What are WPA Creditable Benefits?

Executive Summary. Home care agencies in New York are still experimenting with different ways to meet the State’s Wage Parity Act (“Act” or “WPA”) requirements. The Act requires a minimum basic wage (cash) of the applicable New York State minimum wage plus additional wages or supplemental wages (i.e., benefits) equal to another $4.09 per hour in NYC or $3.22 per hour in Nassau, Suffolk and Westchester counties (the “WPA Package”).

Options for WPA Packages. Some agencies prefer to provide the entire required amount as cash wages; that, however, causes the entire amount to be subject to employment taxes, which are an additional cost to the agency but are not creditable against the WPA Package. Other agencies provide some additional cash wages plus some non-taxable benefits, such as minimum value health plan coverage in order to avoid penalties under the Affordable Care Act. Still others provide additional benefits, creating a WPA Package that provides everything from transportation benefits to cell phone plan reimbursements.

Advantages of Benefits vs. Cash. The goal for agencies is to deliver the WPA package in a way that is tax advantaged. When this is done properly, it can be a “win-win” for the agency and the worker. The agency takes an income tax deduction for the actual cost of providing benefits and avoids employment tax costs, plus the entire amount is creditable against the agency’s WPA obligation. The worker receives the benefits at no cost and, in most cases, without tax, making the benefits more valuable to the worker than additional cash wages.

Pitfalls with Tax-free Benefits. But this win-win situation for the agency and worker is not always easy to achieve. Not everything qualifies for tax-advantaged treatment – it requires complying not only with the WPA, but also with many other federal and state laws, including the Internal Revenue Code, ERISA, the Affordable Care Act, and wage and hour laws, including the NYS Domestic Workers’ Bill of Rights. Each of these laws has specific rules about how benefits must be set-up and operated. Just because a benefit meets the standards of one law doesn’t mean it meets the standards of the other—for example, if a cell phone plan reimbursement program meets all the standards to be tax qualified under the Internal Revenue Code, it is not a creditable cost towards the WPA Package. When the requirements of all of these laws are ignored, agencies expose themselves to government audits, penalties and employee lawsuits. Agencies must consider all these laws and how they interact when choosing WPA benefits.

What to Consider When Choosing WPA Benefits to Offer. In order to take credit for a benefit, agencies may generally consider any non-wage payment that primarily benefits the employee rather than the agency. This, however, is not a very clear standard, and a number of factors must be taken into account in choosing benefit offerings. For example, some benefits provide tax benefits both to the agency and the worker; others do not. Some benefits require that a formal “plan” be established, while others can simply be set up as payroll practices without a formal plan. Some benefits will provide full dollar-for-dollar credit against the agency’s WPA obligation; others will not. Each benefit has its own characteristics, advantages and disadvantages, and tax consequences, both to the agency and the worker.

Conclusion. Choosing, setting up, and administering benefits under the WPA is not straightforward. You should carefully consider each benefit and consult with an experienced attorney representing your interests to make sure your benefit will be creditable under the WPA, tax advantaged, and not leave you exposed to audits and lawsuits under various state and federal laws. 

FordHarrison LLP advises and counsels home care agencies on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact one of the authors, Jeffrey Ashendorf at jashendorf@fordharrison.com and Stephen Zweig at szweig@fordharrison.com, of the firm’s Homecare Industry Law Group in its New York City office at (212) 453-5900. Also, please visit our blog at http://www.homecareemploymentlaw.com for additional developments and information.

The State Budget: What LHCSAs Need to Know

Authors: Stephen E. Zweig, Phillip Davidoff, Eric Su

Executive Summary. The New York State Fiscal Year 2018-19 State Budget (“Budget”) includes significant changes for Licensed Home Care Services Agencies (“LHCSAs”), limiting the amount of contracts MTLCs can enter into, threatening the continued operation of many LHCSAs, and adding further regulatory requirements for LHCSAs.

Budget Highlights

MLTCs Limited to Certain Number of LHCSAs

  • Currently, MLTCs can contract with as many LHCSAs as they choose. Effective October 1, 2018, MLTCs are limited in how many LHCSAs they can contract with. However, the Budget does not restrict how many contracts
    LHCSAs can have or how many cases LHCSAs can service from an MLTC.
  • The MLTC contract limit is determined by a formula and will be different for each MLTC. MLTCs will have separate limits for two regions in the state: (1) downstate (NYC, Long Island and Westchester) and (2) upstate (the rest of the state). The formula is based on how many members the MLTC has in each of the regions. Members include all patients of an MLTC and is not limited only to patients receiving LHCSA care.
  • Beginning October 1, 2018, the downstate region limit is one LHCSA contract for every 75 MLTC members and the upstate region limit is one LHCSA contract for every 45 members. For example, an MLTC with 4,500 members downstate and 4,500 members upstate would be allowed to have 60 LHCSA contracts downstate and 100 LHCSA contracts upstate.
  • The limit decreases the next year, on October 1, 2019, to one LHCSA contract for every 100 MLTC members downstate and one LHCSA for every 60 members upstate. Using the same example as above, an MLTC with 4,500 members downstate and 4,500 members upstate would be allowed to have only 45 LHCSA contracts downstate and 75 LHCSA contracts upstate.
  • Exemptions are limited, available only for single case agreements in select circumstances and for other reasons only at the discretion of the DOH.

LHCSAs Required to “Register” Each Year

  • Beginning on January 1, 2019, in addition to being licensed, all LHCSAs will have to register with the DOH. The DOH has not yet issued any registration materials or guidelines.
  • A $500 fee will be charged for each month a LHCSA has failed to register. If a LHCSA fails to register for two consecutive years or has a pattern of late registration, the DOH can revoke the LHCSA’s license.

LHCSAs Required to Report “Costs” to DOH

  • The DOH can require a LHCSA to report on the “costs incurred” by the LHCSA in providing services, including direct care and administrative costs.
  • On 90 days’ notice, the DOH can request any “type or amount” of cost information, including supporting documentation.
  • The owner or top executive of the LHCSA will be required to certify that all cost information submitted is accurate and correct.

Moratorium on LHCSA Licenses

  • There is a moratorium on “the processing and approval of applications seeking licensure” for LHCSAs from April 1, 2018 to March 31, 2020. It is not clear if this includes non-merger transfer of ownership applications.
  • The only exemptions are for: (1) transfers of ownership where two or more LHCSAs are merging, (2) applicants filling a demonstrated geographic, cultural, linguistic or other gap in coverage, and (3) applications filed in conjunction with an assisted living program application.

Changes to Standards for Licensing

  • The public health and health planning council (“Planning Council”) previously considered only the competence and character of the owners and operators of the applicant as a licensing standard, and was forbidden from considering
    public need or other factors.
  • The Planning Council is now required to consider the public need for the LHCSA “at the time and place and under the circumstances proposed,” as well as the finances and financial sources of the applicant. The Planning Council also now has wide latitude to consider other factors it considers “pertinent”.

Conclusion. LHCSAs may be squeezed out as MLTCs have to limit the amount of LHCSAs they can contract with to stay under the legal limits. More regulatory obligations, especially the requirements that owners or top executives certify under penalty of perjury that all cost information submitted is accurate and correct, adds civil and potentially criminal penalties to audits of LHCSAs performed by OMIG and other agencies. LHCSAs need to prepare now to get their houses in order to comply with the new regulations and position themselves to keep their MLTC contracts.

FordHarrison LLP advises and counsels home care agencies on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact one of the authors, Stephen Zweig at szweig@fordharrison.com, Phillip Davidoff at pdavidoff@fordharrison.com, or Eric Su, esu@fordharrison.com of the firm’s Homecare Industry Law Group in its New York City office at (212) 453-5900.

The State Budget: What CDPAP Fiscal Intermediaries Need to Know

Authors: Stephen E. Zweig, Phillip Davidoff, Eric Su

Executive Summary. The New York State Fiscal Year 2018-19 State Budget (“Budget”) includes significant changes for fiscal intermediaries (“FIs”) under the Consumer Directed Personal Assistance Program (“CDPAP”). Effective immediately, FIs must receive New York State Department of Health (“DOH”) approval for all advertising material and provide the DOH with cost reports upon request.

Budget Highlights

DOH Must Pre-Approve FI Advertising

  • FIs must submit all advertisements to the DOH prior to putting the advertisement into use.
  • “Advertisements” is defined broadly to include any material in any medium “that can reasonably be interpreted” as marketing the FI’s services.
  • FIs are not allowed to publish any “false or misleading” advertisements.
  • FIs must remove or stop using any unapproved or “false or misleading” advertisement within 30 days of receiving notice from the DOH.
  • If the DOH determines that an FI used two or more unapproved or “false or misleading” advertisements, the FI will be prohibited from providing services and its FI authorization will be revoked.

Overseeing advertising shows the DOH’s intent to more closely control the way FIs solicit clients. The DOH will have broad discretion in determining what is “false or misleading.” The DOH had already requested all advertising materials be submitted with the FI authorization application. The Budget now gives the DOH clear legal authority to require submission of marketing material prior to use by an FI and to revoke FI authorizations for two violations of its “false or misleading”
standard.

FIs Required to Report “Costs” to DOH

  • The DOH may require FIs to report on the “direct care and administrative costs” of providing personal care services, “as accounted for by the [FI].”
  • On 90 days’ notice, the DOH can request any “type or amount” of cost information, including supporting documentation.
  • The owner or top executive of the FI will be required to certify that all cost information submitted is accurate and correct.

Requiring certification of financial information and supporting documentation by owners or executives of FIs adds further civil and potentially criminal penalties for perjury to investigations and audits of FIs performed by OMIG or other state agencies, including Wage Parity Act audits. Also, as the DOH has recently stated, all fiscal intermediaries must have a Medicaid provider number, separate and apart from any Medicaid provider number they may have for a LHCSA or other line of business. Currently operating fiscal intermediaries should apply for a unique Medicaid provider number immediately.

Conclusion. The Budget continues the state’s efforts, begun with the authorization requirement and the application of the Wage Parity Act to CDPAP, to bring FIs under tighter control. You should work with an attorney versed in CDPAP and the Wage Parity Act to develop compliant marketing materials and structure administrative and benefit costs to comply with the Wage Parity Act and other laws.

FordHarrison LLP advises and counsels home care agencies on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact one of the authors, Stephen Zweig at szweig@fordharrison.com, Phillip Davidoff at pdavidoff@fordharrison.com, or Eric Su, esu@fordharrison.com of the firm’s Homecare Industry Law Group in its New York City office at (212) 453-5900.

DOH Extends Deadline for Fiscal Intermediary Authorization Application to Dec. 15

Notice of Extension.  The New York State Department of Health (DOH) has extended the deadline from November 30 to close of business on December 15, 2017 for currently operating Fiscal Intermediaries under the Consumer Directed Personal Assistance Program (CDPAP) to submit their Applications for Fiscal Intermediary Authorization.

Currently operating Fiscal Intermediaries must now submit the Authorization Application by December 15 or cease operations immediately. Those who are not yet a Fiscal Intermediary but wish to become one should also submit their Authorization Application by December 15 in order to be among those first to be reviewed.

FAQs Issued. Also today, the DOH issued FAQs addressing the Authorization Application. These FAQs can be found at:

https://hca-nys.org/wp-content/uploads/2017/11/Consumer-Directed-FI-Authorization-FAQs-11-28-17.pdf 

The FAQs answer questions raised after the Authorization Application was issued, as follows:

  1. You must obtain your FI Authorization from DOH before you request a Medicaid Provider Identification number, and the Medicaid number for your FI must be separate from any LHCSA Medicaid number.
  2. You can submit an Authorization Application that is not totally complete to comply with the December 15 deadline, as long as you exercised due diligence to submit an application that was as complete as possible. This implies that you will be able to supplement your application. However, the thoroughness of your application will set the timeline for its review.
  3. As requested in the October 2017 Medicaid Update, (although not specifically requested in the Authorization Application), you are required to submit your marketing and outreach materials in pdf format, and any videos and audio segments in their original format, if they cannot be altered to pdf.
  4. DOH will use the CDPAP statute’s and regulations’ parameters in reviewing your marketing and outreach materials to determine whether they comply with the roles and responsibilities assigned to FIs and consumers.
  5. If you fail to submit your Authorization Application by December 15, your FI is deemed out of compliance with the CDPAP statute, is not authorized to operate as an FI, and is subject to contract termination protocols of your MCOs. However, the additional sentence, “Until the Department receives the Authorization application, the FI will remain out of compliance,” raises the question of whether a late filing can be cured and what the ramifications of a late filing will be to an FI.
  6. All Board members must sign the written resolution authorizing the application’s submission.
  7. Submit the Survey or other mechanism you intend to use to obtain input from consumers and other interested parties; if not available, indicate what you intend to develop to meet this requirement.

FordHarrison LLP advises and counsels Fiscal Intermediaries under CDPAP and home care agencies on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact the author, Stephen Zweig, szweig@fordharrison.com or (212) 453-5900, or contact any of the other attorneys of the firm’s Homecare Industry Law Group in its New York City office. Also, please visit our blog at homecareemploymentlaw.com for additional developments and information.

Introduction. HOW you do things, it is said, is as important as WHAT you do. Operating a Fiscal Intermediary (“FI”) under New York’s Consumer Directed Personal Assistant Program (“CDPAP”) epitomizes this. Do you know the difference between operating as a “Fiscal/Employer Agent” and an “Agency with Choice”? Do you know how to incorporate the Wage Parity Act (“WPA”) into your wage and benefits package under CDPAP? The risks for getting it wrong are enormous. Here is a summary of what you need to know. Our goal is to teach how to get it right, with all the agreements, documents, and consumer orientation materials you need.

How do You Choose Between a “Fiscal/Employer Agent” and an “Agency with Choice”?

You choose or the choice is made for you. If you do not set yourself up to operate as a Fiscal/Employer Agent, you will likely default to being an Agency with Choice. An Agency with Choice is a joint employer with the consumer of the consumer’s personal assistants. A Fiscal/Employer Agent is not. Beginning October 13, 2017, you must add a WPA Package of benefits or additional wages ($4.09 in NYC/$3.22 in LI and Westchester) to minimum wage rates. Use this introduction of the WPA Package as an opportunity to choose the Fiscal/Employer Agent model.

Fiscal/Employer Agent Model. The consumer is the sole employer of his or her personal assistant(s) and has total freedom of action and choice in whom to employ, where and when to receive services, how they are delivered, and how much to pay in benefits. You are only a payroll and benefit administration company. You are not in charge of a consumer’s care. If you operate correctly as a Fiscal/Employer Agent, you do not take on any liabilities that you cannot control, such as unpaid wages for hours worked and overtime you did not know about, personal injury liability for the consumer and others, and penalties for not providing health benefit coverage under the Affordable Care Act. Also, because NYC has a two-tier minimum wage schedule until 2019 and a consumer with less than 11 employees in NYC is considered a “small employer,” the “total compensation” due the consumer’s personal assistant(s) is only $14.59 per hour until December 31, 2017 under the Fiscal/Employer Agent Model, as compared with $15.09 under the Agency with Choice model, where the agency is considered a large employer. This year, the minimum wage for a consumer’s personal assistant is $.50 lower for a small employer than for a large employer, $1.00 lower next year, and $1.50 lower the following year. This can enable you to take cases where the managed care reimbursement rate would otherwise be too low to take the case.

Agency with Choice Model. You and the consumer are joint employers of the consumer’s personal assistants. Even though you do not receive the consumer’s plan of care, or hire, fire, train, schedule hours or decide when or where services may be rendered, in a home or car or anywhere else, you are jointly and separately liable for how the consumer’s personal assistants perform their services and any hours worked and unpaid and overtime unpaid. Because past and present liability for 24- hour cases is still unsettled, and the ten largest shareholders of a non-publicly held corporation in New York can be held personally liable for unpaid wages and benefits, this is particularly troublesome. This, alone, is reason enough not to be an Employer with Choice.

How Do You Provide the WPA Package Under the Fiscal/Employer Agent Model?

Types of benefits. To attract cases, you want to provide benefits that personal assistants want to receive. Benefits that are not taxable to personal assistants are the obvious choice. For example, if a consumer allocates $1.00 per hour to a pre-tax transit plan, a personal assistant working 40 hours per week, in a 30% tax bracket, can receive a $121 monthly Metrocard tax-free, whereas the personal assistant would have had to earn $173 in order to have, after taxes, the $121 necessary to buy the card herself — a $52 per month saving! Another desirable benefit is a Qualified Small Employer Health Reimbursement Account (“QSEHRA”), which only became available this year. A personal assistant who purchases a subsidized health plan on the NYS Health Insurance Exchange (https://nystateofhealth.ny.gov/) can be reimbursed tax-free for the premiums they pay by allocating part of their $4.09/$3.22 Package to this benefit. Open enrollment for Exchange plans for 2018 is November 1, 2017 to January 31, 2018, just in time for personal assistants to apply. For those who need health insurance because their wages, with minimum wage increases, will make them ineligible for Medicaid, this can be a great benefit. Other pre-tax benefits that can be made available include dependent care, whether for child or elder care, and educational benefits for personal assistants to continue their education or learn new skills.

Designing and Delivering the Benefits. Here is where “HOW” you do it becomes so important. Tax-free benefits must meet Internal Revenue Code, ERISA, and WPA requirements. If you do not want to be considered a joint employer of a consumer’s personal assistants, do not sponsor a “cafeteria plan,” do not cover pre-tax benefits through a funded trust to which you contribute amounts per hour, unless it is properly constructed and qualified by the Internal Revenue Service as a “voluntary employees’ beneficiary association”; and do not pay exorbitant administrative fees for delivering benefits. Auditors from the NYS Medicaid Inspector General, NYSDOL and IRS will scrutinize administrative fees, among other things, to see how much of the WPA Package is actually reaching personal assistants. Plaintiffs’ attorneys are already bringing WPA cases, suing for failure to pay the full Package.

How Do You Orient a Consumer Under the Fiscal/Employer Agent Model?

Have a system in place for enrolling (or re-enrolling with the added WPA Package) consumers into your Fiscal/Employer Agent, which includes an orientation script that protects you against claims of joint employment, and all 21 agreements and documents to be used with the consumer or the personal assistant during the orientation, with you as the consumer’s agent for this express purpose. Don’t “set the wage rate” or determine the benefits package for personal assistants. Place wage and pre-tax benefit choices in front of consumers, and let the consumers decide on their own which they want to give their personal assistants. Also allow consumers to choose to give taxable benefits allowed under the WPA, such as more rest or sick days than those required by the NYS Domestic Workers Bill of Rights and the NYC Earned Sick time Act.

If you have any questions regarding this Alert or would like our advice of your home care agency’s particular facts and circumstances, please contact the author, Stephen Zweig, Partner in FordHarrison’s New York City office and head of the firm’s Home Care Industry Group, who has counseled and defended home care agencies for over 35 years, at szweig@fordharrison.com, or (212) 453-5906, or the FordHarrison attorney with whom you usually work.

 

The 2nd Department Rejects NYSDOL’s “13 Hours Rule” For 24-Hour Shift Workers

Executive Summary. Yesterday, in two long-awaited decisions, the New York State Appellate Division, Second Department ruled that home care workers who worked 24-hour shifts, commonly referred to as “live-in” shifts, were required to be paid for all 24 hours, regardless of the sleep and meal times they were afforded. The two cases are Andryeyeva v. New York Home Attendant Agency and Moreno v. Future Care Health Services, Inc.

Rationale. Both of yesterday’s decisions followed the reasoning of Tokhtaman v. Human Care, LLC, decided by the Appellate Division, First Department earlier this year, rejecting the New York State Department of Labor’s (“NYSDOL”) longstanding opinion that workers could be paid for 13 hours per shift, provided they were afforded at least eight hours for sleep time and three hours for meals (the “13-Hour Rule”). The Second Department determined that the NYSDOL’s 13-Hour Rule was an interpretation that was “neither rational nor reasonable” under New York’s minimum wage law and regulations.

Appeal. The Andreyeyeva, Moreno, and Tokhtaman decisions were all unanimous, so there is no automatic right to appeal to the New York Court of Appeals, New York State’s highest court. However, these three decisions stand in stark contrast to decisions in federal courts in New York in which those courts have deferred to the NYSDOL’s 13-hour Rule, namely Severin v. Project OHR and Bonn-Wittingham v. Project OHR. Indeed, in Bonn-Wittingham, the Court considered and expressly rejected the First Department’s reasoning in Tokhtaman. This split between the state courts and federal courts could provide an avenue for review of this issue by the New York State Court of Appeals.

In the meantime, these three decisions present significant challenges for agencies. Without a different decision or government action, agencies may face enormous backpay liability for all their 24-hour cases worked over the past six years.

What questions do these decisions raise?

  1. Who is directly affected by these decisions? Are fiscal intermediaries for CDPAP as well as LHCSAs affected? Are non-profit agencies as well as for-profit agencies affected?
  2. Who has ultimate liability for having to pay 24 hours pay for 24 hour shifts for the past six years? Are owners of corporations and LLCs personally liable for unpaid wages and taxes? How can owners protect their personal assets?
  3. What legal options exist? If the Second Department refuses, as the First Department did, to allow an appeal, what alternative way exists to bring this issue before the New York Court of Appeals?
  4. What do you do with 24-hour shift cases you are currently servicing?

FordHarrison LLP advises and counsels home care agencies and Fiscal Intermediaries under the New York State CDPAP on all issues relating to labor, employment and benefits. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your workplace, please contact the authors, Stephen Zweig at szweig@fordharrison.com, and Philip Davidoff at pdavidoff@fordharrison.com,  or contact any of the firm’s attorneys in its New York City office at (212) 453-5900.

Appellate Court Nixes Employee Arbitration Agreements – What Does This Mean for Home Care Employers?

Notice: By decision dated July 19, 2017 (the “Decision”), the Appellate Division, First Department (the “First Department”) (which has jurisdiction over Manhattan and Bronx) held that arbitration agreements obligating employees to waive their rights to bring collective disputes, such as class actions regarding wage disputes, were unlawful and unenforceable because they “run afoul of the National Labor Relations Act” (the “NLRA”). Though freely acknowledging that the United States Supreme Court will resolve a similar issue in its October 2017 Term, the Decision currently binds the trial courts in Manhattan and the Bronx and has precedential effect for other trial courts throughout New York. The Decision can be appealed to New York’s highest court, the New York Court of Appeals.

How Did this Issue Come Up?

In Gold v. New York Life Insurance, former insurance agents engaged as independent contractors by New York Life Insurance Company (“NY Life”) asserted violation of New York Labor Law and sought recovery of underpayment of wages. Each agent’s contract contained a provision requiring arbitration of claims or disputes with NY Life. By these agreements, the insurance agents also waived any right to bring their claims on a class, collective or representative basis. On appeal from summary judgment in favor of NY Life, the First Department interjected itself into the national debate concerning enforceability of class and collective action waivers in the context of wage and hour litigation by refusing to enforce NY Life’s arbitration agreements.  The court held that these agreements were unenforceable because their class and collective action waivers violate the NLRA. The Decision is significant in that the First Department rejected the current and longstanding position held by the Second Circuit of the U.S. Court of Appeals (the “Second Circuit”) (which court’s jurisdiction includes Manhattan and Bronx) that upholds class and collective action waivers, and sided with the United States Court of Appeals for the Seventh Circuit in deeming such agreements to have an effect of unlawfully abrogating employees’ right under Section 7 of the NLRA.

What Does the Decision Mean for Home Care Employers?

Until the United States Supreme Court rules otherwise in its upcoming term, the Decision is troubling for New York employers who have relied on the United States Supreme Court’s and Second Circuit’s decisions upholding employee waivers to commence and/or participate in collective, class or representative actions. Following so soon after the First Department’s decision in Tokhtaman v. Human Care LLC, ruling that 24- hour workers are entitled to 24 hours of pay, the risk of class action 24-hour cases has increased as has the risk that Wage Parity Act claims will be added.

Plaintiffs’ attorneys seeking to assert wage claims that arose in Manhattan and Bronx will likely elect to avoid the U.S. District Court for the Southern District of New York and not pursue claims under the Fair Labor Standards Act, and assert only wage claims under New York Labor Law in state court.

Since arbitration agreements with class action waivers may no longer offer employers protection from class actions in state trial courts, we encourage home care agencies to review and evaluate their current wage and hour practices, implement regular self-audits, especially of their 24-hour cases, and undertake immediate corrective action in the event non-compliance is identified.

 FordHarrison LLP advises and counsels home care agencies and Fiscal Intermediaries under the New York State CDPAP on all issues relating to labor, employment and benefits. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your workplace, please contact the authors, Stephen Zweig at szweig@fordharrison.com, and Philip Davidoff at pdavidoff@fordharrison.com,  or contact any of the firm’s attorneys in its New York City office at (212) 453-5900.

Compensating Aides for 24-Hour Cases: The Latest

On August 15, 2017, the Appellate Division, First Department, which had earlier held that 24-hour “sleep-in” aides must be paid for all 24 hours, denied a motion to reargue or further appeal its decision to the New York Court of Appeals, New York’s highest court. Though significant, it is unlikely that this will be the last word on this issue.

Recent History. For several years, federal and state courts in New York have grappled with the issue of compensating home health aides for 24-hour “live-in” or “sleep-in” shifts under New York Labor Law.

Beginning in 2012 with Severin v. Project OHR, and continuing as recently as May 2017 with the Bonn-Wittingham v. Project OHR case, United States District Courts in New York have said that 24-hour shift workers who are afforded eight hours of sleep time (at least five hours of which are uninterrupted) and three hours for meals may be paid for 13 work hours. The New York Department of Labor has long maintained that this approach is consistent with the New York Labor Law.

In contrast, beginning in 2014 with Andryeyeva v. New York Health Care, Inc., and as recently as 2017 with Tokhtaman v. Human Care, LLC, state courts have rejected the NYDOL’s opinion and the deference provided to that opinion by the federal courts, holding that aides working 24-hour shifts must be paid for 24 hours. One notable exception in New York State courts is Moreno v. Future Care Health Servs., Inc., in which the Kings County Supreme Court found similarly to the federal courts.

As these cases have made their way through the courts, the split between the federal and state courts has deepened. So where do the cases presently stand?

NYS Courts. In April 2017, in the first appellate-level decision to address the issue, the Appellate Division, First Department, covering Manhattan and the Bronx, upheld a lower court’s decision in Tokhtaman v. Human Care, LLC, requiring aides to be paid for 24 hours. On August 15, 2017, the Appellate Division, First Department denied the agency’s motion to reargue and also refused to permit it to appeal to the New York Court of Appeals.

Tokhtaman was decided was decided by the Appellate Division, First Department less than one year after its initial filing in the lower court. Contrast this with the Andryeyeva case. The complaint in Andryeyeva was filed nearly seven years ago. The supreme court’s decision concluding that sleep-in aides were entitled to 24 hours’ pay for 24-hour shifts was issued in September 2014 and was promptly appealed. The appeal has since then been pending before the Appellate Division, Second Department, covering Kings, Queens, Richmond, Westchester, Nassau and Suffolk counties. Oral argument in the Andryeyeva appeal and the Moreno appeal was held in tandem in January 2017. To date, no decisions have been reached.

Federal Courts. While the Andryeveva appeal has been pending in state court, another federal court has waded into the controversy. In December 2016, the United States District Court for the Eastern District of New York in Bonn-Wittingham v. Project OHR agreed with the analysis of the Severin court and deferred to the NYDOL’s opinion regarding payment of 13 hours to 24-hour shift aides. In May 2017, Plaintiffs brought to the Court’s attention the Appellate Division, First Department’s decision in Tokhtaman, arguing that it represented a change in the controlling law on the issue and that the Court’s earlier decision applying the NYDOL’s 13–hour Rule should be revisited.

The Court promptly, and quite pointedly, rejected Plaintiffs’ position. The Court noted that the Appellate Division, First Department is a “state intermediate court” whose decisions are not “controlling.” Furthermore, the Court said that the New York Court of Appeals “is not likely to follow Tokhtaman” because the NYDOL’s interpretation of NYLL is “entitled to deference” by the Courts, particularly where, as here, the NYDOL’s interpretation does not conflict with the law and is otherwise reasonable. Notably, the Court cited the Moreno decision in support of its rejection of Tokhtaman.

Conclusion. The Appellate Division. First Department’s Tokhtaman decisions have decided for now the issue of pay for 24-hour shift home care workers who work within its jurisdiction (i.e., Manhattan and the Bronx). By refusing to allow an appeal of its decision to the New York Court of Appeals, the Appellate Division, First Department has heightened concern and interest in the pending Andryeyeva appeal in the Appellate Division, Second Department. If the Appellate Division, Second Department holds differently in Andryeyeva, aligning with the federal courts, it would have a significant impact and almost certainly set the stage for the issue to be decided by the New York State Court of Appeals.

24-Hour Home Care Workers Must Be Paid For All 24 Hours (Appellate Division, First Department, New York Supreme Court)

Executive Summary. Tuesday, April 11, 2017, the First Department, Appellate Division of the NYS Supreme Court held that 24-hour case home care workers must be paid for all 24 hours if they are “nonresidential,” that is, they do not exclusively reside in the patient’s home. Tokhtaman v. Human Care, LLC (2017 NY Slip Op 02759). This is the first time an appellate-level court in New York has ruled this way. The First Department covers New York (i.e., Manhattan) and Bronx counties. A case dealing with the same issue, Andryeyeva v. New York Health Care, Inc. (Index No. 14309/2011 (Queens Cty.)) is currently on appeal in the Second Department, Appellate Division. The Second Department covers the counties of Richmond, Kings, Queens, Nassau, Suffolk, Westchester, Dutchess, Orange, Rockland, and Putnam. Oral argument in that case was held in January of this year. Whatever the outcome, the NY Court of Appeals may ultimately be asked to rule on this issue.

24-Hour Cases. In its decision, the First Department declined to follow the NYS Department of Labor’s (“DOL’s”) guidance that 24-hour case home care workers, whether residential or non-residential, could lawfully be paid for only 13 hours if they were afforded sufficient sleep and meal breaks. This guidance, the court decided, contradicted the DOL’s own regulations, which refer only to “residential” employees, because it failed to distinguish between “residential” and “non-residential” employees. In making its decision, the First Department arguably departed from the norms of administrative law, under which courts usually give deference to the administrative agency’s interpretation of its own regulations.

This decision, if upheld on appeal to the NY Court of Appeals, could upend the use of 24-hour home care cases in New York and result in substantial backpay liability. No home care worker employed by an agency qualifies as a “residential” employee under New York law as currently interpreted. That means agencies potentially could owe workers an extra 11 hours in wages, plus overtime and spread of hours pay for each 24-hour shift in the past 6 years.

Wage Parity Act. In addition, the First Department also refused to dismiss the home care workers’ breach of contract claims under the Wage Parity Act (“WPA”). These claims, which allege the employees were not properly compensated under the WPA, were brought by the workers as “third-party beneficiaries” of their employer’s contracts with New York State (or its subdivisions) to provide home care services to Medicaid-eligible clients. This is also very significant because it places the issue of WPA compliance in the courts, and in the hands of private litigants, as well as with the NYS Department of Labor.

In sum, the First Department’s decision is a setback for home care agencies in New York.  Much will be riding on the upcoming decision of the Second Department in the Andryeyeva case and subsequent appeals to the New York State Court of Appeals.

FordHarrison LLP advises and counsels home care agencies and Fiscal Intermediaries under the New York State CDPAP on all labor, employment and benefit issues. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your agency, please contact the authors, Stephen Zweig at szweig@fordharrison.com or Philip Davidoff at pdavidoff@fordharrison.com, or contact any of the attorneys of the firm’s Homecare Industry Law Group in its New York City office at (212) 453-5900.

Participating in New York’s CDPAP Is Necessary to Maintain Your Caseload

Why Has CDPAP Become So Popular? 

Publicity. Radio, newspaper, and subway ads are driving Medicaid home care clients and home care workers to abandon traditional home care agency programs for the greater flexibility and freedom of choice of New York’s Consumer Directed Personal Assistance Program (“CDPAP”). Managed care companies are also on board, offering this as an alternative to traditional home care. The benefits to all are many and the restrictions are few, unlike traditional home care.

Contracts. Managed care companies contract with a “Fiscal Intermediary,” a business entity created solely to provide payroll and benefit administration services under the CDPAP. The Fiscal Intermediary, in turn, contracts with Medicaid recipients, known as “Consumers,” referred by the managed care company. Continue reading