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.

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

Union Agreement to Arbitrate “Sleep-In” Wage and Hour Claims Applies Even Though Agreement Was Signed After Lawsuit Began

Executive Summary: In Lai Chan et al. v. Chinese-American Planning Council Home Attendant Program, Inc., decided February 3, 2016, the Southern District of New York (covering New York, Bronx, Westchester, Rockland, Putnam, Orange, Dutchess, and Sullivan counties) deferred to arbitration the unpaid wage and overtime claims of Sleep-in workers covered by a union agreement, even though the agreement to arbitrate was signed after the lawsuit alleging these claims against the home care agency was commenced. An earlier decision in this same case from the New York County Supreme Court had denied the agency’s motion to dismiss the complaint, and volunteered that under New York Labor Law, Sleep-in workers must receive wages for 24 hours of work. This question will now be decided in arbitration, not in a court action.

What Reason Did the Federal Court Give?

The question presented was whether unpaid wage and overtime claims of Sleep-in workers should be deferred to arbitration under a union collective bargaining agreement even though the agreement with the arbitration provision was signed after the claims were brought in court.

The plaintiffs claimed that the agreement to arbitrate, which was embodied in a 2015 Memorandum of Agreement between the agency and 1199 SEIU, could not apply retroactively to their claims. The court rejected this argument, stating that under controlling case law, unless the parties said otherwise in the agreement to arbitrate, “an arbitration provision may cover claims that accrued prior to the execution of the agreement to arbitrate.” Moreover, the court added that any question on the scope of the arbitrable issues was for the arbitrator to decide, not the court. Were it not for this court’s decision, the agency would have had to defend the workers’ claims as a class action in court.

Points to Consider:

  1. To have a court defer wage and hour (or other) claims, whether brought singly or as a class, to arbitration, you must have your home care workers sign bona fide arbitration agreements. These agreements should be written in a manner to be understood by home care workers, provide sufficient protection to allow workers to bring their claims in arbitration, and be entered into voluntarily by workers with safeguards against any claim of fraud or duress.
  2. Implementation of arbitration agreements in non-union settings and procedures to obtain worker signatures must be consistent, uniform, and designed to obtain informed consent, whether the agreement is requested from a new employee as a condition to hire or a current employee as a condition of continued employment.

 

What Questions Does This Decision Raise?

  1. How do you construct an enforceable arbitration agreement that meets all legal requirements?
  2.  What is the “best practice” to be used in asking home care workers to sign arbitration agreements?
  3.  Where an employer knows a class action lawsuit was filed against it, must it advise all workers, including new hires who are asked to sign arbitration agreements, of the lawsuit?
  4.  Will individual arbitration agreements with non-union workers, if implemented properly, apply retroactively to class actions the same as union agreements to arbitrate?
  5.  How would an agreement to arbitrate with a union affect an agency’s former workers from bringing an action in court, either as a class or singly?
  6.  What time limits for bringing wage and hour claims will apply to claims brought in arbitration?

FordHarrison’s Home Care Law Group is composed of partners and associates who are immersed in the home care industry and dedicated to solving its problems. The Group can provide you with an arbitration agreement and written implementation procedures. If you have any questions about this Legal Alert, please call the Group Head, Stephen Zweig, at 212-453-5906 or email him at szweig@fordharrison.com.

DOH Reverses Position on Overtime Pay Under The Wage Parity Act

Executive Summary: On November 2, 2015, the NYS Department of Health (“DOH”) issued important notices affecting the wage and overtime obligations of New York City and Nassau, Suffolk, and Westchester County home care agencies. In addition to setting Total Compensation under the Wage Parity Act for March 1, 2016 – February 28, 2017, the DOH reversed its existing position that overtime pay does not reduce the additional and supplemental wage package due on each episode of care hour worked under the Wage Parity Act. This reversal of position has major ramifications for the home care industry in downstate New York.

What was the DOH’s position on overtime? Until issuance of Dear Administrator Letters (“DALs”) titled “Official Notice of Home Care Worker Wage Parity Minimum Rate of Total Compensation,” on November 2, 2015, the DOH had said that, “(o)vertime was not included in the Total Compensation rate of $14.09″ under the Wage Parity Act.” (FAQ No. 7, Home Care Worker Wage Parity FAQs May 2014). Under that interpretation, an agency servicing a WPA covered case in New York City was obligated to pay overtime wages for all hours over 40 in a workweek PLUS an additional wage and benefit package of $4.09 (the “$4.09 Package”). On and after the effective date of the U.S. Department of Labor’s “Final Rule,” October 13, 2015, this meant that an overtime episode-of-care hour under the WPA had a labor cost of $15 in wages and $4.09 Package, for a total cost of $19.09.

What is the DOH’s new position on overtime? Each of the Notices issued by the DOH on November 2, 2015, one for New York City and one for Nassau, Suffolk, and Westchester County home care agencies, expressly state that “FAQ number 7 is superseded by this notice.” The Notices state further:

The Overtime premium pay (1/2 times the workers “regular rate of pay”) that employers are required to pay for overtime hours under state and federal minimum wage laws may be used to satisfy the Total Compensation required under the wage parity law. (emphasis added)

This means, says the DOH, that “if the Total compensation rate is $14.09, then the requirement to pay or prove $14.09 is fully satisfied by payment of $15, for that same hour of overtime.” No longer must an agency servicing a WPA case in New York City pay the $4.09 Package on top of $15.00 for an overtime hour.

What questions does this raise for home care agencies?

  1. If the actual cost to an agency for a WPA covered overtime hour as compared to a non-overtime hour has effectively been reduced to $15 per hour, instead of $19.09 per hour, will this reduction in the overtime premium to $.91 be given more weight in deciding whether to provide a worker with overtime hours in order to retain that worker and worker’s client and greater priority to “continuity of care” concerns?
  2. If the DOH’s “Notice Regarding Overtime Pay under Wage Parity,” is, as written, “provided to clarify the extent to which overtime can be used to satisfy the Total Compensation requirements for a given hour of overtime” is this clarification effective retroactively?
  3. If a home care agency has already paid WPA covered overtime hours at $19.09 per hour, is there any recourse or future reduction in WPA $4.09 Package obligations available to that agency?

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 our Home Care Group members, Stephen Zweig, Philip Davidoff or Eric Su in FordHarrison’s New York City office at (212) 453-5900, or the FordHarrison attorney with whom you usually work.

24-Hour Shift Cases: Now Far Too Costly To Service?

Executive Summary. Last week, a Manhattan Supreme Court Justice denied a motion to dismiss a class action lawsuit against Chinese–American Planning Council Home Attendant Program, Inc., brought for unpaid wages, overtime, and failing to pay workers properly under the Wage Parity Act, among other alleged violations. That alone is not newsworthy. What is newsworthy is the court’s statement that “(a)rguably, 12 NYCRR 142-3.1 (b) (a NYS Department of Labor Wage Order) indicates that an employee who works a 24-hour shift is entitled to 24 hours pay ….” Decisions from justices in both the Manhattan and Brooklyn Supreme Courts have now reached this same conclusion, which is very troublesome for agencies continuing to service these cases.

The Court’s Reasoning Why 24 Hours Wages Are Due

The court said that the Wage Order differentiates between 24-hour shift residential employees (who have no other home other than the client’s) and non-residential employees (who have their own home, in addition to the client’s), allowing an agency to deduct sleep-time and duty free time only for residential employees. Quoting from the Wage Order, the court found significant the omission of non-residential employees from the following exception:

(A) residential employee – one who lives on the premises of the employer – shall not be deemed to be permitted to work or required to be available to work: (1) during his or her normal sleeping hours solely because such employee is required to be on call during such hours; or (2) at any other time when he or she is free to leave the place of employment.

The court added that no deference was due to a NYS DOL 2010 Opinion Letter which said that residential and non-residential employees should be treated the same for purposes of these deductions from hours worked, because “courts are not required to embrace a regulatory construction that conflicts with the plain meaning of the promulgated language.” Further quoting from the Wage Order, the court also added that “Employees who are ‘on call’ are considered to be working during all hours that they are confined to the workplace including those hours in which they do not actually perform their duties.”

This reasoning is especially significant because it is broader than the U.S. Department of Labor’s (“DOL”) Final Rule on the Application of the Fair Labor Standards Act to Domestic Service, recently validated by the D.C. Court of Appeals, but not yet effective and in force. Although the Final Rule recognized the difference between 24-hour shift workers who live in a client’s home (which it terms “live-ins”) and 24-hour shift workers who do not, it did not limit the deduction of sleep time or duty free time to live-ins alone.  If the Manhattan and Brooklyn Supreme Court justices’ interpretation of New York law stands, it will supersede the federal rule on this issue.

The Bottom Line. Unless and until an appellate court in New York rules differently, home care agencies who employ “sleep-in” workers are exposed to potential current and past liability for 24-hour shift sleep-in cases when the worker is paid for fewer than 24 hours’ pay.

If you have any questions regarding this Alert or would like our advice regarding your home care agency’s particular facts and circumstances, please contact the author, Stephen Zweig, Partner in FordHarrison’s New York City office, who has counseled and defended home care agencies for over 35 years, at szweig@fordharrison.com or (212) 453-5900, or the FordHarrison attorney with whom you usually work.

DOL’s Final Rule Upheld by D.C. Court of Appeals

BREAKING NEWS: The D.C. Court of Appeals ruled today that the US Department of Labor’s (“DOL”) Final Rule on the Application of the Fair Labor Standards Act to Domestic Service (the “Final Rule”) is valid, because it is “grounded in a reasonable interpretation of the statute (FLSA) and is neither arbitrary nor capricious.” Under the Final Rule, home care agency workers are no longer covered by the FLSA’s companionship services exemption or its live-in domestic worker exemption. This decision is of serious concern to the home care industry. Whether the decision will be appealed to the U.S. Supreme Court remains to be seen.

What Questions Do Home Care Agencies Need To Have Answered?

  1. When will the change in the law be considered effective? The Final Rule was initially to be effective January 1, 2015, before it was invalidated by the district court. The D.C. Court of Appeals has reversed the district court, and remanded for entry of summary judgment in favor of the DOL. How will the District Court’s earlier decisions, or a delay in issuing its decision on remand, delay the effective date? What position will the DOL take on the effective date?
  2. When will the DOL begin to enforce the Final Rule? When the Final Rule was originally issued, the DOL said it would delay enforcement for six months from the effective date or until June 30, 2015, and for the remainder of 2015, would exercise prosecutorial discretion in determining whether to bring enforcement actions. Will the DOL still provide for a meaningful transition period?
  3. How does validation of the Final Rule affect private attorney lawsuits and class actions? Agencies are now obligated to pay time and one half the worker’s regular rate of pay for hours worked over 40 in a workweek. If a worker receives a base rate and a higher rate for certain hours (e.g. weekend), calculation of a worker’s overtime rate will be more difficult because it requires a weighted blending of the two rates to provide the regular rate of pay for that week. Employers who do not comply may be targeted by plaintiff’s lawyers.
  4. How does validation of the Final Rule affect enforcement actions by the NYS Department of Labor? The Final Rule effectively eliminates the differing treatment of workers under New York law based on whether they are employed by agencies or directly by households. Formerly, under the NYS Domestic Workers Bill of Rights, for- profit agency home care workers who qualified as “companions” under federal law only had to be paid overtime at one and one half the NYS minimum rate of pay. Now all agencies, for-profit and not-for-profit, must pay home care workers overtime at one and one-half times the individual worker’s regular rate of pay.
  5. What effect does the Final Rule have on the “hours worked” rules applicable to the home care industry? Is there a difference in the treatment of “live-in” workers versus “sleep-in” workers? What type of written agreements with 24 hour case workers must be entered into? Is it a “duty-free” hour if the worker is required to remain on-call on the premises? How must sleep time and travel time be handled?

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, who has counseled and defended home care agencies for over 35 years, at szweig@fordharrison.com or (212) 453-5900, or the FordHarrison attorney with whom you usually work.