Healthcare’s Wage & Hour Claim Challenge:

Practical Steps to Protect Your Organization

May 3, 2011

Reid Bowman, Esq.

• General Counsel of ELT.

• Over 25 years of HR and labor employment law experience, primarily working with multi-state employers.

• Designs strategic ethics, wage & hour, discrimination prevention, and employment law compliance programs.

Bradley Strawn, Esq.

• Shareholder, Littler Mendelson.

• Concentrates his practice advising employers in complex class and collective actions involving overtime and other wage-related claims.

• Routinely advises employers on legal compliance and litigation prevention measures relating to wage and hour.

Agenda The Numbers Tell the Story

Greater Enforcement by the DOL

Key Risk Areas

Practical Compliance SolutionsTraining Solutions that Tangibly Reduce Risk and Deliver a ROI.

The Numbers Tell the

Story

Healthcare is a Major

Target

Targeted Areas

Practical Compliance

Solutions

The Numbers Tell the Story

A Question For You

Do you consider wage and hour issues to be the number one employment law risk facing your organization? Yes

No

Of the 4,152 employment class action lawsuits filed in federal or state court in 2010, 3,785 (or approx. 91%) were wage and hour related complaints!

Wage & Hour Class/Collective Actions:

The Flood Continues

• Non-government wage and hour settlements in 2010 remained high. For the top 10 settlements in 2010: Total: $241MAverage: $22MMedian: $14.8M

Wage & Hour Lawsuits Becoming Stronger Focus for the Plaintiff’s

Bar

The Beat Goes On

What does this all mean? More class/collective action players for the future.

*http://www.uscourts.gov/Statistics/JudicialBusiness/JudicialBusiness2010.aspx

Healthcare is a Major Target

New Challenges and Old Problems

The New DOL

• Secretary of Labor Hilda Solis:

“Make no mistakethe DOL is back in

the enforcement business.”

• National public awareness campaign: “We Can Help”

• “Bridge to Justice” Campaign

DOL’s Enforcement Approach

– From 4-26-2010 DOL Regulatory Agenda

“Plan, “Plan, Prevent, and Protect”” • Encourages employers to “find and fix” violations before the DOL Investigators arrive.• Employers are expected to design and implement plans to avoid violations of workplace laws.•According to the DOL: "[a]ny employers that seek to exclude workers from the FLSA's coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give to WHD enforcement personnel who might request it.”Bottom line: DOL making obligation to “find and fix” an affirmative duty; absence of those action viewed as a compliance failure.

Targeting Healthcare Employers

• Focus on industries "known for employing vulnerable workers" Healthcare specifically

referenced• February 22, 2010, DOL Press

Release: – 66% of healthcare employers

investigated by Albany office in last 5 years violated

– Collected more than $2 million in back wages

– Announced major compliance initiative targeting New York healthcare employers

Heightened Government Enforcement• December of 2009: SSM

Healthcare pays $1.7 million in back wages to nurses for work done during unpaid meal breaks to settle DOL lawsuit.

• February, 2010: Missouri hospital pays $280,000 to employees for unpaid pre- and post-shift work, and work during auto-deduct meal periods.

A Question For You

In the past 12 months, has your organization been faced with a wage & hour claim from current or former employees? Yes

No

I don’t know

Health Care Class Actions Are All Over the Map

Wage Hour Class/Collective Action Complaints Against Healthcare Organizations Since 1/1/09

NV

CA

HI

AK

ID

WA

ORWY

MT

CO

NMAZ

UT

SD

ND

KS

OK

IA

MN

MO

AR

NE

TX

MI

WI

IL

LA

MS AL

TN

IN OH

KY

GA

SC

PA

NC

FL

VA

WV

NY

ME

VTNH

CT RI

MA

NJ

DEMD

D.C.

154

95

52

3230 14

20

1

12 1022

4

3

2

41 3

3

1

7

1 5

2 1

9

1

2

1

31

41

Thomas & Solomon

• Small law firm in Rochester New York began targeting large health care systems with wage and hour class actions in 2008

• 2008 T&S filed class/collective actions against healthcare systems in Rochester, New York

• Quickly moved to Buffalo and Syracuse, New York

• Spring 2009, filed class/collection actions against Pittsburgh-area healthcare systems

Thomas & Solomon

• September 2009 filed actions against 5 Boston healthcare systems

• November 2009 filed actions against 7 Philadelphia-area healthcare systems

• March 2010 filed more than 20 federal and state court cases against almost every major healthcare institution in New York City

• New healthcare employers added to www.hospitalovertime.com website frequently. Website lists healthcare employers in 48 states, the

District of Columbia, Guam, Philippine Islands, Puerto Rico, and Virgin Islands.

Modus Operandi

• Obtain employees’ names and addresses from publicly available directories of healthcare licenses.

• Send “investigatory” letters to employees’ homes to offer assistance in protecting employees’ rights.

• Obtain “consents” through word of mouth, home mailings, and website: hospitalovertime.com.

• Target largest healthcare employers in specific cities.

Modus Operandi (cont’d)

• Simultaneously file actions against largest healthcare employers in target cities.

• Boilerplate complaints with virtually identical claims asserted against all targeted employers.

• Issue press releases to garner media attention.

• Generally file motion for conditional certification with complaint or very soon after filing of complaint.

• Force employees to fight on two fronts by filing claims in state and federal court.

-----Original Message-----From: Hours Worked [mailto:medrecallnewscl@gmail.com]Sent: Monday, January 04, 2010 3:50 PMTo: [INSERT NAME]Subject: You May Not Have Been Paid For All The Time You Were Permitted To Work

IF YOU WORKED AS AN HOURLY EMPLOYEE FOR A HEALTH CARE FACILITY OR HOSPITAL OUR INVESTIGATION SUGGESTS THAT...

YOU MAY NOT HAVE BEEN PAID FOR ALL THE TIME YOU WERE PERMITTED TO WORK!

PROTECT ANY AMOUNT YOU MAY BE OWED BY CALLING NOW.

(this is not a sales program)

BECAUSE OF SEVERAL EMPLOYMENT LAWS, EVERY DAY YOU DELAY MAY ELIMINATE YOUR ABILITY TO RECOVER MONEY.

CALL TOLL-FREE FOR NO OBLIGATION INFORMATION (888) 668-3817

Plaintiffs’ firms are hiring outside companies to send email blasts to employees of target companies. Below is actual text from one such email:

What to Expect: Solicitation

• Lawyers are using vendors such as “services to lawyers” (http://servicestolawyers.com/home/), traditionally used for medical malpractice, workers compensation claims and car accident cases, to spam employees of hospitals and healthcare providers with this type of information.

• Email addresses can be identified either by:– Identifying a domain name

(____@littlerhospital.org) and obtaining an employee roster

– Obtaining a list of employees (such as nurses) from a professional licensing board

What to Expect: Solicitation

The “Copycat” Problem

• Major players like Thomas & Solomon have provided a roadmap to other plaintiffs’ firms– “Copycat” firms piggyback on the efforts of others by

copying publicly available work product and strategies– Electronic resources facilitate information sharing among

Plaintiff’s firms practicing in same industry (i.e. “Pacer” federal court filings readily available to the public)

• Carlson Lynch– At least two recent auto-deduct class actions against

major hospital systems in Illinois– Also hit healthcare systems in PA & Ohio

Other Law Firms Now Looking

at Healthcare Employers• Joseph Sellers of Cohen Milstein

– Lawyer who filed huge gender discrimination class action v. Wal-Mart recently filed wage hour class action against Gentiva

• Klafter Olsen, major class action law firm– auto-deduct meal break case against Kindred

• Blumenthal, Nordrehaug & Bhowmik, California– Several class actions against Kaiser—IT misclassification

• Outten & Golden, New York– Ruggles v. Wellpoint: significant nurses misclassification

collective action

• Shavitz Law Group, Florida• Morgan and Morgan, Florida

- Shavitz & Morgan – high volume firms targeting smaller employers

Key Risk Areas

Pay Practices1. Auto Deductions for

Meal Periods.2. Deductions for

Short Meal/Rest Breaks.

3. Exception Time Reporting.

4. Rounding.5. Early Arrivers and

Long Punching.

Pay Practices (con’t)

6. Pre- and Post-shift Computer Logging and Other Activities.

7. Discrepancies Between Time Records and Other Electronic Records.

8. Remote Work.9. Garbage In, Garbage Out.10. Failure to Include Bonuses,

Incentives, and Commissions in Overtime Calculation.

11. Editing Time Records.

Practical Compliance Solutions

A Question For You

In 2011, my organization is spending more on wage and hour compliance and risk management:

Yes

No

I don’t know

The Good News

• Despite rising number of claims, there are measures employers can take now to strengthen defenses and make themselves a less attractive litigation target.

• Many “preventative steps” can be quickly implemented with little or no cost.

• Most healthcare employers already have the basic compliance structure in place on which a more elaborate wage and hour compliance model can be built.

Building a Good Faith Defense to Off-the-Clock Claims

• Key problem for healthcare employers is lack of sufficient evidence to establish proper timekeeping and “good faith” defense to off-the-clock claims.

• Compliance model should be targeted toward building evidence of employer’s good faith efforts to ensure employees accurately report and are paid for all working time.

Obstacles to Effective Compliance Model

• Employees and managers have misconception about respective legal obligations and what is compensable working time.

• Employees are often careless timekeepers.

• Some managers may instruct employees to work off-the-clock due to budgetary restrictions.

• Some unscrupulous employees may falsely claim off-the-clock work.

What is a Faragher/Ellerth Defense?

• In certain areas of the law, courts have recognized something called the “doctrine of avoidable consequences,” which prevents a party from recovering damages where the injured party could have avoided harm through reasonable efforts.

What is aFaragher/Ellerth Defense?

• Used for 10+ years in Title VII matters, following US Supreme Court decisions in Faragher and Kolstad.

• Courts have now started to recognize the validity of this defense in wage and hour actions.

What if We Don’t UsePreventive Measures?

• Recent nationwide collective action lawsuit (1/20/10) filed against Northwestern Memorial Healthcare in Illinois alleges that failure to use remedial measures constitutes evidence of employer “bad faith” and “willful” wage and hour violations:– “Despite this ‘off-the-clock’ work, defendant did not provide

additional compensation to Plaintiff or other class members, nor did it take ameliorative measures to ensure that such ‘off-the-clock’ work ceased occurring.”

• Failure to adopt any remedial measures could be used against a healthcare company in wage and hour litigation.

• Timekeeping policies should appear in handbooks, ethics policies, and collective bargaining agreements.

• Require signed receipt to demonstrate knowledge of policies and procedures.

Element 1:Adopt and Publicize Clear Timekeeping Policies and

Procedures

Adopt and Publicize Clear Timekeeping

Policies and ProceduresRecommend policies should:• Define working time with examples

that target most common misconceptions.

• Address meal periods, and instruct employees on what to do if a meal period is interrupted or missed.

• Prohibit off-the-clock work but advise that in the event work is performed, employees will be paid.

• Require immediate reporting of off-the-clock work within 72 hours of occurrence.

Element 1: (cont’d)

Recommend policies should:• Provide a mechanism for employees to report off-the-clock work.

• Require advance authorization for overtime except in the event of an emergency.

• Advise employees that no one is authorized to require off-the-clock work.

• Require employees to pursue alternative complaint mechanism by calling 1-800 number if no response received from initial complaint within 5 business days.

Element 1: (cont’d)Adopt and Publicize Clear Timekeeping Policies and

Procedures

A Question For You

Regarding wage and hour training, in the next 12 months, my organization is:

Already conducting training

Planning to implement training

Considering training

I don’t know

• Train both managers and employees regarding FLSA and state law wage and hour requirements and Company timekeeping policies and procedures.

• Training should involve interactive learning model with examples targeted toward  common violations (i.e., missed meal periods, improper supervisory instructions, and volunteering).

Element 2:Training

Training ROI• Prevent inadvertent federal and

state law violations.• Prevent claims:

• Policies are clear and irrefutable.

• Plaintiff credibility?• More difficult to certify a class.

• Reduce damage awards and potentially build a good faith defense.

• Build a culture of compliance.

When To Train• Should be integrated into

employment relationship.

• Should be done regularly to reinforce policies and understanding:– Employee orientation.– New manager training.– When there are new legal

developments or policy changes.– Every 2 years.– More often for highly

specialized compensation jobs.

Who Should Be Trained

• Employee training should focus on the basics, such as:– Review of key policies.– Define hours worked.– No off-the-clock work.– Meals and rest periods.– Rules relating to OT.– Reporting and correcting

errors, and misconduct.

Who Should Be Trained

• Manager training should focus on employee topics, plus:

– Compliance responsibilities.– Handling employee

complaints.– Manager misconduct.– Prohibition against

retaliation.– Good record keeping

practices.

Training Solutions• Live Training:

– Instructor led and tailored to audience (i.e., senior leaders).

– When highly customized materials required.

• E-learning: 40%+ (and growing) of employers today chose e-learning

solutions.– Interactive and engaging – hands on experience.– Creates electronic records and employee

acknowledgments. – Significant cost savings– Easy to reach bulk of managers and employees –

repeatedly.– Content can be duplicated for evidentiary purposes.– Ensures exposure to policies

Online Training Advantage

• Online training is consistent and repeatable.

• As a result, can be presented to a jury or mediator exactly the way learner saw it.

Clearly demonstrates that if after training employee violated policies, it was NOT because of lack of understanding, but deliberate attempt to circumvent employer’s pay rules.

Online Training Certification Page

Employees must certify that they

Have completed the course;

Have reviewed your wage & hour and payroll policies and will abide by them; and

Know who to call with any questions or concerns

• Require non-exempt employees to review time records.

• Daily review is ideal but something less frequent can be used provided employees have the opportunity to review actual records.

• Provided records are correct, require employee certification as to accuracy.

Element 3:Certification of Time Records

Certification of Time Records

• If records are not correct, require employee to identify any inaccuracies to permit immediate correction.

• Require employees to review accuracy of paycheck and, if systems permit, certify secondary review. On-line tools make this level of review more available.

• Certification should cover off-the-clock work and meal periods.

Element 3:

• Most employers already have some type of complaint mechanism in place…..but

• Existing complaint mechanisms often do not specifically reference wage and hour issues.

• Revise existing complaint mechanism to ensure it specifically addresses wage and hour issues.

• Publicize complaint mechanism in handbooks, open door policies, collective bargaining agreements, ethics handbooks, and other employee communication channels.

Element 4:Adopt a Robust Complaint Mechanism

• Train managers and payroll personnel to be alert to payroll concerns and treat any complaints with same level of attention as other employee relations complaints (i.e., sexual harassment).

• Promptly investigate payroll concerns using same techniques and controls as other types of internal complaints.

• If determined to be appropriate, take prompt and effective remedial steps.

• Effective remediation may require payment of back wages.

Element 4: (cont’d)Adopt a Robust Complaint Mechanism

• Adopt an audit protocol to ensure employees and managers are following policies and procedures.

• Audit protocol should be designed to be discoverable in the event of future litigation as part of Company's good faith defense.

• Promptly investigate and remediate any discovered violations.

• Implement appropriate discipline for managers and employees in the event of violations.

Element 5:Audit Time Records for

Compliance

• In some reported cases, employers have been criticized for quickly disciplining employees for timekeeping violations but not doing so for manager violations.

• Manager misconduct is increasingly being characterized as “wage theft”.

• Promptly address Manager misconduct. Where confirmed, consider it a serious violation of the Company's most important policies.

Element 6:Impose Appropriate Discipline for Policy

Violations by Employees and Managers

• Timekeeping policies and procedures should be reinforced through available communication means.

• Annual letter to all employees. • Newsletters. • Ethics alerts• Postings. • Refresher training.

Element 7:Periodic

Reminders

A Question for You…

If your organization may be interested in purchasing ELT’s online training solutions, and you would like an ELT Sales Executive to follow up with you, type "YES" in the box below.

If your organization may be interested in purchasing ELT’s online training solutions, and you would like an ELT Sales Executive to follow up with you, type "YES" in the box below.

Interested in our solutions?

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Additional substantive questions?

bstrawn@littler.comrbowman@elt.com