To pay or not to pay: Appeals court rules on overtime payment regulations

Per-visit pay combined with hourly pay does not exempt nurse

In January 2002, the U.S. District Court for the Northern District of Ohio at Cleveland ruled that a home health nurse who received a combination of per-visit pay to see patients and hourly wages to complete paperwork or attend inservices is not exempt from overtime pay, according to the Fair Labor Standards Act (FLSA).

"The FLSA states that a professional can be exempt from overtime if he or she is paid on a fee-only basis or a salaried basis," says John C. Gilliland II, Esq., an attorney in Indianapolis who specializes in home health and employee law. In Elwell v. University Hospital Home Health Care Services, the court ruled that Wendy Elwell, a home health nurse who was paid a combination of per-visit fees and hourly wages for on-call time, longer-than-normal patient visits, and mandatory meetings, was not an exempt employee because the fee-basis part of the FLSA’s professional exemption description does not allow for extra pay for extra work,1 he explains.

Although the findings of this Appeals Court only are binding in the states of Ohio, Michigan, Kentucky, and Tennessee, Gilliland points out that this is a precedent that other courts will notice. "Even if you’re not within this jurisdiction, this is a good time to review pay policies and make sure they fit the FLSA’s descriptions," he suggests.

"This decision doesn’t affect us at all," says Kay Sykes, director of human resources for Alacare Home Health & Hospice in Birmingham, AL. "We have always gone against industry norms in this area and chosen to take the conservative approach," she says. "We pay our professional staff on a salary basis so they qualify as exempt employees," she explains.

Because a salaried staff member is exempt from overtime, this is a good option for some agencies, Gilliland says. It might be difficult to move to a salaried staff for some agencies because it is a nontraditional approach to pay in home health, he says. "Per-visit payments make it easy to tie productivity to pay," he explains. "Some home health managers are not used to managing salaried employees and worry that productivity will drop because it will be harder to manage the employees."

There are a number of options for wage payments, with straight salary being only one, according to Gilliland. If an agency manager is not comfortable with a salaried staff, he or she can develop a hybrid that pays a small salary along with bonuses for each patient visit, he says. A salaried employee can receive bonuses for extra work without jeopardizing the exempt status according to the FLSA, he explains.

Another benefit of this approach is that you do reward your more motivated employees for productivity and you still compensate everyone for on-call, inservices, and mandatory meetings, he adds.

There is a warning if you choose this option, Gilliland adds. There are salary requirements for the professional exemption, so choose your salary levels carefully or your employees still won’t qualify, he says. "The basic amount is $170 per week or $150 per week in Puerto Rico, the Virgin Islands, or American Samoa. If the weekly salary is at least $250, a shorter test is used to determine eligibility," he explains.

The choice of paying employees on a salary basis means that Sykes does not have to worry about the Elwell decision, but she says that staff morale is another benefit. "Knowing that their paycheck is not going to change from pay period to pay period gives our staff an added sense of security," Sykes says. This is an advantage when recruiting new nurses and retaining experienced nurses, she adds.

Happy employees might keep your agency from finding itself sued by employees who are not pleased with denial of overtime, Gilliland says.

Elwell was awarded $25,478 in damages as a result of overtime pay she did not receive and $49,884.85 in attorneys’ fees and costs. "This was only one nurse suing, and the award was relatively small," he points out. "The real danger is for an agency that has a group of nurses sue and win." If a large enough group of nurses sues one agency and wins, it might mean bankruptcy for the home health agency, he adds.

Make changes with care

You still are liable for past violations, but if you handle your review of your pay policy and implementation of any changes with care, you may not find yourself served with a notice of suit, Gilliland points out.

Whichever option you choose to use, be sure you have a fair pay policy and present the final decision in a positive manner, he recommends. "If you do change your pay structure, be sure that your nurses’ compensation is comparable to what it was under the old system." If you present the change as a positive way to stay competitive, and the employee does not suffer a loss in pay, it should be received well, he says.

Of course, how changes are presented differs from agency to agency depending on the corporate culture, Gilliland says. "Some agencies are very upfront with their employees, others bury the change in a small paragraph deep in the employee handbook," he explains.

"Make sure you also pay attention to the laws of your state," Gilliland suggests. "There are some instances in which state laws and the FLSA conflict."

Even if you can’t decide whether you want to stay fee-based, salaried, or a combination, remember that there is another option to classifying your professional employees as exempt, Gilliland says. "Although it requires careful managing, you can always pay overtime."

[For more information about the issue of overtime pay, contact:

  • John C. Gilliland II, Attorney-at-Law, Gilliland & Caudill, LLP, 6650 Telecom Drive, Suite 100, Indianapolis, IN 46278. Telephone and fax: (317) 616-3647. E-mail: jcg@gilliland.com. Web site: www.gilliland.com.
  • Kay Sykes, Director of Human Resources, Alacare Home Health & Hospice, 4752 Highway 280 E., Birmingham, AL 35242. Telephone: (205) 981-8000.]

Reference

1. Wendy Elwell v. University Hospitals Home Care Services, No. 98-02472, U.S. Court of Appeals for the Sixth Circuit (Jan. 11, 2002).