shut down the physician’s practice. At that point, a lot of times, what the physician’s attorney will do is tell the judge, “Judge, this contract has a buyout provision in it. Therefore, money will make this situation go away. Therefore, Judge, you shouldn’t issue the injunction because money will solve this problem.” Because, just backup real quick, courts will not issue an injunction if a monetary remedy will suffice, okay? So in that situation, what the employer has to do is say, “Well, Your Honor, we tried to get the money, but the money has yet to be paid, which is the whole reason why we’re here in the first place,” right? So, that’s point number one, physician is still competing and physician also hasn’t paid the money.

Dana Stutzman: But the other reason why, like I said, money is not always going to cure all evils is because in that scenario that I just described, right, where you have a hospital, let’s say, it’s the only hospital within a geographic region and the physician leaves and goes across the street, you now have another player in the marketplace who otherwise should not be there. And so yes, given enough time, the hospital would be able to show how many patients went over to the competing physician. They could show how many employees left the hospital to go over to work with the competing physician, right?

Dana Stutzman: So yes, there, you could quantify damages, but the impossible task is to determine how much loss of potential new revenue, potential new patients were diverted over to this physician’s competing practice. That’s the part where it’s impossible to quantify, right? Because again, potential new business means that, well, if I’m the hospital, “They weren’t our patients yet. We were hoping because we’re doing our advertising in our geographic area, we’re hoping that they were going to come over and treat with us and utilize our services. But now, court, because we have this unauthorized provider, this unauthorized player in the marketplace, we have no idea of how many patients and how many clients are being diverted over to that competing practice. For that reason, because we can’t quantify that, we have no way to determine how much money potentially we’re losing. That’s why, court, we need you to issue the injunction to shut down that practice so that the physician honors the terms of the restrictive covenant,” right? So, that’s kind of the long-winded answer of when the money isn’t going to be an adequate make-whole remedy.

Dana Stutzman: So, we kind of walked through four of the main takeaways, which just leaves the last and final point. And that has to deal with kind of the public policy considerations that go into physician noncompetes, physician restrictive covenants. The battlegrounds here basically look like this, physicians for probably decades have attacked physician noncompetes and restrictive covenants on public policy grounds, meaning they’ve taken the position that when it comes to physicians, noncompetes and restrictive covenants are unique and should be found per se, meaning on their face, unlawful because it’s not just dealing with employer and employee interaction as might be the case with, I don’t know, a salesperson, right?

Dana Stutzman: But when it comes to a physician and hospital or a physician and healthcare employer, the restrictive covenant interferes, so the argument goes, with the physician-patient relationship because it could potentially arguably disrupt continuity of care if physician leaves from one location, wants to go to a competitor. What the physicians have said is, “It’s not good for policy because that’s going to restrict the patient’s ability to continue treatment with the physician of their choosing,” right? So, that’s what the physicians have argued.

Dana Stutzman: I have actually heard a number of times, in fact, most recently, at one of the committee hearings over in the Indiana legislature, one of the doctors kind of refers to the fact that he was under a restrictive covenant. He referred to himself as an indentured servant. So, I appreciate the advocacy there, but I do think that that one is bit of a stretch, right, I mean especially because providers do great work, physicians do great work, and they’re often well-compensated. And so, indentured servant who is earning upwards of, I don’t know, depending on the specialty, what, $300, $400, $500 million a year, I don’t know that, really, that argument plays so well.

Dana Stutzman: But in any event, that’s what the physicians have argued is that it impacts in a negative way the physician-patient relationship. Most courts across the country when faced with that argument, they do find there is some viability to it. But at the end of the day, the courts typically strike it down, which in fact, again, in Indiana in the Indiana Supreme Court has done just that. They’ve rejected that public policy argument that the physicians put forward twice before. The first time was back in early 1980s, and the second time was more recently in 2008.

Dana Stutzman: And the reason why the courts, for example, the Indiana Supreme Court, struck down this public policy argument that the physicians are arguing and putting forward is basically twofold. First they, the courts, said that the public’s general interest in medical services is subservient to the public interest in the freedom of individuals to contract. Translated, that means there is a more compelling policy argument that society functions best when it can rely on legally enforceable contractual agreements, right? So, if you sign the contract, then you’re contractually obligated to honor its terms. And if you didn’t like the terms of the noncompete or the restrictive covenant, then you should have either A, negotiated a different deal or B, not signed the agreement in the first place, right?

Dana Stutzman: So, again, that’s just kind of a watered down simplified version of what the courts have done in terms of why they’ve thus far have not bought into the public policy argument, right? So, like I said, the courts have basically held freedom of contract at a higher level from a policy standpoint than the physician-patient relationship argument that the physicians are putting forward.

Dana Stutzman: And then the second piece, and this is, again, kind of practically speaking wraps up this conversation, wraps up this podcast for now, what the courts have said is, “Hey, when it comes to public policy arguments in terms of what the physicians are arguing and when we have to balance, okay, freedom of contract versus the arguments that the physicians are making, those balancing decisions when it comes to public policy are better left to the legislature, right? So, if the legislature wants to make some laws along public policy lines, then the legislature is free and clear to do so.”

Dana Stutzman: Indiana, like I said, is in the process of doing just that. Other states, I have to double check the data on this. I have some outdated data from one of the cases that I researched before this podcast. But back at the time around 2008, there were only three states, only three out of 50, only three states that had, I think, physician restrictive covenant laws on the books. My sense is that since that timeframe, 2008, that number has increased. And I feel very strongly that that number is most likely going to keep increasing, meaning there are going to be more and more states that will be passing legislation to restrict the employer’s ability to implement restrictive covenants when it comes to physicians and healthcare providers.

Mary Kate Liffrig: Great. Well, this has been really helpful framework and very helpful information. We started this conversation talking a little bit about this proposed legislation in Indiana in particular, and then we’ve just looped around to it again. Just for our listeners in Indiana, can you give us a sense from a timing perspective of what we should expect since you’ve mentioned that this is an issue that the legislature is currently considering?

Dana Stutzman: Yeah, and so, don’t 100% quote me on this, but I do know that in Indiana, it’s a, I think, what they call the short session this year, which means, I think, that the legislature is going to be wrapping up its legislative duties and legislative stuff around mid-March. So, whatever legislation makes its way into becoming a law would then become effective July 1 of 2020. So, short answer is we’ll have a lot more clarity in terms of how things are going to shake out in Indiana by mid-March. And so, I think the plan is to do a follow-up podcast to talk more specifically about the Indiana changes and then also to try and kind of wrap in and tie in some additional commentary about what we’re seeing in other states across the country because obviously, we recognize that our client base in terms of Hall Render is more than just Indiana, right? So, by mid-March, we should have a better sense of the lay of the land, and we’ll be able to talk about that.

Dana Stutzman: And then whatever happens, if there is going to be something that happens and becomes law, it takes effect on July 1 of 2020. So, we’ll have a couple of months to pick it out in front of it, to talk about it, plan it, and then we’ll also figure out, again, depending on what kind of legislation passes, is the legislation effective July 1 of 2020 on a going forward basis? Does it affect all contracts regardless of when they were entered into? So, those are some of the details that we’re continuing to monitor.

Mary Kate Liffrig: All right. Well, Dana, thank you for your time today, and as a reminder to our listeners, for more healthcare employment law content, please visit our website at hallrender.com and please subscribe to our podcast. And if you’d like to be added to our monthly newsletter, feel free to send me an email at [email protected] or contact your regular Hall Render attorney.

In this episode, we discuss what constitutes protected activity under the National Labor Relations Act, in the context of profane or offensive speech, and how that standard may be changing.

Attorney with Hall Render.

Attorney with Hall Render.

-Coming Soon.-

Mary Kate Liffrig: Hello and welcome to Hall Render’s HR Insights for Healthcare Podcast, covering labor and employment law cases and trends for professionals working within the healthcare industry. I’m Mary Kate Liffrig, and I’m an attorney with Hall Render, the largest healthcare-focused law firm in the country. I’m here today with my colleague, Brad Taormina. Brad and I both practice labor and employment law and regularly advise healthcare clients on a variety of labor and employment law topics. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice. Brad, thanks for being here today. Before we dive into the substantive portion of our podcast, can you tell me a little bit more about your practice?

Brad Taormina: Sure. Thanks Mary Kate. My practice is focused on labor and employment with a particular concentration on traditional labor issues. Generally, this includes union management relations, collective bargaining, unfair labor practices, labor arbitration and litigation between unions and employers.

Mary Kate Liffrig: Well, perfect. So today we’re going to be talking about something that’s right up your alley, protected activity under the National Labor Relations Act in the context of profane or offensive speech. Can you give us just the basics on the National Labor Relations Act and its protections for employees?

Brad Taormina: Sure. The NLRA is a federal law that applies to private sector employers with or without unions. The act grants employees the right to organize, the right to bargain collectively, and the right to engage in protected concerted activity. That last protection, the protected concerted activity is what leads to the topic that we’re going to discuss today and also leads to a lot of the litigation at the board and generally that allows employees to discuss and complain about the terms and conditions of their employment.

Mary Kate Liffrig: What is the current standard used by the NLRB for deciding whether offensive or profane comments by workers are protected as protected concerted activity under this federal labor law?

Brad Taormina: Well, it actually depends on whether the offensive or profane comments are communicated between an employee and a manager or supervisor or whether those statements are made by one employee to another. So in the context of an employee making comments to a manager or supervisor, the board uses a standard that came out of a case called Atlantic Steel. We call them the Atlantic Steel factors. Those four factors are the location of the activity, where were the statements made, the subject matter of the activity, the nature of the employee’s outburst, and whether the outburst was in any way provoked by an employer’s unfair labor practice. So those are the four factors that the board weighs. The more employees that are around or within earshot of the comments, the less likely they are to be protected.
The context of the conversation, it’s more likely to be protected if it’s taking place on a picket line or in the context of an organizational campaign, less likely to be protected if it’s an employee just airing an individual gripe to a supervisor in the middle of the shop floor. 

Mary Kate Liffrig: And under this Atlantic Steel… oops, sorry. Go ahead.

Brad Taormina: If the statements are made by one employee to another employee, it’s a different standard that they use. The board uses a totality of the circumstances analysis and so this analysis encompasses those four same Atlantic Steel factors, but then also considers a number of other factors, whether the employer maintained a rule prohibiting the language, whether the employer generally considers that language to be offensive, whether the statement was impulsive or deliberate, and some other similar standards.

Mary Kate Liffrig: Great, thank you. So under the Atlantic Steel standard and the totality of the circumstances standard, generally speaking, were we seeing that a lot of profane and obscene language was being protected as protected concerted activity or was it applied pretty rigorously such that a lot of that conduct was not protected?

Brad Taormina: Yeah, it was the former. We were seeing that the overwhelming majority of these issues and these cases resulted in the board holding that the comment and the activity were protected. So we had some cases and some of the cases were cited by the board and their invitation to submit briefs in this case, but we saw some pretty egregious cases where employees were making very offensive and egregious comments including comments that could easily be considered to be sexually offensive and racially offensive. And the board was holding that those comments were protected or did not result in losing the protection of the act.

Mary Kate Liffrig: My understanding is that the current standard is under review by the NLRB. And Brad, that’s something you’ve alluded to already during this podcast. Can you tell me about the General Motors case that’s pending right now?

Brad Taormina: Sure. So the complaint issued in the pending case alleged that the employer violated the act by suspending an African American shop steward three times for his conduct in the course of meetings with management. One of the incidents was for cursing out a manager during a contract dispute. One of the incidents was for speaking in what was described as a mock slave voice during an argument with management. And the third incident was for telling a manager that he would quote, ‘mess him up’, unquote, and playing loud rap music with offensive lyrics during a union management meeting. So the case was heard by an administrative law judge.

The ALJ issued a decision finding that the loud offensive music and the mock slave voice lost the employee the protection of the act, that those actions were not protected. And also held that the profanity during the contract dispute with management did not lose the employee the protection of the act. Both parties filed exceptions to the ALJ’s decision, which is how it ended up in front of the board. The board invited interested parties to file briefs in the case and specifically raised the issue of whether individuals who engage in profane outbursts or offensive statements or conduct of a racial, sexual, or otherwise discriminatory nature in the context of NLRA protected activity, whether they lose protection of the act.

And along with that, whether the board should overrule the standards that it currently applies to analyze these questions.

Mary Kate Liffrig: So who has weighed in thus far and what are they advocating for?

Brad Taormina: So a lot of parties have weighed in. There have been a lot of briefs filed. And as you can imagine, there’s a wide range of things being advocated for. Relevant to us, we’ve seen the EEOC weigh in, we’ve seen the American Hospital Association and the Federation of American Hospitals weigh in. And of course we’ve seen the general council for the NLRB has weighed in.

Mary Kate Liffrig: What is the general counsel’s position for what the standards should be in this type of situation?

Brad Taormina: So the GC for the NLRB has argued that the protections under the NLRA should not be interpreted to override or supersede protections provided by the relevant anti-discrimination laws and essentially that the board should overrule current precedent to clarify that employers are allowed to take corrective action concerning harassing conduct in the workplace even if it occurs in the context of otherwise NLRA protected activity.

Mary Kate Liffrig: Oh, interesting. And so you said the EEOC has weighed in as well, since this has to do with delving into the EEOC’s sphere and what counts as discriminatory or abusive language, what’s their position?

Brad Taormina: The EEOC has taken a position fairly similar to that of the GC’s position. The EEOC brief does not argue what standard the board should use or adopt. The EEOC brief first sets forth an explanation of Title VII’s protections and prohibition on harassment. And then similar to the GC, the EEOC brief takes the position that given that employers must address racist or sexist conduct that violates Title VII and may need to do so before the conduct even becomes actionable under Title VII. The EEOC urged the board to consider and adopt a standard that permits employers to address such conduct, including by disciplining employees as appropriate.

Mary Kate Liffrig: Well, interesting. Just from a logical perspective, I can see that employers would be in a difficult position if they were not permitted to take adverse action against an employee who was using language that would be considered harassing or otherwise profane and making other employees uncomfortable. Right? Because we’ve got an obligation to protect our employees and also an obligation to workers to allow them to engage in protected concerted activities. So it’s an interesting question that they’re grappling with. So what about the American Hospital Association? I think you said they also submitted a brief.

Brad Taormina: So the AHA and the Federation of American Hospitals filed a brief to also support overruling the current precedent used by the board asking the board to harmonize the NLRA’s protections with the relevant anti-discrimination and anti-harassment laws similar to what we saw from the GC and the EEOC. But in addition to that, the AHA brief emphasizes the special considerations in the healthcare environment and argues that the board should adopt a modified standard for healthcare settings under which employee conduct that occurs in that setting and that also violates a lawful rule of the employer is not presumptively protected by the act. So this specific healthcare standard that the brief is arguing for would provide more discretion to healthcare employers beyond conduct that could be viewed as discriminatory or harassing and would arguably cover any conduct that violates a lawful employer rule.

So this presumably includes rules against insubordination, solicitation in patient care areas, code of conduct, and other common workplace rules.

Mary Kate Liffrig: Are there groups that advocated to maintain the status quo? I think what we’ve talked about thus far, all of the groups you’ve mentioned are in favor of modifying the standard.

Brad Taormina: Yes, there are of course groups on the other side. Pro labor groups on the other side are advocating to maintain the current precedent.

Mary Kate Liffrig: Got it. So obviously we don’t know what the outcome is going to be here, but looking into your crystal ball, Brad, what’s your sense of what might be coming?

Brad Taormina: Sure. We have a lot of employer friendly decisions that have been issued recently by the current board and I think it’s a pretty safe assumption that our current board is going to likely overrule the current precedent and is going to establish a standard similar to that that the general council is advocating for. So I think we’re likely going to get a standard that protections under the NLRA will not override or supersede protections provided by the anti-discrimination laws and that employers don’t violate the act when they take corrective action against employees for engaging in conduct that could be viewed as contributing to a hostile work environment.

Mary Kate Liffrig: So do you think the healthcare industry is likely to get its own standard?

Brad Taormina: I hope so. I think we’re definitely going to continue to advocate for special consideration for healthcare employers. And I think a lot of the interested groups will continue to advocate for a special standard. We’re not likely to get that standard in this case because it’s not a healthcare employer or a healthcare setting that is currently at issue in this case. So I think we’d be unlikely to have that standard established in this case. But in the past, the board and the courts, including the Supreme Court, have consistently recognized that there are special considerations in healthcare, that the primary function in a healthcare setting is patient care and that there are realities and considerations that need to be taken into account when they’re applying these rules in a healthcare setting.

So I think it is likely down the road that in a relevant and applicable case, we have a good chance of getting a broader and special rule for healthcare employers in healthcare settings.

Mary Kate Liffrig: So Brad, any final thoughts?

Brad Taormina: Yeah, thanks Mary Kate. I’d just like to mention again, and I briefly mentioned this in the beginning, but just as a reminder, these rules that come out of these cases and the National Labor Relations Act itself applies to private employers with or without unions. So whether or not your employees are represented by a union or covered by a collective bargaining agreement, these same rules do apply. So it’s good for all private employers covered by the act to be aware of these rules and these changes in precedent.

Mary Kate Liffrig: Well, great. Well, thank you so much for joining me today. This has been really helpful. As a reminder to our listeners, for more healthcare, labor, and employment law content, please visit our website at hallrender.com. And please subscribe to our podcast. If you’d like to be added to our monthly newsletter, please feel free to send me an email at [email protected], or you can contact your regular Hall Render attorney.

Mary Kate Liffrig focuses her practice in the area of labor and employment law, with an emphasis on counseling employers through all areas of the employment relationship.

Dana Stutzman counsels a diverse group of employers and health care clients in numerous aspects of employment and labor law, health care regulatory matters and issues specific to the behavioral health industry.

Kevin Stella serves as the firm’s hiring partner and chair of the human resources committee. His practice is focused on labor and employment law, with an emphasis on employment issues facing health care clients. 

Mary Kate Liffrig: Hello and welcome to Hall Render’s HR Insights for Healthcare podcast, covering labor and employment law cases and trends for professionals working within the healthcare industry. I’m Mary Kate Liffrig.

Dana Stutzman: And I’m Dana Stutzman.

Liffrig: Dana and I are attorneys with Hall Render, the largest healthcare-focused law firm in the country. We both practice employment law and regularly advise healthcare clients on a variety of labor and employment law topics. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice.

Stutzman: Mary Kate and I are here today with our colleague, Kevin Stella. Kevin is a shareholder in our Indianapolis office and he practices labor and employment law. Kevin, thank you for being here and I was wondering if you could just start with an overview, if you will, of your practice and what it looks like on a day-to-day basis.

Kevin Stella: Yeah, thank you both for having me. As you said, I practice labor and employment law here at Hall Render. I’ve been here 18 years and more, and I practice on a day-to-day basis labor employment law and work with healthcare human resource folks in hospitals, physician practices, other healthcare-related entities, and the the work I get to do ranges from hire-fire handbooks, policies, agreements, FMLA, ADA, leave of absence issues, which we’ll talk about today specific to pregnancy. And so it’s been a very enjoyable practice and very fortunate to have the clients I get to work with.

Stutzman: Wonderful. All right, thank you for that. Now, let’s get to it. Let’s get into the weeds a bit. Today we are going to talk about the federal Pregnancy Discrimination Act, sometimes referred to in shorthand as the PDA, and recent cases and EEOC enforcement actions related to accommodating pregnant workers. I know personally this is a topic that I have started fielding questions on more and more frequently over the last couple of years. Kevin, as a starting point, I was wondering if you could just give us a quick description of what the Pregnancy Discrimination Act is and what it requires of employers to do in a very general sense.

Stella: Sure. So the Pregnancy Discrimination Act, as some of our listeners may know, it was passed in 1978 and it was passed to make clear that Title VII of the Civil Rights Act prohibits discrimination based on pregnancy, based on childbirth, as well as related medical conditions, that that would all constitute sex discrimination under Title VII. And so when we talk about pregnancy, it would obviously be current pregnant employees are protected, as are employees who had a prior pregnancy or who may intend or want to become pregnant in the future. And then on the medical condition side, if an employee is pregnant and there are medical conditions related to that pregnancy, they can be protected for that as well.

Stella: And that could be things like gestational diabetes or preeclampsia or other medical conditions that may be related to pregnancy. And so employers, what the PDA says is employers cannot take adverse employment action or treat pregnant workers or those who are described less favorably than those who are not pregnant. At the end of the day, women who are affected by, again, pregnancy, childbirth or those related medical conditions, they have to be treated the same as other persons who are not affected by pregnancy or childbirth or medical conditions, but similar in their ability or inability to work. That’s the crux of what we’re talking about.

Liffrig: Kevin, thank you for that explanation. So it sounds like the PDA is fairly broad and it prohibits discrimination just like any other protected class under Title VII. So just like we can’t discriminate against an employee because of their sex or religion or race, we can’t discriminate based on pregnancy. But I think one of the most interesting things about the PDA is the obligation to accommodate. Can you tell us a little bit more about what’s required with regards to accommodation of pregnant workers?

Stella: Sure, so again you can’t treat them less favorably, and so if you have a class of employees, non-pregnant employees, who are afforded certain accommodations, pregnant employees, to the extent that they’re similar in their ability or inability to work as those non-pregnant employees, should be afforded the same accommodation. And where this is really a very good example of this, and where it has come to a head more recently is in a Supreme Court case from 2015. It’s the Young vs. UPS and it illustrates that point very well. I’ll provide you a few specifics on that. This was a case where UPS, as many employers do, they have a light duty program, and when we talk about light duty, what we mean by that is if an employee for some reason has certain restrictions or cannot do certain aspects of his or her job, a light duty program then would allow that person to perhaps move to a different job entirely for some period of time to accommodate those maybe physical restrictions that he or she has.

Stella: And so UPS had a light duty program. Sometimes healthcare employers call it transitional duty, so transitional duty, light duty, kind of the same thing. So UPS had a light duty program and it was only available to three categories of workers. The first category were drivers, UPS drivers, who had become disabled on the job. If they’d become disabled on the job, like a work-related injury, then they would be eligible for a light duty work opportunity at UPS. The second category were employees who had lost their Department of Transportation certification. They could have a light duty job. The third category were employees who suffered a disability under the ADA. And so what’s missing in that category is obviously pregnant workers. It’s not one of the categories of workers who could receive light duty. And so there was a female driver, a pregnant driver at UPS, who her physician issued lifting restrictions.

Stella: As a result, she could not perform all of her duties as a driver, but yet was not eligible for light duty work. And so she brought a lawsuit because of that and said, “Hey, this is not right. This is not fair that I am being treated differently than these other three categories of non-pregnant workers.” Now historically, when I first started practicing law in 2002, we would rationalize treating a pregnant worker different. We would say, “Okay well look, if we are only,” for example, UPS did this, “We are only going to afford light duty work to those who are injured on the job. Those who are not injured on the job, they don’t get light duty. Maybe they go out on FMLA leave, maybe they get some other type of leads, but they’re not going to get a light duty position. And as far as pregnant workers, we’re going to treat them the same as those non-pregnant employees who are injured off the job. Therefore, we’re not treating them unfavorably.”

Stella: But UPS has kind of turned that on its head, and ultimately the court came down and said, “We’re not outright prohibiting or banning light duty programs that aren’t afforded to pregnant workers. However, if those policies impose a significant burden,” that’s the key phrasing from the case, “If those light duty policies, for example, impose a significant burden on pregnant workers, then we’re going to significantly question whether that’s legal or not.” And in essence, they have made it, they being the Supreme Court, in this ruling have made it much easier for a pregnant worker to prevail on the argument that she should be afforded in this case light duty, that she should be afforded the same light duty opportunities as a non-pregnant worker who is unable to perform his or her job.

Liffrig: That’s really interesting. To your point, I mean pre-Young vs. UPS, the rule was that the PDA just required an employer to be essentially pregnancy blind, right? So ignore the employee’s pregnancy, treat that employee the same as it would if she were not pregnant. And so now it sounds like you’re saying the Supreme court ruling in Young vs. UPS has maybe made it a little bit harder to make that point to show that a policy is pregnancy blind because of this substantial burden.

Stella: That’s right. And I would actually say a lot harder, a lot harder. And we’ve seen an increase in activity and interest from the plaintiff’s bar, from the EEOC in challenging these types of programs and policies. For example, recently Walmart settled a pregnancy discrimination suit, a class action for $14 million. That’s a big number, and the basis of that case is very similar, if not the same as, what we’re talking about or what I’ve described with UPS. It is around an employer’s, or Walmart’s in that instance, practices and policies that were afforded to non-pregnant workers but not to pregnant workers. Healthcare specifically, the EEOC seems to have taken an interest. There have been … well, I’ve mentioned the UPS case of course. In 2015 the Supreme Court really remanded that case back to the lower courts in light of its ruling to say, “Okay, lower courts, you apply this ruling now. Now that we’ve given you the framework with which to rule on this case, go forth and rule on the case.”

Stella: Well, not surprisingly, that case has settled. UPS has settled that case for $2.25 million. And then the healthcare side, I mention healthcare specifically, we’ve seen a number of claims brought, litigation brought by the EEOC against healthcare entities around things like light duty programs, as well as leave programs, where sometimes employers will offer leave from work, maybe even beyond or outside of the FMLA, but pregnant workers may not be entitled to them. So there’s been a focus on this issue and even more so a focus, I believe, by the plaintiff’s bar and certainly the EEOC on healthcare specifically.

Stutzman: Kevin, the topics that you’ve brought in, that you raised here just a couple of seconds ago about light duty, concept of light duty, concept of leave, in my mind those often go hand in hand with the ADA, the Americans with Disabilities Act. So I’m wondering if you could talk briefly about how the ADA comes into play here in the PDA arena. I recall, maybe a decade ago or so, there was case law that suggested that pregnancy in and of itself without additional complications was not a disability under the ADA. The question now, given Walmart, given Young, given uptick in EEOC enforcement, is that still good law? Is it still pretty solid ground for an employer to take the position that pregnancy by itself does not equal a disability under the ADA?

Stella: Well, as you said, it’s a changing landscape for sure. It’s a changing landscape. A side commentary, I think the workplace obviously is evolving as it always has. There are more progressive policies, more progressive ways in which we’re trying to accommodate workers, and I think the courts are evolving that way too. That all said, generally I would still say that a normal pregnancy is not likely to be a disability under the ADA. But again, it’s a changing landscape and we have to be very aware and attuned to that. Secondly, many times it’s not a normal pregnancy. There can be the preeclampsia, the gestational diabetes. We know that when the ADA was amended back in 2009 that what constitutes a disability anymore is very … is intended to be interpreted broadly. So when you start talking about medical conditions related to pregnancy, it very easily could become an ADA-protected disability as well.

Stella: And so to your point, we’re having to be very mindful of not just the PDA but the ADA. So the other comment I have on that is this. I have, over the last several years, more and more I feel like we’re getting calls from clients where it’s a what otherwise seems to be a normal pregnancy of an employee, and in the healthcare setting it often is a bedside nurse or some other healthcare worker in which there’s some physical demands, physical requirements of the job, and what otherwise appears to be a normal pregnancy. But the physicians are issuing lifting restrictions, 20, 25 pound lifting restrictions. Maybe that’s in an effort to certainly protect the mother and the unborn child, or maybe it’s done in an effort to protect the physician from liability, him or herself.

Stella: But it adds a layer of complication to the analysis because you have maybe a normal pregnancy, maybe we don’t have any reason to believe or know why the restrictions were issued other than just a precaution. But now we have to analyze whether or not that individual, that pregnant worker must be accommodated. If you have a light duty program, is that person entitled to a light duty position, or is that person entitled to some leave if they can’t do the lifting? Is the lifting an essential function of the job? It’s an analysis that we have to look at individually, an analysis that I encourage our clients to reach out to their legal advisors to think through, because it is, as I said, it’s a changing landscape.

Liffrig: So along those lines, Kevin, in light of the Pregnancy Discrimination Act and in light of the Americans with Disabilities Act, what is your advice to employers to help ensure compliance as it relates to accommodating pregnant workers?

Stella: Well, the first thing, and hopefully just by listening to this podcast, I think that’s a big step, is to understand the changing landscape, to understand the law and these protections. Probably simply stated, the protections today are greater than what the protections were 10, 15, 20 years ago. These laws are just being interpreted to protect workers, which is not a bad thing. That’s not a bad thing. So that’s certainly step one, understand, have your radar up when these issues come across your desk. And how you used to handle them may not be how you need to handle them, so seek advice. Number two, specific to light duty programs, if a client has a light duty program, either formal or informal, it is important to review it. It is important to review it against the backdrop of that UPS-Young holding.

Stella: We know there’s now a significant burden that employers carry to demonstrate that a light duty program is not discriminatory against pregnant workers. Does your light duty program pass that test? They need to be taken off the shelf and reviewed and studied and as you both know, a lot of times a light duty program is not formal. A lot of times a light duty program is what that department director or that floor manager has decided. This month, maybe it was a something that they were able to offer light duty to an employee, but six months from now they don’t want to offer light duty. So where those practices are not as formal, it’s important for employers to really get a command of what’s happening out there in the departments, on the floors, on the units, and considering is that, again, against the backdrop of UPS and Young, are we in a defensible position? So education, review your policies, train your managers and supervisors, and again consult with legal counsel if you have questions.

Liffrig: And what about … I guess this might be an opportunity to also just remind our listeners that there are state laws that may also impact this analysis and so employers should also be reviewing their state laws, understanding what those are and how they may differ from federal law as they develop their policies.

Stella: That’s a great point. Along that line of changing landscapes, states, and even some instances, local government are passing additional family leave laws and rights for workers as it pertains to just leave and work life balance generally. So, be mindful of those developments.

Stutzman: Okay. Kevin, in closing, I wanted to thank you for joining Mary Kate and for joining me on the podcast. It’s been very helpful. And as a reminder to our listeners, for more healthcare employment law content, I’m encouraging you to please visit our website at hallrender.com, and please feel free to subscribe to our podcast. If you’d like to be added to our monthly newsletter, please feel free to send me an email directly at [email protected], or you can reach out to your regular Hall Render attorney.

In this episode, we discuss the impact of the Final Overtime Rule, which impacts the minimum salary threshold for exempt employees under federal wage and hour law. 

As a shareholder with the firm, Dana Stutzman counsels a diverse group of employers and health care clients in numerous aspects of employment and labor law, health care regulatory matters and issues specific to the behavioral health industry. He is a trusted advisor and confidant. He advises management and health care clients on a wide variety of regulatory issues, from discipline and discharge matters to privacy, professional staff and physician contracting matters.

Mary Kate Liffrig focuses her practice in the area of labor and employment law, with an emphasis on counseling employers through all areas of the employment relationship. She counsels clients on a wide variety of employment law issues, such as hiring and disciplinary matters, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family Medical Leave Act, wage and hour issues, handbook and policy review/creation and employment contract drafting and negotiations.

Dana Stutzman: Welcome to Hall Render’s HR Insights for Healthcare podcasts covering labor and employment law cases and trends for professionals working in the healthcare industry. My name is Dana Stutzman, and I am an attorney with Hall Render, the largest healthcare focused law firm in the country. I’m here today with my colleague, Mary Kate Liffrig. Mary Kate and I both practice employment law and regularly advise healthcare clients in a variety of labor and employment law topics. Please remember that the views expressed in this podcast are those of the participants only and do not constitute legal advice.

Today we’re going to talk about a topic both near and dear to my heart, the federal Fair Labor Standards Act which many of you in the biz know is a federal wage and hour law commonly referred to as the FLSA. Let’s get down to brass tax. The US Department of Labor issued a final rule in the fall of 2019 that went into effect on January 1st. Let’s just start with a couple of general questions about the FLSA generally and then more specifically about this final rule.

Mary Kate, can you give us just a few of the basics about what the final rule is and what it requires? Please.

Mary Kate Liffrig: Absolutely. In September of 2019, the Department of Labor issued a final rule increasing the salary thresholds under the FLSA for exempt employees.

Stutzman: Perfect. That’s a wrap. That’s all we have time for … No, I’m kidding. I’m kidding. All right. Let’s drill down on this just a little bit more. Can you just give a bit of a primer on federal wage and hour law as background?

Liffrig: Yeah. Very generally speaking, the federal Fair Labor Standards Act governs minimum wage and overtime. So covered nonexempt employees are entitled to minimum wage of $7.25 per hour and are entitled to overtime at time and a half for hours worked over 40 in a work week. Quick disclaimer, many states have enacted their own wage and hour laws that could be more favorable to employees than the Fair Labor Standards Act. So certainly employers should be aware of the laws applicable to them.

Sticking just with federal law, the FLSA really only requires that employees receive minimum wage and overtime guarantees, but certain employees can be exempt from these requirements. When we refer to exempt employees, that’s who we’re referring to. In order to be exempt, from these minimum wage and overtime requirements, they have to meet very specific exemptions that are outlined in the regulations.

Stutzman: Okay. Can you give us just a few examples of these exemptions that you’ve referred to? Again, we’re talking federal law, FLSA. Can you provide us just a couple of exemptions by way of example?

Liffrig: Yeah, so the most common that we see in the healthcare industry are probably the executive, administrative, and professional exemptions. Then somewhat less frequently, but still with some regularity, the highly compensated employee exemption, and these exemptions have both a salary basis component, that is in order to be considered exempt the employee has to be paid on a salary basis at a minimum threshold set by the Department of Labor, and they all also have a duties component. They have to perform certain exempt work.

Stutzman: Okay, so that’s helpful. As I kind of think about it in my mind’s eye, Fair Labor Standards Act, two basic types of workers. You have on the one hand nonexempt employees, and then on the other you have exempt employees. Nonexempt employees are commonly, although technically it’s not accurate, but commonly referred to as hourly workers, hourly folks, and exempt workers are commonly, again technically it’s not accurate, but they’re referred to as salaried workers.

Because we want to be precise, we’re going to use the technical terms exempt and nonexempt. Nonexempt employees have to get paid at least minimum wage, and they’re entitled to certain overtime guarantees. Is that right?

Liffrig: Yep, you got it.

Stutzman: Okay. Then, on the other hand, you’ve got exempt employees who are exempt from minimum wage and overtime requirements. If I am an exempt employee and I work 55 hours in a work week, I should not be paid and I shouldn’t anticipate getting paid overtime for those 15 hours that I’ve worked over 40. Again, do I have that right, and am I thinking of this in the right way?

Liffrig: Yep, you sure are. So we’re talking about, just as you said, who is exempt from minimum wages and the overtime requirements that you just succinctly explained.

Stutzman: When we look at the boxes that have to be checked in order to be exempt, basically you have two things to be an exempt employee under the FLSA. First, you have to be doing exempt duties meaning the type of day to day activities that you carry out in your job have to be considered exempt duties, and there’s a bunch of regulations that talk about that.

Then also there is a pay threshold, a salary threshold, that also has to be satisfied in order to be considered exempt. Is that right?

Liffrig: Mm-hmm (affirmative).

Stutzman: And as you pointed out earlier, this is we’re only talking right now today about the federal side of the house. We’re not talking about state laws. So this is just a federal thing, is that right?

Liffrig: Yep. Many states have adopted laws that set higher minimums wages or set different requirements for exemptions, and so employers just need to be able to comply with both state and federal law in those instances, and certainly, we’re not going to get into that nuance here. We’re just talking FLSA.

Stutzman: Let’s go back and drill more specifically into this final rule, how it comes into play. I think you said that the final rule increased the salary threshold under the FLSA for certain exempt employees. Can you walk me through what that means exactly?

Liffrig: The new rule says that in order to be considered exempt from overtime, employers have to pay their professional, executive, administrative, and salaried computer employees a minimum of $684 per week or the equivalent of $35,568 annually. That’s up from the prior minimum salary of $455 a week or $23,660 annually. Employers are allowed to meet 10% of these salary minimums with nondiscretionary bonus payments and incentive payments.

Then the other change that the final rule makes is increasing the minimum salary requirements for this special class of exempt employees that we call highly compensated employees or HCEs. Previously the minimum salary requirement for HCEs was $100,000 annually, and that’s up to $107,432.

Stutzman: Let me jump in again because there’s a lot of numbers and there’s a lot of data there. Let’s try and maybe simplify it out a bit. Let’s just use one exemption as an example. It doesn’t matter. It can be executive or administrative, whatever. We have exempt duties, and what we’re talking about is the pay component, and it sounds like the new rule increased the salary up to $684 per week which is equivalent to $35,568 on an annual basis. Is that right? Do I have that straight in my head?

Liffrig: Yep, that’s exactly it. Just again to drill down on the details here, if we’re looking at the executive employee exemption just an example, if you’re going to be exempt under the executive employee exemption there’s that salary basis test that we’re talking about, the $684 a week, and then there are the specific duty requirements. The executive exemption, duty requirements, are the employee’s primary duty has to be managing the enterprise or a customarily recognized department of the enterprise. The employee has to regularly direct the work of at least two or more employees, and the employee has to have the authority to hire, fire, or make their suggestions or recommendations, and those recommendations have to be given particular weight.

The final rule impacts the salary basis threshold, but it did not at all impact the duties test. Those duties all still remain intact, are not at all impacted by what we’re talking about. Only the salary based component was impacted.

Stutzman: If I’m an executive employee, and I’m doing those executive functions that you just described, as long as I’m being paid the equivalent of $35,568 or more I can continue forward in my exempt employee status. Is that right?

Liffrig: Mm-hmm (affirmative). Yep, that’s it.

Stutzman: Okay. Earlier on you had some verbiage, made reference to, nondiscretionary bonuses. Can you expand on that just a little bit more?

Liffrig: When we talk about the salary basis requirement, what we’re talking about is an employee has to be regularly receiving a predetermined amount of compensation each pay period, and that predetermined amount, the salary, can’t be reduced because of variations in the quality or quantity of the employee’s work.

Generally speaking, we say you’ve got to be paid on a salary basis, and that dollar amount doesn’t change from week to week or pay period to pay period, but under the final rule up to 10% of the minimum salary threshold can be satisfied by the payment of nondiscretionary bonuses, incentives, and commissions that are paid quarterly or more frequently. This just provides a little bit of flexibility to employers on the method of compensation so long as it’s still calculating or adding up to the right amount.

Stutzman: Okay. Got it. So the main takeaway there in terms of the nondiscretionary is that it provides a little bit more wiggle room in terms of how an employer gets to or above the newly increased amount of the annualized salary. Is that a fair summary?

Liffrig: Yep.

Stutzman: Okay. Very helpful. I think you touched on this, but let’s talk about it a little bit more. You made reference to the highly compensated employee exemption. What’s the background story there, and how does the final rule impact that?

Liffrig: Highly compensated, or HCEs, are just another category of exempt employees. So again, exempt from minimum wage and overtime requirements, and as we’ve talked about already in order to be considered exempt under the FLSA, generally have to meet a duties test and a salary basis test. Same rules apply to the HCE exemption generally, but under the HCE exemption the salary basis standard is much higher, much more stringent, and the duties requirement is much simpler and easier to meet.

To get into the details, under the HCE exemption an employee can be deemed exempt if they meet this higher salary basis test instead of being $35,568 annually it’s $107,432 annually. From a duties perspective, they just have to have a primary duty that’s either office or non-manual work, and they have to customarily and regularly perform at least one of the exempt duties of an exempt executive, administrative, or professional employee. Much, much lower standard from a duties perspective, higher dollar requirement.

Stutzman: Okay, that makes sense. The higher the dollar if you hit the HCE test or exemption then some of those duties fall by the wayside. Is that right?

Liffrig:            Mm-hmm (affirmative).

Stutzman:        Okay.

Liffrig: Yep.

Stutzman: Mary Kate, I think you touched on this before, but is it a fair statement to say that this is the first time in quite a long time that the salary thresholds have been increased?

Liffrig: Yes. Prior to the change that went into effect this January, the salary basis threshold had been at a lower since 2004. There was an effort, a failed effort, to increase the salary threshold under the FLSA back in 2016, but this is really the first time that the rule has gone into effect. The 2016 rule was just like the 2019 rule, establishing a new salary threshold, but it was significantly than what we have in the 2019 rule. Back in 2016, the salary basis requirement would have been bumped up to $913 a week or just about $47,500 annually. That’s not the exact number but close enough for our needs. Again, very significant jump.

Before that could go into effect, though, a district court in Texas enjoined the rule, and then ultimately the 5th Circuit struck it down, and it just ended up languishing. We didn’t see anything on that for several years, and then earlier in 2019 we finally got a proposed rule setting these more moderate salary bumps.

Stutzman: I think if memory serves me correctly, there’s some inside baseball, some inside politics going on back at the timeframe of the 2016 rule. That 2016 rule which would have increased the salary threshold to an even higher point of what it is now, that was a carryover from the Obama Administration. Is that right?

Liffrig: Yep, it was.

Stutzman: Okay. That would make sense because I think with the higher dollar amount, that means that a larger group of people would be entitled to overtime payments. Is that right?

Liffrig: Yeah, that is right. When this new rule was published in 2019, the Department of Labor estimated that about 1.3 million people who would otherwise be exempt on the prior salary basis threshold set in 2004 would become eligible for overtime. In addition, the Department of Labor estimated about 101,800 workers would have been impacted by the increased salary basis requirement for highly compensated employees. You can imagine if the threshold for the salary basis had been bumped even higher, the number of employees would have been even higher as well.

Stutzman: Okay. All right, got it. There’s your inside baseball for the day. Switching gears slightly, Department of Labor as this past year has frankly been pretty active. I’m looking at a headline, what is it PR piece put out by the Department of Labor. It notes that in 2019 employers paid out a record $322 million to resolve Department of Labor wage claims. That I believe was in 2019 alone.

Liffrig: Oh wow.

Stutzman: So, it’s a lot of money at stake. From a big picture standpoint, the point is that wage and hour, even just looking on the federal side, is a high risk area for employers, and many employers are not really doing it the right way. Not intentionally but just often times there’s honest mistakes in that regard.

Mary Kate, in practical terms now that the final rule is in effect, what should employers be doing? What should employers be thinking about? What steps can they take to just make sure that their house is in order from a wage an hour standpoint?

Liffrig: With regard to the final rule specifically, I think the first thing that employers need to do is look at their exempt employees and specifically those exempt employees whose salaries are less than what the final rule’s requirements are. They may have been exempt under the salary basis threshold set in 2004, but they’re not hitting the requirement now that this new rule went into effect January 1st. Look at those people and figure out how we’re going to bring them into compliance.

There’s really two ways to do that. One is you reclassify those individuals as nonexempt, make them eligible for minimum wage, make them eligible for overtime. Or you start paying them more and increase their salaries to meet the final rule salary levels. That’s for both your exempt professionals under the executive, professional, administrative, and salaried computer workers exemptions, or under the highly compensated employee exemption.

That’s really all we need to do from an immediate perspective under the final rule. I guess again as a note, look at your state laws, make sure you’re in compliance with those as well with regard to all of your pay practices.

Then now it’s also a good time to just make sure everyone is appropriately classified. If you’re looking at people’s classifications, it’s the right time to make sure that, “Hey, if we’re classifying this person as exempt are they truly meeting the duties requirements? Are they really meeting the salary basis requirements?” Because Dana, you’re right. The Department of Labor has been very active this year. They’ve issued proposed rules that we’re still waiting to see what happens with, but we’ve gotten several this year.

We’ve gotten proposed rules on joint employment, on how to calculate the regular rate, on how to calculate overtime when you’re using a fluctuating work week, and again they’re at a proposed stage, but those rules could come out in the near future. We’ve also seen a lot of opinion letters this year. So yeah, the Department of Labor has been very active. It’s just an especially good time to review policies, review pay practices, review exempt determinations and worker classification.

Stutzman: Sure. That’s a good springboard to an online wage and hour assessment tool that Hall Render has put out to help employers navigate these rather thorny wage and hour issues because there are so many of them. It’s web based, relatively straight forward to click through. You don’t even have to have a lot of detailed information at your fingertips because the way that this online assessment is set up, it has a response button that says, “I don’t know the answer to this question,” and that’s okay.

Shameless plug called LYRIC assessment. LYRIC stands for Lower Your Risk Improve Confidence, and the website is www.LYRICassessment.com. Literally you spell it out. LYRIC is L-Y-R-I-C, assessment A-S-S-E-S-S-M-E-N-T. www.lyricassessment.com. It’s password protected because there is the exchange of potentially confidential attorney client and work product information through that portal, but please feel free to hit me up. Either call me or email me, and I’m happy to convey the password to you.

You get into that website, it has a survey that takes maybe 10-15 minutes, and then it outputs on the backend a risk profile, and then from there the Hall Render attorneys can help you walk through what compliance issues need to be cleaned up.

So for example I’m looking at the website right now, and we have this ongoing ticker on the righthand side that shows all the different kind of latest and greatest news and headlines in which employers have had to pay out big dollar amounts for wage and hour violations. So I’m looking at the previously mentioned $322 million recovered by the DOL. There are some high applying contractors that had to pay $12,700. There’s a headline about a $27,155 for a wage and hour violation. Another employer had to pay $190,000 for a wage and hour violation.

The point is this thing gets updated on a weekly basis, and there’s always employers that are making the headlines. We don’t want any of our clients to make those headlines, so that’s the purpose of the assessment.

Mary Kate, any closing thoughts? Any final words of wisdom that you want to pass along to the listeners?

Liffrig: Yeah, I guess I would just reiterate that these wage and hour issues, like you were just describing, they’re hugely expensive for employers, and that’s because these wage and hour issues are typically going to impact an entire class of people. That’s why we end up seeing class and collective actions on the wage and hour front.

So if you’re misclassifying one employee, you may be misclassifying a lot of employees. If your policies are problematic then your policies are problematic for all of the employees they apply to. It’s just another reason that it’s important to take this seriously, and it’s a good time to do a refresh now that we’re at the beginning of the year.

Stutzman: So it’s a subtle point. I think in particular what our healthcare clients with health system clients, one policy, one single policy could unintentionally negatively impact a couple thousand employees. So that’s where it’s high stakes, high risk. That said, I hope that you found this discussion helpful, and we’ve just about bumped up into a time limit for our time today. I wanted to thank you, the listener, for listening to the podcast. Mary Kate, thank you as well for joining us and providing us with this very helpful, timely information.

Finally, as a reminder to our listeners for more healthcare employment law content please visit our website at www.HallRender.com, and subscribe to our podcast. If you’d like to be added to our monthly newsletter, feel free to send me an email at my address. It’s [email protected]. Thanks, everybody. Have a great day.