Complex laws around healthcare employees get more complicated

Employers have seen an enormous number of changes recently to various rules about how they manage their employee base. This includes a notice of proposed rulemaking by the Federal Trade Commission (FTC) in late 2023, sweeping memoranda from the National Labor Relations Board (NLRB), and final rules from the NLRB on joint employment. All of this is deeply complicated for employers of all types, but in the healthcare world, it can be particularly cumbersome to try to mesh competing agency expectations and demands—from the Centers for Medicare and Medicaid Services (CMS) to the NLRB.

Healthcare Is Not Immune

These issues are further exacerbated by the fact that healthcare employment doesn’t follow the traditional manufacturing industry structure the Board uses when crafting its directives.

Health care is a complex and sometimes chaotic mix of employees, independent contractors, and persons who—because of their licensure and rules of ethics—must exercise substantial independent judgment, particularly in relation to medical decisions, as well as have multiple joint programs, practices, leased employees, and groups that might simply rent space.

Health care is widely considered to be the most highly regulated industry in the United States, and the employment realm is no different.

FTC

In 2023, the FTC proposed a new rule that prohibits noncompetes across the board in all industries, except for those who have had significant ownership in a business. Given the enormous number of comments received on this proposed rule, the FTC pushed back finalization, and it’s anticipated that at least a preliminary determination regarding the nature and structure of the rule, along with more limitations, will be announced in April 2024.

Substantive changes to the proposal are expected, with potential limitations to include an exemption for highly compensated employees, as we see in several other states. There may be a possible exemption for certain professions that have substantially more information relating to any individual business or industry and that could create distinct competitive problems.

NLRB

The NLRB, through memorandum statements, has also indicated noncompete agreements are likely to violate Section 7 of the National Labor Relations Act (NLRA) because they prohibit an employee from leaving a noncompliant employer and seeking employment elsewhere.

Note that the NLRA typically applies to employers that either are unionized or have a potential union push/election going on. However, Section 7, which prohibits employers from limiting an employee’s ability to question, discuss, or act relating to the terms and conditions of employment, applies to all employers regardless of union status.

Confidentiality

Confidentiality is a big area that can encompass many things, such as nondisparagement statements, severance agreements, cooperation statements (such as providing testimony in future lawsuits or being available for interviews), and issues that may be covered by the Health Insurance Portability and Accountability Act (HIPAA) or the Health Information Technology for Economic and Clinical Health Act (HITECH), including patient information and documentation. It also can include intellectual property issues.

In the healthcare arena, this push to make things less confidential, primarily through the NLRB, comes into direct conflict with HIPAA/HITECH; the FTC’s Health Breach Notification Rule (which primarily relates to vendors of personal health records, including online apps); and the increasing number of states that have specific legislation about consumer information and data and how data are used, shared, and stored.

All of this makes it increasingly important for employers, particularly those in health care, to understand the nature and type of data and documents that are used, create solid policies and practices to protect such documentation, define both the nature of the data and the prohibitions in ways their employees understand, and acknowledge and train on these policies and practices.

There’s a huge array of highly confidential data in the healthcare setting, including credentialing, peer review, patient data, and QI. Given the rule of “primacy,” those statutes that were more specific in the protection of data, such as FTC rules and HIPAA/HITECH, would take precedence over a more generalized pronouncement of the NLRB relating to limitations on how you can enforce data protection requirements with employees.

Joint Employer Rule

Joint employment usually comes into play in the healthcare arena when a worker is employed at your facility through a temporary agency, although it could also be implicated in a variety of other circumstances, such as when you house a physical therapy group that’s interconnected with your chief nursing officer/director of nursing, house supervisors, floor nurses, and others.

In October 2023, the NLRB issued its joint employer standard with an original effective date of December 26, 2023, and extended to February 26, 2024, because of multiple pending legal challenges.

The joint employer standard goes back to an earlier rule the Board used, again focusing on what it calls the essential terms and conditions of employment. If you can affect a person’s essential terms and conditions of employment, then you may be considered the person’s employer in conjunction with the temporary agency or other company that’s employing the worker.

Essential terms and conditions of employment include:

• Wages, benefits, and compensation;
• Hours of work and scheduling;
• Assignment of duties;
• Supervision of duties;
• Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
• Tenure/hiring and discharge; and
• Working conditions related to health and safety.

At first blush, when looking at this list, any employer would assume all employers are joint employers at all times because it isn’t possible in the healthcare world to allow a temporary worker or even a visitor come onto your premises and not have specific rules and requirements relating to health and safety, including infection control, management of data, and some form of supervision.

Take, for example, radiology. According to federal rules and the expectations of accreditation, you can’t simply let people wander around in a medical lab unless they’re assigned to that area or are accredited technicians. In health care, there are always rules.

Of particular importance is that the standard now includes “reserved control” or “indirect control.” Even if you aren’t directing workers’ current compensation, hiring, and firing or if you wouldn’t independently discipline them but would contact the agency to discipline them, you’re still exercising either reserve control (something you could do in the future) or indirect control (control through a third party), which could potentially render you a joint employer.

You may be wondering: “Why do I care? We already contract payment and a variety of other things to the temporary agency, and, in fact, as the employer, we pay a premium for those things.” If you’re deemed a joint employer under the rules, you can be held liable for a variety of things, including failure to pay wages, failure to properly pay overtime, health and safety concerns, wrongful termination, and potentially issues relating to union campaigns or union questions.

Independent Contractors

On January 10, 2024, the U.S. Department of Labor (DOL) issued its new final rule on independent contractor classification under the Fair Labor Standards Act (FLSA). While Congress has made a bipartisan effort to stop the rule from going into effect, President Biden vetoed the resolution to stop the expanded rule on May 3. The rule, while still not in effect, has a chance to be reinstated upon examination by the 5th US Circuit Court of Appeals.

Like the NLRB rules on joint employment, this rule goes back to a prior interpretation of independent contractor status, specifically rescinding the 2021 independent contractor rule. The new (old) rule once again focuses on a multifactor “economic reality test.” The DOL specifically states it’s looking at whether an independent contractor is, as a “matter of economic reality[,] economically dependent on the employer for work.”

As many employers have already stated, this can be a very difficult rule to apply because every vendor, employee, worker, or independent contractor is typically, to some extent, economically dependent on the person paying the bills. The DOL sets out a series of factors for consideration:

• Opportunity for profit or loss depending on managerial skills;
• Investments by the worker and the potential employer (note the anticipation of a greater investment by the worker than the employer in an independent contractor agreement);
• Degree of permanence of the work relationship;
• Nature and degree of control (which is also a consideration in the joint employer standard);
• Extent to which work performed is an integral part of the potential employer’s business; and
• Skill and initiative (which may be a critical issue to consider when you assess the difference between a surgeon or a nurse being an independent contractor).

The DOL has noted that no single factor controls and that it would weigh factors together to reach a determination of whether someone is appropriately classified as an independent contractor.

A common question many employers ask is whether someone can simply waive employee status. This occurs quite frequently in health care when people retire and then want to do limited work but only as an independent contractor. Being classified as an employee isn’t a waivable right. Employees can’t simply agree they’re independent contractors. An agreement of that type won’t generally limit your liability risk.

Big Picture

How each of these changes is applied to various employees, workers, or independent contractors within your organization is likely going to depend not only on structure but also on the category these workers fit into. Highly skilled, licensed professional workers such as physicians and advanced practitioners have greater latitude, responsibility, and independence relating to any work performed and are likely to be considered differently than other types of employees.

Those who work directly with patients or have direct access to patient information will continue to be subject to more limitations on data access and sharing, training, and similar matters than someone who works primarily in the outdoor plant.

Additionally, you must consider professional expectations, rules of ethics, medical malpractice insurance, and liability risk when structuring the classification for an employee or a worker in contracting, including both independent contractor and joint employment paradigms. The clarity of where workers report, what authority you have over them, and their ability to act independently is increasingly important in being able to prove someone is most appropriately a worker or an independent contractor rather than an employee.

Traditionally, when someone has been paid through another entity or agency, there is at least one indication that person isn’t an employee but is, in fact, an independent contractor. Another factor to consider, as noted in the various rules, is whether the worker has multiple employers and/or is free to leave at any time without penalty or discrimination.

But note that surgeons, physical therapists, or minimal data set (MDS) coordinators who work for multiple entities, own their own company, likely employ others through that company, and have substantive control over the work are in a different position under any rules than certified nursing assistants, medical aides, or restorative aides who work multiple jobs to make ends meet.

As outlined above, the data and the information you need to protect determine what rules apply to employees versus independent contractors or temporary workers, and making sure contracts are clear and specific and mesh with complex and sometimes conflicting rules becomes increasingly important.

Many hospitals already have a model of independent contractor status through the medical staffing rules, which differ from the rules that may apply to employed physicians. Given there are multiple pending lawsuits and challenges to these rules—and that some of the rules (including the FTC proposal regarding noncompetes) aren’t finalized at this time—you need to continue to monitor these changes.

Jo Ellen Whitney is an attorney with Dentons Davis Brown in Des Moines. You can reach her at joellen.whitney@dentons.com.

The post Complex laws around healthcare employees get more complicated appeared first on HR Daily Advisor.