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

Part 4- How Do You Construct WPA Creditable Benefits?

Executive Summary.  Home care agencies in New York are experimenting with different packages of additional wages and benefits to meet the State’s Wage Parity Act requirements. This Act requires a minimum wage rate of $10.00 per hour and additional wages or benefits – a $4.09 per hour package in NYC and a $3.22 package in Nassau, Suffolk and Westchester counties (the “WPA Package”).  Some agencies spend nearly all of the amount above the $10.00 base wage on additional wages, absorbing the additional employment taxes, which are not creditable against the WPA Package.  Other agencies combine additional wages with minimum value and minimum essential health plan coverage in order to avoid penalties under the Affordable Care Act. Still others expand into more items, going beyond additional wages and health plans to create benefit programs that provide everything from transportation benefits to cell phone plan reimbursements. Their goal is to deliver all these benefits tax-free to workers, so receiving the benefits is better than additional wages alone, which subject a worker to income and FICA tax. When this is done properly, it is a “win-win” for the agency and the worker. The agency takes a business tax deduction for the total benefits’ actual cost, the worker receives the benefits without cost and tax-free, and the entire amount is creditable against WPA total compensation. But this can be difficult to achieve. It means complying not only with the WPA, but also with the Internal Revenue Code, ERISA, the Affordable Care Act, and wage and hour laws, including the NYS Domestic Workers’ Bill of Rights. When a benefit is not screened through each of these statutes, agencies are exposed to government audits, penalties, and lawsuits, as well as the soon-to-be announced protocols for validating WPA certifications. Continue reading

FLSA Conditional Certification Denied in NYS for 5,000 Home Care Workers

Continue reading

Individuals, Families, and Households and those who Jointly Employ Home Care Workers with them are all Liable for Unpaid Overtime

Executive Summary: Claims by home care workers for unpaid overtime have risen steadily since the U.S. Department of Labor, in 2015, eliminated the federal overtime exemptions that allowed agency employers essentially to pay no overtime wage premiums. This has greatly affected agency employers In New York, who are increasingly seeing class action suits being filed against them. It has also affected individuals, families and households in New York who hire home care workers directly, especially when the home care worker is an agency-employer worker who is continued for extra hours in a workweek. Since 2010, the New York Domestic Workers Bill of Rights has required “direct-hire” employers of home care workers to pay overtime at time and one half the worker’s regular rate. When an agency worker is continued for extra hours by an individual, family or household, both can be held liable for unpaid overtime on all hours worked over 40 in a workweek, regardless of who scheduled the hours. Beyond the agency and individual, family, or household, others who have the power, whether or not exercised, to hire, employ, or pay the worker, such as a child or relative who takes care of a client’s affairs or an attorney acting under a power of attorney or as a legal guardian, conservator, or trustee, are also at risk of being held liable. Continue reading

NYSBA Elder Law and Special Needs Section Summer Meeting

When
July 22, 2016
8:45 AM – 10:25 AM

Where
The Logan Hotel
1 Logan Square
Philadelphia, PA 19103
215-963-1500

About the Program
FordHarrison Partner Stephen E. Zweig, will be a panelist on “Hidden Traps and Pitfalls in Employing a Home Care Worker: Advising Your Client on Doing It the Right Way,” during he NYSBA Elder Law and Special Needs Section Summer Meeting on July 22.

The program will cover: A review of the current status of Federal, NYS, and NYC employment laws, including a review of Internal Revenue Code, Fair Labor Standards Act, NYS Domestic Workers Bill of Rights and NYC Earned Sick Time Act. Managing the risks with knowledge and know-how; constructing employment contracts that protect you; penalties and lawsuits when you skip, skimp, and get stuck.

Please click here for a schedule of events for July 22: NYSBA – Elder Law and Special Needs Section Summer Meeting (July 21-23 2016)

For more information and to register, click here: http://www.nysba.org/store/events/registration.aspx?event=ELDSU16