COMPENSATION AND BENEFITS REGULATIONS

These laws influence the compensation (salary) and benefits provided to employees.

Social Security Act of 1935

The Social Security Act is a federal law that covers all private and most public sector employees. This act laid the groundwork for unemployment compensation in the United States. Social Security is paid by the employer and the employee in equal payroll taxes and Medicare participant premiums. Social Security is composed of several different, but related, programs: retirement, disability, dependent and survivor’s benefits, as well as health benefits under Medicare. The amount paid to the retiree or disabled or dependent survivor is calculated based on the worker’s average wages earned during his or her working life.

TABLE 8.7 Compensation and Benefits Laws

Fair Labor Standards Act (FLSA) of 1938

This is the main statute regulating employee benefits. The Fair Labor Standards Act (FLSA) establishes the minimum wage, requires payment for overtime work, and sets the maximum hours employees covered by the act may work. The act covers all nonmanagement employees in both for-profit and not-for-profit institutions.

The employer must pay one and one-half times the regular hourly pay rate for any work the employee performs over 40 hours in a seven-day (one-week) period. FLSA uses the single workweek to compute the hours of overtime. The law does not permit averaging hours over two or more weeks. Thus, an employee who works 35 hours one week and 45 hours the next—for a weekly average of 40 hours for the two weeks—must still be paid the overtime rate for five hours.

One exception allows hospitals to negotiate an agreement with their employees to establish a work period of 14 days. In this case, overtime pay would go into effect for employees who work more than 80 hours in the 14-day period. It is also acceptable to require fewer than 40 hours a week to qualify for overtime payment or a higher rate than one and one-half times the regular hourly pay, but the employer cannot require more hours or pay less than the law requires.

This law affects only full-time hourly employees. Some workers, such as management or salaried employees, are exempt from the minimum wage and overtime requirement of the FLSA. In addition, part-time employees and employees who are part of a time-sharing program generally do not benefit from this law.

The Fair Pay Act of 2013 amends the Fair Labor Standards Act (FLSA). This regulation guarantees overtime payment to employees earning less than $23,600 annually. Some employees, such as licensed practical nurses, are guaranteed overtime payment under this regulation. Registered nurses may also qualify depending on their status as either hourly or salaried. There can be steep fines for failure to make the required overtime payments.

Equal Pay Act of 1963

The Equal Pay Act , an amendment to the Fair Labor Standards Act, makes it illegal for an employer to discriminate on the basis of gender in the payment to men and women who are performing the same job. Equal work means work that requires equal skill, responsibility, and effort under the same or similar working conditions. For example, male orderlies cannot be paid more than female orderlies (Odomes v. Nucare, Inc., 653 F.2d 6th Cir. 1981).

MED TIP

Employees generally “earn” a certain number of paid sick days per year based on the number of hours worked. These can be saved up and used when the employee has to take time off for an illness or surgery. Sick days are not part of earned vacation days. In general, they cannot be used except for sickness.

Unemployment Compensation

The Social Security Act was the origin of this insurance program. Today, employers pay taxes into a state unemployment compensation plan that covers employees who are unable to work through no fault of their own. The unemployment compensation laws provide for temporary weekly payments for the unemployed worker. State unemployment compensation insurance taxes for individual employers vary from state to state according to state laws and the turnover experience of the business.

In order to receive unemployment insurance, the employee must have worked for an employer who has paid, or was required to pay, unemployment compensation taxes. However, certain types of employers are exempt, such as employers for religious, educational, or charitable organizations; employers for small farming operations; employers of family members; and employers who use federal government labor.

While state unemployment insurance law provides temporary payments for those who lose their jobs, if an employee is fired for good cause, the employee is not entitled to unemployment benefits. In the case of Love v. Heritage House Convalescent Center, the court found that a nursing assistant was properly denied unemployment benefits because she was terminated for poor work attendance. According to the employee’s personnel record, the convalescent center had already shown great tolerance in allowing the employee to continue working as long as it had (Love v. Heritage House Convalescent Ctr., 463 N.E.2d 478, Ind. Ct. App. 1983).

Unemployment compensation was also denied in a case in which a nurse’s aide was discharged for leaving a resident unattended and unrestrained on a commode and for using the medication of one patient (a medicated cream) on another patient (Starks v. Director of Div. of Employment Section, 462 N.E.2d 1360, Mass. 1984).

Federal Insurance Contribution Act (FICA) of 1935

The Federal Insurance Contribution Act is the oldest act relating to compensation. Under FICA, employers are required to contribute to Social Security plans for their employees. There is a severe fine if the payment by the employer is not made on time. This act also requires detailed record keeping documenting the employer’s payment. The key to the proper implementation of this act is to hire a trusted office manager.

Workers’ Compensation Act

The Workers’ Compensation Act protects workers and their families from financial problems resulting from employment-related injury, disease, and even death. Under the law, employers typically pay into a fund to help cover costs when an employee is hurt or sustains an injury arising in the course of employment. Examples include a back injury, or a work-related disease, such as carpal tunnel syndrome from improper or prolonged computer keyboard usage.

The goal of workers’ compensation is to get the employee back to work as soon as possible. COBRA may allow for a retraining opportunity if the injury results in permanent inability to work in the same job. If there is a health problem within the first three months of employment on a new job, the previous employer may have to pay the workers’ compensation, as most of the benefits were paid into the employee’s fund by that employer. Some medical practices only handle patients with workers’ compensation injuries. Workers’ compensation programs are administered at the state level with no federal involvement or mandatory standards.

Under the Workers’ Compensation Act, an employee must submit a written notice of the injury to the employer. Generally, an employee will receive only a partial salary, such as two-thirds of salary, as compensation.

Workers’ compensation benefits are generally available even if the employee is at fault for his or her injury, but an employee who has violated hospital policy is not eligible to receive benefits. In Fair v. St. Joseph’s Hospital, the hospital employee was disqualified from receiving compensation because he violated the policy by fighting with a coworker (Fair v. St. Joseph’s Hosp., 437 S.E.2d 875, N.C. App. 1933).

Even if an employee is covered by workers’ compensation, the employee may still sue and recover for injuries caused by nonemployees. For example, in a 1994 case in California, a psychiatric nurse sued a psychiatric patient who kicked her in the abdomen, causing injury to her unborn child. The court ruled that the workers’ compensation law did not bar this lawsuit (Agnew-Watson v. County of Alameda, 36 Cal. Rptr. 2nd 196, CT. App. Cal. 1994).

Employee Retirement Income Security Act (ERISA) of 1974

The Employee Retirement Income Security Act (ERISA) regulates employee benefits and pension plans. Prior to the passage of ERISA, widespread abuse of pension plans led to their collapse, leaving retired employees without the pension benefits their companies had promised. ERISA responded to this problem by requiring employers to put aside money that can be used only to pay future benefits. ERISA also guarantees vesting of pension plans.

Vesting refers to a certain point in time; such as after 10 years of employment, when an employee has the right to receive benefits from a retirement plan. Under ERISA, employees who stay with a company for 10 years are entitled to 50 percent of the employer’s retirement plan even if they leave the company and take another job. The employee is entitled to 100 percent of the employer’s pension contribution after 15 years of employment, when he or she becomes fully vested. In some cases in the past, employees had been laid off just before they become vested. ERISA now prohibits this practice.

Family and Medical Leave Act (FMLA) of 1994

The Family and Medical Leave Act (FMLA) allows both the mother and father to take a leave of absence of up to 12 weeks, in any 12-month period, when a baby is born. The employee’s job, or an equivalent position, must be available when he or she returns to work. In almost all cases, the leave is without pay. The FMLA also requires employers to provide unpaid leave for up to 12 weeks to employees who request leave for their own or a family member’s medical or family-related situation, such as birth, death, or adoption.

The company must maintain the employee’s health coverage while the employee is on a family medical leave. The employee must be returned to the original or equivalent position he or she held before going on the leave. In addition, there cannot be any loss of employment benefits that accumulated prior to the start of the leave.

CONSUMER PROTECTION AND COLLECTION PRACTICES

The consumer protection and practices laws serve to protect the consumer from unfair practices. See Table 8.8 for a listing of these laws.

Emergency Medical Treatment and Active Labor Act (EMTALA)

The Emergency Medical Treatment and Active Labor Act (EMTALA) is a section of the Consolidated Omnibus Budget Reconciliation Act (COBRA) dealing with patient dumping , a slang term for transferring emergency patients from one hospital to another if the patient does not have health insurance or is unable to pay for services.

TABLE 8.8 Protection and Collection Practices

Patients entering a hospital emergency room must now be stabilized before they can be transferred to another facility. If the patient cannot be stabilized then he or she can be transferred to a regional trauma center without incurring an EMTALA violation. According to this law, if a hospital is reported for patient dumping, the person doing the reporting (the whistleblower) may not be penalized. The government may impose stiff fines and even terminate Medicare agreements if the hospital is determined to have violated EMTALA. In addition, the patient can also sue the hospital. A physician may also be at risk for legal action if he or she misrepresents the patient’s condition. However, EMTALA does not apply to health maintenance organizations, private clinics, or private physicians’ offices. The practice of patient dumping has significantly diminished since the passage of EMTALA.

Fair Credit Reporting Act of 1971

The Fair Credit Reporting Act establishes guidelines for use of an individual’s credit information. If a patient has been denied credit based on a poor rating from a credit agency, the patient must be notified of this fact and given the name and address of the reporting agency. The agency must disclose the credit information to the consumer, who may correct and update this information.

Equal Credit Opportunity Act of 1975

The Equal Credit Opportunity Act prohibits businesses, including hospitals and medical offices, from granting credit based on the applicant’s race or gender—unfair treatment referred to as discrimination. This law mandates that women and minorities must be issued credit if they qualify for it, based on the premise that if credit is given to one person, it should be given to all persons who request it and are qualified.

Truth in Lending Act (Regulation Z) of 1969

The Truth in Lending Act (Regulation Z) requires a full written disclosure about interest rates or finance charges concerning the payment of any fee that will be collected in more than four installments. This is also called Regulation Z of the Consumer Protection Act. Installment payments are often used for orthodontia, obstetrical care, and surgical treatment. It is legal to include a finance charge if a patient pays the bill in installments. However, few physicians and dentists require this charge.

Fair Debt Collection Practices Act of 1978

The Fair Debt Collections Practices Act prohibits unfair collection practices by creditors (institutions or persons who are owed money). For example, the Federal Communications Commission (FCC) has issued guidelines for the specific times that credit collection phone calls can be made. It also prohibits telephone harassment and threats. Under this law, telephone calls for purposes of collections must be made between the hours of 8:00 a.m. and 9:00 p.m., with no weekend calls ( Figure 8.4 ).

Figure 8.4 Collection Calls are Made Between 8:00 a.m. & 9:00 p.m.

Table 8.9 provides some guidelines for collection efforts.

Using a Collection Agency

Medical offices and hospitals would not be able to remain in business if patients didn’t pay their bills for medical care. However, fair collection practices must be honored.

TABLE 8.9 Guidelines for Collection Efforts

Professional collection agencies are available when all other attempts to collect unpaid bills fail. The account should always be reviewed with the physician or head of the medical practice before turning it over for collection.

Once the patient is told the account is going to a collection agency, it must, by law, go. After the account has been turned over, no further collection attempts can be made by the physician’s office or hospital—that would be considered harassment. If the patient should contact the office or hospital after the account has been turned over for collection, the patient should be referred to the collection agency.

MED TIP

Personnel involved in the billing and collections operations of any facility must have a full understanding of the laws regulating the collection process.

Bankruptcy

When patients become unable to pay their debts, they may file for bankruptcy. Bankruptcy is a legal method for providing some protection to individual debtors who owe money by establishing a fair method for distribution of the debtor’s assets to all the creditors. If a patient files for bankruptcy, a court-appointed trustee may place the patient’s assets in a special fund. The trustee then distributes the funds according to a predetermined method. Once a debtor files for bankruptcy a creditor , to whom money is owed, such as a physician who has an outstanding debt owed by the patient, may no longer seek payment from the patient but must instead file a claim in bankruptcy court at a later date.

MED TIP

A creditor who fails to comply with bankruptcy laws, such as by harassing the debtor, can be cited for contempt of court.

Federal Wage Garnishment Law of 1970

Garnishment refers to a court order that requires an employer to pay a portion of an employee’s paycheck directly to one of the employee’s creditors until the debt is resolved. The Federal Wage Garnishment Law restricts the amount of the paycheck that can be used to pay off a debt.

Claims against Estates

When a patient dies, a bill should be sent to the estate of the deceased. It is important to follow up with the collection of bills to prevent the impression that the physician was at fault in the patient’s death. There is generally a specific time limit allowed when filing a claim against an estate. The probate department of the superior court in the county that is handling the estate can provide information on the time limits and also the name of the administrator of the estate.

The Statute of Limitations

This statute defines how long a medical practice has to file suit to collect on a past-due account. Because the time limit varies from state to state, an attorney should be consulted to determine the particular state’s law. If an aging account is more than three years old, the creditor should investigate the state’s statute of limitations before spending time, effort, and money to collect the debt. Because there is a statute of limitations on collecting a debt, it is important to attempt any debt collection as soon as possible.