High Court Arbitration Ruling a Boon for Health-Care Sector

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By Meg McEvoy

The Supreme Court’s decision holding that employers can enforce individual arbitration agreements may provide health-care providers facing wage and hour class actions with some relief.

The Supreme Court held May 21 in a 5-4 decision that employers can bar workers from going to court or joining together in class actions via agreements that require employees to individually arbitrate claims. Attorneys say the decision has impacts for class action litigation in the health-care industry, which has been vulnerable to wage and hour litigation that can drain providers of millions of dollars.

“The health-care industry is particularly susceptible to class and collective actions because you have large groups of workers in the same position who could potentially bring claims,” Edward Berbarie, a labor and employment law specialist and partner with Littler Mendelson in Dallas, told Bloomberg Law.

Wage and Hour in Health Care

Health care is among the industries the Department of Labor has identified as having a higher-than-average volume of wage and hour violations. In fiscal year 2017, health-care wage and hour violations pursued by the DOL totaled 1,288 cases, covering 15,374 employees, with $12.3 million in back wages paid by health-care entities, according to the DOL. In FY 2014, the department recovered back wages of $17.7 million in the health-care industry.

Yet agency enforcement figures across the health-care sector pale in comparison to the settlements reached in plaintiffs’ lawsuits against providers.

In 2015, a home health-care provider agreed to pay $8 million to settle claims on behalf of 2,000 registered nurses and physical, occupational, and speech therapists who were paid under a “per-visit” model that plaintiffs alleged violated overtime laws (Tomkins v. Amedisys, Inc., D. Conn., No. 3:12-cv-1082, preliminary settlement filed 9/18/15).

A class of registered nurses won a $3.5 million settlement in 2013 against a Wisconsin health-care system over claims they weren’t paid for on-duty meal periods (Fosbinder-Bittorf v. SSM Health Care of Wis., Inc, 2013 BL 293779, W.D. Wis., No. 3:11-cv-592, settlement approved 10/23/13).

And a federal district court in Massachusetts in 2013 approved a $2.2 million settlement on behalf of 13,000 plaintiffs in jobs from custodians to professional staff nurses for overtime violations and other allegations.

In that case, plaintiffs who opted into the class received a minimum of $100, and the named plaintiff received $2,500, while nearly $1 million went to attorneys’ fees, litigation expenses, and administration fees (Cavallaro v. UMass Mem’l Health Care, Inc., D. Mass., No. 4:09-cv-40152, final approval granted 10/17/13).

Funds Diverted From Patient Care

Defense attorneys say large class settlements are particularly concerning for the health-care industry because they divert funds away from patient care.

“Many of [these] are seven-figure settlements, if there’s any ‘there’ there, which typically results in millions of dollars paid to the attorneys,” Adam Abrahms, a partner at Epstein Becker Green in Los Angeles, and a member of both the firm’s labor and employment and health-care practices, told Bloomberg Law. “Allowing a plaintiff’s lawyer to take millions of dollars out of the patient care pot is highly troublesome.”

Plaintiffs’ attorneys, on the other hand, say class actions are crucial for employees bringing both wage and hour and other types of employment law claims.

“Many of the claims that workers may have available under federal law are ones that they either need to or would much prefer to pursue collectively, either because they have a fear of retaliation, or the costs of litigation are such that they cannot be borne by one person,” Joseph M. Sellers, chair of the civil rights and employment law group at Cohen Milstein in Washington, told Bloomberg Law.

Some employee claims, like discrimination, may not be perceptible until brought on a collective level, Sellers said. “That somebody was denied a promotion may or may not call to their attention that it was for an impermissible reason, but if they see that that has happened to a dozen other co-workers that they can learn about through a collective proceeding, they may have a different view,” Sellers said.

Sellers also said that individual arbitration may be a less efficient way for health-care entities to resolve similar claims. Bloomberg Law has reported that across industries, thousands of individual employee arbitrations that were on hold are reviving as a result of the court’s decision.

“Respectfully, I think [the court’s decision] fails to account for the special place that our civil rights and wage and hour laws occupy,” Sellers said. “If [the Epic Systems Supreme Court decision] doesn’t someday get overturned by legislative action, I think it’s ultimately going to have catastrophic consequences for many workers in the country.”

Senate Democrats have introduced bills that would reverse course on the decision. The Arbitration Fairness Act, introduced in different versions by Sen. Richard Blumenthal (D-Conn.) and by former Sen. Al Franken (D-Minn.), would prevent arbitration agreements from being enforceable in the context of employment and civil rights disputes, but such legislation would be unlikely to pass a Republican-controlled Congress.

Complex Compensation Models

Health-care businesses, particularly, can fall victim to wage and hour lawsuits because their compensation models are “more complicated than a standard employer and can involve various differentials or added payment types, like on-call pay,” Abrahms said. This results in health-care entities being caught for more technical or occasional mistakes, according to Abrahms.

Health-care employees like nurses and physicians who are eligible to bring wage and hour claims are also relatively high wage-earners, making them better prospective plaintiffs from a recovery standpoint.

A 2012 National Labor Relations Board decision cracked open the argument for class plaintiffs that the National Labor Relations Act prevented employers from enforcing mandatory arbitration agreements, because such agreements would deprive employees of their collective bargaining rights and thus violate federal law.

Now that the Supreme Court has resolved the issue in favor of employers, hospitals and other health-care entities can proceed to enforce their arbitration schemes as a litigation-management tool, attorneys say.

“The National Labor Relations Board has had its comeuppance,” Patrick J. Hoban, a labor and employment law partner with Zashin & Rich in Cleveland, told Bloomberg Law. “For all employers, class litigation waivers in mandatory arbitration agreements are more and more common, including in the health-care sector. They exist in order to protect employers against vast long term high cost class litigation.”

“Arbitration clauses find their way into many different types of health-care agreements, whether with patients, insurers, or vendors,” Abrahms said. “The continued enforceability [of arbitration agreements] under the Federal Arbitration Act benefits the health-care industry.”

The case is Epic Systems Corp. v. Lewis, U.S., No. 16-285, 5/21/18.

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