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Are you in compliance with the FLSA?

The Federal Department of Labor is yet another Federal agency on the prowl for nursing homes. Here's how to stay on the safe side of compliance with the Fair Labor Standards Act

The U.S. Department of Labor has the long-term care industry in its crosshairs. The DOL's Wage and Hour Division recently concluded a special investigative effort targeting 288 nursing homes to determine industry adherence to the Fair Labor Standards Act and has more recently announced that it will now conduct a similar compliance survey in the residential "group home" segment of the long-term care industry. As with the nursing home survey, the upcoming initiative will involve investigation in some 250 randomly chosen facilities that provide care in community-like settings for the aged and disabled.

Previously, DOL Wage and Hour investigations had been largely limited to those arising from employee complaints. According to the DOL, by its current initiatives it is seeking to establish a baseline level of FLSA compliance within long-term care - an industry it sees as populated with low-wage occupations in need of special attention.

Although the Secretary of Labor, Alexis Herman, admitted that the level of compliance among nursing homes was higher than expected, she went on to state that the rate of violations uncovered in the audits (86 of the 288 homes), is "too high." According to Secretary Herman, this 30% rate of noncompliance translates into "tens of thousands" of nursing home employees who are not being properly compensated. She found this unacceptable and worthy of further attention. Nursing homes can expect to be much more closely scrutinized for FLSA compliance in the future and can anticipate that employee complaints will be given even more prompt and thorough attention by the DOL than in the past.

The violations uncovered in the DOL's random audit most frequently involved nurse assistants, food service workers and activity aides. Most of the violations involved insufficient pay for overtime work and misapplied overtime exemptions. A significant number of employers were miscalculating the employees' regular rate of pay for purposes of overtime pay by not including items such as shift differential on-call pay or bonuses. In some cases, employees were improperly being paid straight time or being given compensatory time for hours that should have been paid at time and one-half. Another problem area involved not paying employees on an "8 and 80" overtime pay plan under Section 7(j) of the FLSA governing daily overtime for hours in excess of eight.

Long-term care facilities may now very well be the DOL's number one target for FLSA violations and would be well advised to get the house in order before a Wage and Hour Division investigator comes knocking at the door.

The penalties for FLSA violations are steep. Employers found guilty of violating the Act must pay employees for unpaid wages for at least the two prior years and potentially three. Since the employer is obliged under the law to keep accurate records, and since when a violation is found the records are obviously not correct, strong presumptions run in favor of the employees' claims as to hours owed. In addition, if the DOL pursues litigation, it will invariably seek liquidated damages in an amount equal to the back wages due, effectively doubling the employer's liability. If this is not enough to get your attention, an employer who has previously admitted to or been found in violation of the FLSA is also subject to a penalty of up to $1,000 per violation for its repeat offenses.

Long-term care facilities should start by ensuring that they are not misclassifying "nonexempt" employees as "exempt" to avoid pay for overtime. An employer who mistakenly treats an employee as exempt and does not compensate for work in excess of forty hours can expect to pay dearly and is unlikely to have any reliable time records to contest the amount of the claim.

Unfortunately, we find that many employers still equate "salaried" employees with exemption from overtime under the FLSA. The FLSA provides for only a limited number of exemptions from overtime pay that may be applicable to a long-term care facility - the so-called "white-collar" exemptions for executive, administrative and professional personnel. The Wage and Hour Regulations spell out specific salary requirements, as well as tests based on the nature of the work performed, for employees to qualify for exempt status. Employers should not take these requirements lightly, as they are strictly construed by the DOL.

The minimum salary requirements in the Regulations are relatively low, easy to satisfy and usually are not an issue. However, under the FLSA, for qualifying employees to remain exempt from overtime pay requirements, they must receive the predetermined salary each pay period, "without reduction for variations in the quality or quantity of work performed." Exempt employees must receive the full salary for any week in which they perform any work, without regard to the number of hours worked, subject to a very limited number of exceptions:

* Absences of a day or more for personal reasons other than sickness or accident;

* Absences of a day or more for sickness or disability, if the employer has a plan or policy providing compensation;

* Time lost due to industrial accidents, if the employee is compensated under law or an employer plan;

* Good faith penalties for violation of major safety rules;

* Partial days under the Family and Medical Leave Act; and

* Deductions to vacation or sick leave credits, provided the deductions don't reduce the total weekly salary.

Some of the non-permissible deductions that most often place exempt status at risk are:

* Deductions for part-day absences, either from salary or benefit time;

* Deductions for military leave, witness leave or jury duty;

* Deductions for temporary budget-related reasons;

* Suspensions without pay for disciplinary reasons; and

* Accounting for use of personal or sick leave time by the hour.

Other practices that require exempt employees to account for hours of work make them look very much like nonexempt, hourly employees. The DOL will look very closely when exempt employees keep time, punch a time clock, or have their pay calculated in terms of hourly equivalents. Also potentially problematic, although not per se contrary to exempt status, are plans for additional compensation or even overtime pay linked directly to hours worked over forty.

Each of the white-collar exemptions also has specific work-related requirements. For example, for an employee to qualify for the administrative exemption, the employee's primary duty must consist of office or non-manual work "directly related to management policies or general business operations" that require "the exercise of discretion and independent judgment."

In reviewing overtime compensation practices, long-term care executives should pay particular attention to any program designed to provide a nonexempt employee other than actual wages at the rate of time and one-half for overtime hours worked. (Of course, most long-term care facilities can take advantage of Section 7(j) of the FLSA, which allows them to base overtime compensation on work in excess of eighty hours in a fourteen day period, provided they also pay overtime for all hours worked in excess of eight in any given day.) Owners and executives also should be concerned about plans and schemes that provide for compensatory time or "banking" of time for use as time off in a later pay period. Most are found to violate the FLSA.

In terms of policing hours worked or not worked for purposes of overtime compensation under the FLSA, managers should closely scrutinize practices during supposedly dutyfree "unpaid" meal periods, particularly on patient/resident floors, and immediately before and after shift starting and ending times. Both are frequent sources of FLSA problems and involve considerable potential liability. Under DOL Regulations, for example, in order to not count the meal period as time worked, it must be duty-free, uninterrupted and at least thirty minutes in length.

The DOL nursing home audit also disclosed Child Labor Law violations. It is not uncommon for long-term care facilities to employ teenagers and students subject to the Child Labor Laws, often in food service. The laws place specific limitations on the type or amount of work a minor can perform at different age thresholds - 18, 16 and 14. Most frequently coming into play in long-term care facilities are the regulations applicable to 14-and 15-year-olds who, for example, when school is in session, may not work more than three hours per day or eighteen hours per week. If minors are employed in the food preparation, care also must be exercised to ensure that they are not operating machinery that might be classified as hazardous under DOL Regulations.

Finally, many long-term care facilities often make use of volunteers, independent contractors and other workers in contingent, nontraditional relationships. Suffice it to say that care must be exercised to avoid practices that may make that person an "employee," and particularly a nonexempt employee.

For better or worse, the DOL Wage and Hour Division is on the prowl in the long-term care industry. Owners and executives would be well advised to conduct a self-audit of practices under the FLSA - the sooner the better and with appropriate and experienced counsel - before the DOL investigator appears in the lobby, perhaps unannounced, clipboard in hand.

John E. Lyncheski is chairman of the Labor & Employment and Healthcare Practice Groups of Pittsburgh-based Cohen & Grigsby, P.C. With more than 25 years' experience, Mr. Lyncheski has been selected for Best Lawyers in America for labor law and for Who's Who in American Law. For further information, e-mail at: jlyncheski@cohenlaw.com; or Web site: www.cohenlaw.com.
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Title Annotation:Fair Labor Standards Act
Author:Lyncheski, John E.
Publication:Nursing Homes
Date:Sep 1, 1998
Words:1587
Previous Article:Restraint reduction.
Next Article:We are not alone: an American perspective on long-term care in Nova Scotia.
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