Issue link: https://viewer.e-digitaledition.com/i/1488824
T HER E I S A common misconception that all medical professionals are exempt from overtime compensation. The Fair Labor Standards Act (FLSA) provides an exemption from the Act's minimum wage a nd over time requirements for any employee employed in a "bona fide professional capacity." To meet that test, the employee's primary duty must be the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellec- tual instruction. C le a rly, l ic en s e d phy sici a n s a r e considered professiona l employees. A nd so a re reg istered nurses, nurse practitioners, physician assistants and certain certified medical technologists. Licensed practica l nurses a nd other similar healthcare employees, however, generally do not qualify as exempt profes- sional employees because possession of a specialized advanced academic degree is not a standard prerequisite for entry into those occupations. In addition to meeting the test of a bona fide medical professional, the exempt employee must also be paid on a salary basis; however, the salary requirement does not apply to those who practice medicine (e.g., physicians) and while it may be argued that NPs and PAs practice medicine (since they can diagnose and treat), the courts interpreting the FLSA have generally held that they do not. Thus, if the NP or PA is compensated on an hourly basis, the FLSA requires the payment of overtime compensation for work in excess of 40 hours per week. In the absence of unusual facts and cir- cumstances, the employment of an NP or PA on a fixed salary should be exempt from the FLSA overtime requirements. Some healthcare employers may be tempted to tr y to avoid the statutor y overtime requirements by structuring the hourly compensation arrangement as an independent contractor relationship rather than an employment relationship. Independent contractors are not protected by the FLSA. But the government is wise to attempts to skirt the wage and hour laws merely by calling a worker an independent contractor. The IRS, and more recently the Workers' Compensation Board, have been aggressive in recharacterizing indepen- dent contractors as employees, with the imposition of fines, penalties and interest against the offending employer. That is not say t hat t here ca n not be legitimate independent contractor arrangements. But the employer who wishes to use independent contractors should make sure that those contractors meet certain requirements: They should be truly independent with the right to control the means of their work; maintain their own insura nce; have their own business cards and business identity; and preferably perform services for more than one medical practice. What if the healthcare employer enters into an independent contractor agree- ment with the professiona l's limited liability company (LLC) or corporation? Will that pass muster and thus exempt the hourly compensation from the over- time requirements? The answer is a clear "maybe". The cour ts w i l l look to the economic reality of the arrangement and the designation of the contract between the par ties will not be determinative. The fact that compensation payments are made to an entity rather than a rea l person, and issued a 1099 instead of a W-2, does not insulate the arrangement from potentia l recharacterization. A medica l practice that has hourly c omp e n s a t ion a r r a n ge m e nt s w it h healthcare professionals without paying over time compensation when ea rned creates not only a n ongoing lega l a nd financia l risk but one that could derail the sa le of the practice in the future. Hospitals, private equity venturers and other buyers conduct very thorough due diligence when under ta king acquisi- tions. Part of the due diligence will be a n audit of employ ment practices to ensure that federa l and state wage and hour laws have been complied with. If the potentia l acquirer believes that the medica l practice has significant lega l exposure from noncompliance, it may have leverage to extract large financia l concessions, or in the worst case to walk away from the dea l. n Bruce Wood is a member at CCB Law, a boutique law firm focused on providing counsel to physicians and healthcare p rofess io n al s . He can be rea ch ed at 315-477-6292 or bwood@ccblaw.com. BEWARE THE OVERTIME TRAP BY BRUCE WOOD, ESQ. IT'S NO SECRE T THAT THERE IS A NATIONWIDE SHORTAGE OF SKILLED MEDICAL PROFESSIONALS, PARTICUL ARLY NURSES AND PHYSICIAN A SSISTANTS, WHICH HA S RESULTED IN LONGER WORK WEEKS FOR MANY EMPLOYEES. THOSE STAFFING SHORTAGES WILL NOT BE RESOLVED SOON, AND HE ALTHCARE EMPLOYERS NEED TO BE CAREFUL TO AVOID RUNNING AFOUL OF FEDER AL AND STATE WAGE AND HOURS L AWS GOVERNING THE PAYMENT OF OVERTIME COMPENSATION. M D N E W S . C O M /// M D N E W S C E N T R A L N E W Y O R K n 2 0 2 3 1 1