The U.S. Supreme Court has ruled unanimously that employers may be subject to liability in discrimination cases even if the ultimate decision-maker was not biased toward the employee.  Staub v. Proctor Hospital, No. 09-400 (March 1, 2011).   In this case, Vincent Staub filed a lawsuit against Proctor Hospital after he was discharged from his position as an angiography technologist.  Staub, an Army reservist, alleged the Hospital’s stated reasons for discharge – insubordination, shirking and attitude problems – were pretextual and that the discharge was discriminatory on the basis of Staub’s military status.   Allegations were made that Staub’s supervisor exhibited animosity toward Staub’s fulfillment of military obligations.  Exacerbating the animus were alleged comments by his department manager. 

In its defense, the Hospital presented evidence that Staub had been counseled regarding his negative attitude and disappearances from his work area.  After one such incident, Staub received a written warning prohibiting him from leaving his assigned work area without permission from his supervisor or the department head.  Three months later, Staub was discharged by the Vice President of Human Resources for again leaving his work area without permission.  Staub disputed the basis for the discharge, stating to the Vice President of Human Resources that he left a message for his department head regarding his whereabouts.  The complaint, however, was not investigated. 

Although the Vice President of Human Resources who made the decision to discharge Staub was not shown to have any hostility toward his military obligations, Staub argued that the Vice President’s decision was influenced by the biased supervisor and department head.  Rejecting the argument that the bias did not influence the decision, the Court explained, “if the supervisor performs an act motivated by [discriminatory] animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable.”  Thus, even though the decision maker may have been unaware of the supervisor’s discriminatory animus, the adverse employment action was deemed to have been taken unlawfully.

While the implications of the decision generally are negative for employers, this “cat’s paw” theory can provide a basis for liability only if the purported biased supervisor’s action was the proximate cause of the adverse action.  The Court noted, “if the employer’s investigation resulted in adverse action for reasons unrelated to the supervisor’s original biased action [], then the employer will not be liable.”  In effect, the question is whether the discriminatory conduct of one manager caused a wrongful decision to be made by another who is an “innocent” actor.  To avoid such exposure, employers should investigate thoroughly reports of misconduct before making discharge decisions, especially where the accused worker claims discrimination by lower level supervisors.

Fifteen months after nurses at Lee’s Summit Medical Center voted  68 – 59 to decertify the National Nurses Organizing Committee (“NNOC”), the NNOC has announced it will withdraw as the unit’s bargaining agent.   The NNOC’s decision to withdraw came days before the second certification election was scheduled to be held.  Approximately 130 nurses would have been eligible to participate in the second certification election. 

Nurses at Lee’s Summit Medical Center have had union representation since 2000.  The NNOC’s decision to withdraw as the unit’s bargaining agent follows a September 2010 vote where non-nursing employees of the Medical Center voted against representation by the Service Employees International Union.  

Thanks to Nora Kaitfors for this submission.

 

Like other employers trying to make careful hiring decisions,  health care employers often make pre-hire inquires regarding applicant credit histories and base  hiring decisions, in part, on credit reports obtained.  In a growing trend, many states have proposed legislation prohibiting or substantially limiting the practice.  Nebraska recently introduced two bills to limit the use of credit checks for this purpose.

State Senator Annette Dubas introduced LB 113 which would add the use of credit histories or reports to Nebraska’s list of unlawful employment practices. The bill contains exceptions where information in a credit check directly relates to the occupation for the job being sought.

State Senator Brenda Council of Omaha introduced  LB530 which would prohibit employers from inquiring about or using an employee’s or prospective employee’s credit history as a basis for employment, recruitment, discharge or compensation.  The proposed legislation is entitled the “Employee Credit Privacy Act.”  This proposed bill makes it unlawful for an employer to order or obtain an employee’s or applicants credit history from a consumer reporting agency  unless it is a bona fide occupational requirement.  The Bill provides a pre-determined list of bona fide occupational requirements.  This bill also contains an anti-retaliation provision. Both bills were recently referred to the Business and Labor Committee for hearing. 

Nebraska is just one of many states that has proposed legislation prohibiting employers’ use of  employees or applicants credit history in basing an employment decision.  Currently, four states have enacted legislation including Hawaii, Washington, Oregon and Illinois that limit credit checks for employment purposes and approximately 17 states have proposed similar legislation.  Employers with multi-state operations need to review periodically their background check procedures to ensure they are not running afoul of individual state background check legislation. 

Special thanks to Chad Richter, Partner in Jackson Lewis’ Omaha, Nebraska office, for this contribution.

 

           The U.S. Supreme Court recently addressed medical residents are “students” exempt from FICA taxes under 26 USC § 3121(b)(10).  In a unanimous decision, dated January 11, 2011, the Court ruled that medical residents are employees rather than students and, therefore, are subject to FICA taxes.  See Mayo Found. for Med. Educ. & Research v. United States, U.S., No. 09-837, 1/11/11.   The decision addressed residency programs offered by the Mayo Foundation for Medical Education and Research, which provide stipends to doctors who have graduated from medical school and seek additional instruction in a chosen specialty.  Although residents are required to take part in formal educational activities, the majority of their time is spent caring for patients.   The Court relied heavily on an Internal Revenue Service regulation interpreting the exemption, in which the IRS stated that individuals regularly scheduled to work 40 hours per week or more cannot claim the student exemption.  Chief Justice Roberts wrote, “Mayo does not dispute that the Treasury Department reasonably sought a way to distinguish between workers who study and students who work. Focusing on the hours an individual works and the hours he spends in studies is a perfectly sensible way of accomplishing that goal.” 

            Health care employers promptly should review pay practices with respect to doctors in residency programs to ensure appropriate tax withholdings.    Also, to the extent medical residents are classified as independent contractors, rather than employees, that classification should be carefully reviewed.  In any event, employees engaged in internship or resident programs, whether or not licensed to practice prior to the commencement of the program, may be exempt professionals under the Fair Labor Standards Act if they enter such programs after the earning of the appropriate degree required for the general practice of their profession.   See 29 CFR 541.304.    

In a move seen to make union organizing easier, the National Labor Relations Board has signaled it may be changing its  standards for long-term healthcare bargaining units so that narrow groups of nursing and assisted living facility employees can be approved for NLRB elections and collective bargaining.  It has invited interested parties to file amicus briefs by February 22, 2011.  All submissions must be e-filed at http://mynlrb.nlrb.gov/efile.

The NLRB’s announcement, approved by three of the four members, was made in a  case involving a  Mobile, Alabama,  nursing home. The union petitioned for a unit of all Certified Nursing Assistants (CNAs).  The employer argued that such a unit was too narrow and that the only appropriate unit would be one covering all nonprofessional service and maintenance employees. 

While the NLRB typically requires such a broader unit, in this case, the Regional Director found the union could carve out a unit limited to CNAs.  The employer appealed to the NLRB in Washington, D.C.

The  Board has invited comments on eight specific questions to help it decide whether the standards for determining long-term care units should be changed to encourage “employee free choice and collective bargaining in non-acute health care facilities.” 

One question is  whether the NLRB should extend its acute care hospital rule to long-term care facilities.  The NLRB’s 1989 “acute care rule” defined eight appropriate bargaining units in acute care hospitals.  Although the Board in 1989 said it would not apply these unit rules to long-term care providers , it now wants to revisit the idea, citing the “radical transformation” (its words) of the long-term care industry in the past 20 years. It noted that long-term care employees have demonstrated a “persistent interest” in union organizing with almost 3,000 petitions filed in the last decade.

Some of the NLRB’s eight questions should raise concerns for long-term care providers. For example, one asks whether a unit comprised of a single job classification or “all employees performing the same job in a single facility” should be considered presumptively appropriate.  If the Board adopted such a “rule of interpretation ,” employers could expect a proliferation of units, one for each job classification, i.e., one for CNAs, one for Activity Assistants, one for Dietary Aides, and so on.  Unions would carve a facility into small, easy-to-organize voting units. A long-term care provider might have to negotiate and administer six or more labor contracts, each with a different expiration date.

No matter what the changes may be, they can be expected to result in strict  interpretations that minimize unit litigation and expedite elections.  That will almost assuredly mean higher union win rates.

In opposition to the Board majority’s position, Member Brian Hayes said the majority had overstepped its bounds. Its decision, he said, clearly represents broad rulemaking, without the “inconvenience” of complying with the various safeguards and review required by the Administrative Procedures Act.   Hayes predicted this move is a “prelude to what will likely result in the substantial increase of units in the non-acute healthcare industry….”

The Church Amendment (42 U.S.C. §300a-7(c)) provides that no entity receiving federal funding may discriminate in the employment of any physician or health care personnel because he or she performed or refused to perform a lawful sterilization procedure or abortion.  An Operating Room Nurse filed suit against a New York hospital arguing that the hospital violated her rights under the “Church Amendment” because her job duties required her participation in performing late-term abortions.

The hospital had a written policy allowing employees to register conscientious objections to abortions and other procedures.  As part of the hospital’s hiring process the nurse confirmed her unwillingness to participate in abortions.  She nevertheless later claimed to have been compelled to participate in a late-term abortion.  When the nurse made an official complaint of the incident, she alleged that her supervisors attempted to coerce her to provide written confirmation of her willingness to assist in emergency abortions (even though the hospital’s objection policy lacked an “emergency” exception).

In July 2009, nurse sued the hospital in federal court, alleging violation of rights protected by the Church Amendment.  The District Court granted the hospital’s motion for summary judgment, dismissing the plaintiff’s claims on the ground that the Church Amendment did not create a private right of action. 

Dismissal was affirmed by the Second Circuit Court of Appeals, which held that a private right of action is inferred only when there is “explicit evidence of Congressional intent” to create a private right and a defined private remedy.  Here, the Second Circuit held, there is “no evidence that Congress intended to create a right of action.”  Accordingly, the plaintiff’s claim against the hospital was dismissed.

The lessons are clear for employers.  Written policies should define clearly proscriptions and obligations, as well as the protocol for reporting potential violations.  Moreover, policies should be implemented without exception. 

On December 1, 2010, NNU’s affiliate, the Michigan Nurses Association (MNA) ratified a new collective bargaining agreement with Sparrow Hospital in Lansing calling for penalties of up to $1,200 in cases where the Hospital fails to rectify a staffing shortage.   The Union claims that this new staffing language is “second to none.”

Economic terms of the settlement were not as robust with pay increases limited to 1.5% for each year of the three year agreement.  In addition, health benefit costs will increase, although only to 8% on January 1, 2011. The union claims these costs are still less than other employee groups have had to pay.

The parties’ last contract expired in October.  Operating without a contract, MNA called for a strike which was scheduled for November 22.  This strike was averted on November 19th, when the Hospital and Union reached a tentative deal on a new contract.

Responding to healthcare providers’ concerns about the need for more flexibility in the direct supervision of hospital outpatient services, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update policies concerning physician supervision requirements for hospital outpatient services.  The 2011 Outpatient Prospective Payment System (OPPS) Final Rule became effective January 1, 2011. 

Significant changes to the CMS physician supervision policy include the following:

  • Revising the definition of direct supervision;
  • Delaying enforcement of supervision requirements for outpatient therapeutic services for CMS-certified Critical Access Hospitals (CAHs) and small rural hospitals;
  • Finalizing a new category of services requiring direct supervision only for “initiation of the service”; and
  • Announcing the creation of an independent committee to determine required supervision levels for various individual outpatient therapeutic services.

Redefining Direct Supervision

Prior OPPS rules had established, as a condition of payment, certain requirements for physician supervision of hospital and outpatient diagnostic and therapeutic services.  CMS defined supervision in the hospital outpatient setting by drawing on three primary levels of supervision:  general, direct, and personal. 

A hospital or outpatient diagnostic or therapeutic service requiring direct supervision meant that a supervising physician or non-physician practitioner (NPP) must be present on the same campus or in the office-campus department of the hospital to provide the required supervision.  The 2011 Final Rule modifies this definition to require only that the supervising physician be “immediately available,” meaning “physically present, interruptible, and able to furnish assistance and direct throughout the performance of the procedure but without reference to any particular physical boundary.”  This is a positive change that recognizes that hospitals need additional flexibility in providing services.  Nevertheless, hospitals should proceed with caution as they must still show that supervising physicians are immediately available and interruptible.

Delaying Enforcement of Supervision Requirements

CMS had announced on March 15, 2010, that it would not enforce supervision requirements for therapeutic services provided to outpatients in CAHs from January 1, 2010, to December 31, 2010.  The 2011 OPPS Final Rule extends this policy through calendar year 2011 and applies the non-enforcement policy to small rural hospitals.  CMS defines small rural hospitals as those with 100 beds or fewer and either are geographically located in a rural area or paid under the hospital outpatient prospective payment system with a rural wage index.

With this policy extension to rural hospitals, CMS may be acknowledging the challenges rural hospitals face, particularly as to the practitioners shortage, that make it difficult for rural hospitals to meet physician supervision requirements.

New Categories of Services Requiring Direct Supervision

The 2011 Final Rule identifies a new limited category of 16 outpatient “non-surgical and extended duration therapeutic services,” including observation services for which direct supervision is required for initiation of the service.  After initiation of service, only general supervision will be required.  CMS defines initiation of the service as “the beginning portion of a service ending when the patient is stable and the physician . . . believes the remainder of the service can be delivered safely under general supervision.”    

New Committee to Evaluate Supervision Requirements

The 2011 Final Rule announces that a new independent committee will be formed to review supervision requirements for all outpatient services.  CMS also indicated that it will establish through future rulemaking a process to consider industry requests for supervision levels other than direct supervision for specific outpatient services. 

The use of credit checks by employers as an employment selection criterion is under scrutiny both federally and at the state level.  The U.S. Equal Employment Opportunity Commission, on October 20, 2010, met to review potential policy implications of employers’ use of such credit checks.  The agency has already brought a legal challenge to the use of such records for having an adverse disparate impact against African-Americans.  Meanwhile, some states are moving in the direction of restricting the use of credit checks for making employment-related decisions.

On August 10, 2010, Illinois Governor Pat Quinn signed Bill 4658, which will become the Employee Privacy Act.  It will significantly restrict the rights of Illinois employers to conduct credit checks and use the information for hiring or other employment-related decisions.   The Act, effective January 1, 2011, will generally prohibit employers from (1) inquiring into an applicant or an employee’s credit history, (2) ordering a credit report from a consumer reporting agency, or (3) taking any employment action (such as refusing to hire someone) because of the individual’s credit history or credit report. 

Some types of employers are specifically exempted from the Act; also, under certain circumstances, employers still will be able obtain and use information from a credit report. 

The following types of employers are specifically exempted from coverage:

  • banks and other financial institutions;
  • businesses engaged in insurance or sureties;
  • state law enforcement agencies;
  • state and local government agencies that require credit reports; and
  • qualified debt collection agencies.

Also, any business can conduct a credit check if it can establish credit worthiness is a bona fide job qualification.  To do so, the employer will have to show at least one of the following: 

  • The position involves unsupervised access to cash or marketable assets with a value of $2,500 or more.  Marketable assets are defined as company property that is specially safeguarded from the public and to which only managers and select employees have access.  The Act expressly states that the employer’s fixtures, furnishings or equipment are not marketable assets.
  • The position involves power to sign for business assets of $100 or more per transaction.
  • The position is a managerial position that involves setting the direction or control of the business.
  • The position includes access to protected information, such as personal or confidential information, financial information, trade secrets or State or national security information.  These terms are defined in the Act. “General proprietary information” like employee handbooks, policies or “low-level” strategies are not trade secrets under the Act.
  • The United States Department of Labor or the Illinois Department of Labor has promulgated criteria establishing that credit worthiness is a bona fide job qualification for the position.
  • State or federal law requires the individual’s credit history or requires that the individual be bonded or otherwise secured to hold the position.

The Act does not provide for enforcement by any state agency; a private cause of action is authorized instead.  Under the Act, an individual can sue in state court for injunctive relief and damages, as well as costs and attorneys’ fees. 

Employers are expressly prohibited from requiring individuals to waive the Act’s protections.  Any such waiver will be invalid and unenforceable.  In addition, the Act prohibits employers from retaliating or discriminating against individuals who bring a claim under the Act, testify or participate in an investigation brought under the Act, or oppose a violation of the Act.

Finally, the Act restricts access to and use of credit information only.  It does not prevent an employer from obtaining a background or investigatory report from a consumer reporting agency as allowed under the Fair Credit Reporting Act, as long as the report obtained does not include credit information.

In McCann v. Iroquois Mem. Hosp., No. 08-3420 (7th Cir. September 12, 2010), the Seventh Circuit Court of Appeals addressed Plaintiffs’ allegations that the Hospital, its Board and CEO violated the Federal Wiretap Act, 18 U.S.C. § 2511, 2520, and various state laws.  According to the Hospital, a doctor inadvertently left his dictation machine running after he left the office, resulting in the clandestine recording of a conversation between two individuals: (1) a radiologist with Hospital privileges; and (2) the Hospital’s former director of physicians’ services.[1]  During this “secretly” or accidentally recorded conversation, the two individuals criticized the Hospital’s administration.  The recording made its way to the transcription staff and the transcription made its way to the hospital’s Chief Executive Officer.  After reading the transcript and listening to the recording, the CEO informed the Board of Trustees about the conversation.  Shortly thereafter, the former director of physicians’ services was banned from entering the Hospital for anything other than healthcare.  Similarly, the radiologist’s privileges were terminated.[2]  Together, they filed suit alleging that the recording of the conversation violated the Federal Wiretap Act and various state laws.

 The Hospital, its Board and CEO moved for summary judgment, arguing that the recording was not made intentionally – which is necessary to establish a violation of the Federal Wiretap Act.  The District Court granted summary judgment on the Wiretap Act claim and declined to exercise supplemental jurisdiction over the remaining state law claims.  After denial of Plaintiffs’ motion for reconsideration, the Seventh Circuit Court of Appeals reversed, finding a genuine issue of material fact as to whether the recording was made intentionally, and thus in violation of federal law.  

*          *          *

Before taking an adverse employment action, employers must consider not only the basis for their decision, but the manner of collecting the information that led to the decision.  Although not all states recognize a cause of action for privacy violations, Federal legislation, such as the Federal Wiretap Act, may prevent information from being collected in a certain manner.  Further, while there generally is nothing unlawful about discharging or taking other adverse action against employees because they have been critical of management, local whistleblower statutes must first be considered.  In New York, for example, prior to taking adverse action against an employee who has openly criticized management, an employer must consider whether the criticism alleged an actual violation of a law, rule or regulation and whether such violation presents a “substantial and specific danger to the public health or safety.”  If so, the employee may be subject to protection under Section 740 of the New York Labor Law.  Moreover, in the healthcare setting, New York’s whistleblower law is altered to protect from retaliation persons who “perform[] health care services” and who disclose violations of “improper quality of patient care” “Improper quality of patient care” is defined in Section 741 of the New York Labor Law as “any practice, procedure, action or failure to act” in violation of any law, rule or regulation where such violation may present a “substantial and specific danger to public health or safety or a significant threat to the health of a specific patient.”  Also, unlike section 740, an employee may prevail on a section 741 claim if the employee reasonably believes, in good faith, that the employer’s action constitutes improper quality of patient care; this belief does not need to prove correct.  Other states may have protections for employees who voice concerns, no matter how the employer learns of them.

 

[1] The former director of physicians’ services continued to work for Independent Physicians Association (“IPA”) and was at the Hospital to garner a signature from a doctor in connection with the IPA. 

[2]  The radiologist laws able to remain at the Hospital solely by virtue of an injunction entered in a separate lawsuit.  However, it was alleged that patients rarely were referred to him.