Health Care Lawyer Blog

Under the Fair Labor Standards Act (FLSA), outside sales employees are generally exempt from overtime pay. However, employers bear the burden of proving that employees fall within FLSA exemptions that are construed narrowly against employers. A recent case out of the 2nd Circuit, In re Novartis Wage and Hour Litigation, 2nd Cir., No. 09-0437 (July 2010), considered whether outside pharmaceutical representatives fell within that exemption.

Novartis Pharmaceuticals Corp. researches, manufactures, markets and sells pharmaceuticals. However, under federal regulations, it cannot sell its drugs directly to patients. Novartis instead sells its products to wholesalers, who sells them to pharmacies. Physicians write prescriptions that permit patients to purchase the drugs from pharmacies.

Where an employee promotes a pharmaceutical product to a physician, but cannot lawfully transfer any quantity of the drug in exchange for anything of value, cannot lawfully take an order for its purchase and cannot lawfully obtain from the physician a binding commitment to prescribe it, the employee does not make a sale under the Fair Labor Standards Act (FLSA), according to the 2nd U.S. Circuit Court of Appeals, and therefore cannot be deemed exempt as an outside salesperson.

In making its decision, the District Court reasoned that patients were unable to obtain Novartis’ drugs without a prescription; therefore, physicians were the appropriate targets of the reps’ sales efforts and so they “made sales in the sense that sales are made in the pharmaceutical industry.”

While acknowledging that the physician is “an essential step in the path that leads to the ultimate sale of a Novartis product,” the 2nd Circuit viewed what occurred between physicians and reps as less than a “sale,” thereby disqualifying reps as outside salespeople within the meaning of the FLSA.

For additional information about overtime pay and general employment inquiries, contact FHWN attorney Melinda Balian.

Editor's Note: Today's post was authored by FHWN attorney Sue Nolan.

The details on a new federal income tax credit for certain employers who make nonelective contributions towards employee health insurance premiums will be published next month in the Internal Revenue Service Bulletin.

Specifically, the new credit is designed to help small employers who have relatively low-wage employees. Businesses with 10 or fewer full-time equivalent employees earning less than $25,000 a year on average will be eligible in 2010 for a tax credit of 35% of health insurance costs. Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits. On a state-by-state basis, this credit will change when the states set up Small Business Health Options Programs called "SHOP Exchanges" where small businesses can pool together to buy insurance. The SHOP Exchanges are required to be set up by 2014.

After the SHOP Exchanges are created, the tax credit will remain in place, increasing to 50% of health insurance costs for the first two years a company buys insurance through its state exchange.

Background

The Patient Protection and Affordable Care Act (PPACA) amends the Internal Revenue Code (by adding Section 45R) to provide a credit to small businesses for health insurance costs. The credit applies to any tax year beginning after December 31, 2009. There is a phase-out provision to limit the amount of the credit for small business employers who have more than 10 employees and/or whose average wage is higher than $25,000. Currently, there is a "transition" rule in place that applies until the sooner of 2014 or the time that the employer's state sets up a Small Business Health Options Program called "SHOP Exchange" where small businesses can pool together to buy insurance.

Current Provisions

Credit. The amount of the credit with respect to any eligible small business employer is equal to 35 percent (25 percent for a tax-exempt eligible small employer) of the lesser of (1) the eligible small employer's nonelective contributions for premiums paid for health insurance coverage for an employee or (2) an amount the Secretary of HHS determines is the average premium for the small group market in the State in which the employer is offering health insurance coverage or such area within the State as specified by the Secretary.

Phase-Out. The amount of the credit shall be reduced by the sum of the following:

(1) the amount of the credit multiplied by a fraction whose numerator is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.

(2) the amount of the credit multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.

The dollar amount specified in (d)(3)(B) is currently $25,000.00. The amount of any credit taken reduces the employer's deduction for health care expenses.

After the jump - definitions

Continue reading "New Tax Credit Gives Break to Small Employers Contributing to Employee Health Plans" »

A frequent topic on the Health Care Lawyer Blog has been combating fraud and waste in the health care industry – both waste due to negligence, and “behavioral waste,” which is the term used to describe monies spent on treating preventable illnesses, such as those associated with obesity, smoking and non-adherence to medical regiments.

Therefore, I was pleased to learn that the new PPACA legislation seeks to combat behavioral waste by allowing employers to give further reductions in health insurance premiums to employees who practice healthy behavior. Prior to PPACA, employers were allowed to give a discount of up to 20 percent of the costs of premiums for employees who reached certain health goals – for example, maintaining a healthy weight, quitting smoking, and keeping blood pressure, blood sugar and/or cholesterol within a healthy range. Under PPACA, that cap is now lifted. Starting in 2014, employers can allow discounts of 30 percent and up to 50 percent in the cost of individual or family health care premiums.

Starting in 2011, small businesses (defined as companies that have 100 or fewer employees working 25 or more hours per week) will be eligible to receive grant funding to help implement such wellness programs. There will also be technical assistance and other resources available to help employers evaluate and launch such wellness programs.

PPACA will also expand wellness discounts in the individual (i.e., non-employer sponsored) market – an initial demonstration project involving 10 to-be-determined states is to be launched in July 2014. Employers who want to learn more about seeing up a wellness incentive program should contact Mercedes Varasteh Dordeski.

(For more additional information about PPACA's wellness and prevention provisions, feel free to check out my article in this month's ABA Health eSource.)

Today's post was authored by FHWN attorney Michelle D. Bayer

Effective December 4, 2008, Michigan joined 12 other states who have legalized medical marijuana. The Michigan Medical Marihuana Act (“MMA”), MCLA 333.26421 et seq., legalizes the use of medical marijuana to alleviate the pain, nausea and other medical symptoms caused by specific enumerated medical conditions. (Note: The Michigan statute spelling of “marihuana” is different from the mainstream spelling.) After the MMA was passed in 2008, the Michigan Department of Community Health initiated the Michigan Medical Marihuana Program (“Program”) to administer the registration program provided for in the MMA.

Since the Program began in April of 2009, approximately 6,000 Michigan residents have been admitted and received a registry identification card. The Michigan Department of Community Health receives 59 applications daily and number of applicants is increasing. About 88% of applicants are approved into the program. With these kinds of numbers, medical marijuana issues are certain to arise in the workplace.

Despite the passage of the MMA, employers are not required to allow marijuana use in their workplace. Specifically, there is no requirement under the federal Americans with Disabilities Act (“ADA”) for employers to accommodate a disabled employee’s medical marijuana use, since marijuana is considered illegal under Federal law. While the Michigan Persons with Disabilities Civil Rights Act (“PDCRA”) provides that employers may establish work rules and policies prohibiting the use of alcohol or illegal substances in the workplace, Michigan has now legalized the use of medical marijuana to designated individuals under the MMA.

However, the MMA specifically states that an employer does not have to accommodate the ingestion of marihuana in any workplace or any employee working while under the influence of marihuana. Further, the MMA prohibits an individual from (1) undertaking any task under the influence of marihuana, when doing so would constitute negligence or professional malpractice; (2) smoking marijuana in any public place; or (3) operate any motor vehicle while under the influence of marihuana, among other prohibitions.

After the jump - workplace-specific issues created by the legalization of marijuana in Michigan

Continue reading "Medical Marijuana In the Workplace: What Michigan Workers and Employers Need to Know" »

Back in 2005, the supermarket chain Safeway (along with undoubtedly hundreds of other employers) was brainstorming ways to reduce the company's health care costs. The chain proceeded to implement a unique method for doing so - by providing its employees with financial incentives to practice healthy behavior.

According to a recent Wall Street Journal editorial authored by Safeway CEO Steven A. Burd, the plan has been a success and the supermarket giant has managed to keep its healthcare costs steady (while most American companies' costs have increased 38 percent in the same four years.) Specifically, the Safeway health care model relies on a provision in the 1996 Health Care Portability and Accountability Act (HIPAA) that permits employers to differentiate premiums based on behaviors.

The plan works as follows: Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. Employees are tested on four chronic conditions which regularly attribute to increased health care costs - tobacco usage, healthy weight, blood pressure and cholesterol levels. (The testing program is voluntary and data is collected by outside parties, and not shared with company management.) If employees pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families.

Continue reading "Editorial: Cut Health Care Costs by Encouraging Healthy Behavior" »

I am back from a pleasant hiatus. My children, both living out of town, blessed us with two new grandchildren this summer--a grand-daughter and a grandson--and the last few months have been occupied with enjoyable travel.

The U. S. District Court for the Middle District of Georgia was more active than I was, however, when it recently held that a physician who unsuccessfully sued the hospital where he worked, and some other physicians on staff, must pay the defendants' attorneys fees and costs because he had signed an "Applicant's Consent and Release" when he was applying for medical staff privileges at the defendant hospital. The amount to be paid is yet to be determined but could be substantial because there were 3 defendants seeking fees, including two physicians and their group professional corporation.

In the case of Adeduntan v. Hospital Auth. of Clark City, No.3:04-CV-065 (CDL)(M.D. Ga. July 31, 2008), arising out of the medical peer review of plaintiff's performance during an emergency abdominal aortic aneuryism procedure, the Court found that "...[Dr. Adeduntan] was required to execute the form in order to apply for mediacal staff appointment and privileges at Athens Regional and that [his] signature appears on multiple copies."

The language of the document provided:

"If...I [Dr. Azeez Adeduntan] institute legal action against the Hospital [Athens Regional] and/or its Medical Staff members and do not prevail, I agree to reimburse the Hospital and any Medical Staff members named in the action for any and all costs incurred in defending the legal action, including reasonable attorneys fees."

Recognizing that credentialing litigation is on the rise because of numerous decisions allowing such disputes to move into the courts, and most American courts cannot impose attorney fee obligations on losing litigants, in the absence of a contractual requirement, I would expect that most staff privilege applications would be promptly amended to include such language.

Depending on the applicant's specialty, and state law, the language may or may not be negotiable. A good healthcare attorney, however, is essential to review the application, research the issue and attempt to obtain any modifications. As always, even the most innocuously appearing document--a simple "application" may contain time-bombs that lay dormant for many years.

Our firm published a series of articles in the Summer, 2008 edition of Michigan Medical Law Report.

Michigan Medical Law Report is published by Dolan Media Company. Frank, Haron, Weiner & Navarro was asked to contribute to this prestigious magazine sent to 20,000 practitioners.

Michelle Bayer's article on Internet pharmacies is entitled "They're efficient, but mail-order Internet pharmacies have intricate legal requirements."

Mercedes Varasteh's article entitled "Joint Commission standard fosters collaboration between medical staffs, hospitals" covered the application of MS 120.

Louis Szura wrote on revisions to Section 179 of the Internal Revenue Code in an article, "Economic Stimulus Act offers big tax breaks for health care providers."

David Haron instructed providers on the federal False Claims Act in "Exposing fraud and abuse--what a private citizen may do."

Finally, Melinda Balian and Ross Hammersley gave excellent employment related information in "Employees--your biggest risk and your biggest ally."

I just returned from my Sunday morning Weight Watcher's weigh-in. I reached my "10% Goal" and have lost 10% of the weight I was at when I began the program--this time--in October, 2007. I am looking at another 5% loss within a few months to reach my goal and begin a program of lifetime maintenance. In addition, I am starting an extensive exercise program with a "platoon" type trainer as soon as I pass a stress test ordered by my cardiologist (I had a "minor" heart-attack two years ago so the trainer wants to make certain I am good to go (I know I am, but why take any chances)).

Since I became a weight watcher, I have lost about 6 inches on my waist and many of the clothes I had relegated to the spare closet fit and look terrific. I am finally ready to start shopping again. I also feel much more energetic.

When I started my new program, I issued a challenge to our staff. most are pretty fit and pay attention to what they eat and how they live. We also offered a monetary incentive. We do not have a lot of food and snacks floating around (I used to peek in drawers every afternoon looking for them) but some were unhappy with their appearance. Since my challenge more than one has lost significant weight and we all feel pretty good.

There has been a global movement to '"Wellness Programs" in the workplace (Weight Watchers International and local chapters are available to help organize such endeavors.)

According to the Society for Human Resource Management, wellness programs are a tool to reduce health care costs and disability- and illness-related absences, or and a tactic to attract talent.

Wellness programs are most prevalent in the United States where they’re seen (as our firm has found) as a way to reduce health care costs by making workers more aware of healthy behaviors and encouraging them and their families to adopt healthier lifestyles..

Whether you institute a formal program through an organization such as Weight Watchers or some other professional program, encourage your staff to try something like Weight Loss Wars , create a self-designed pool or contest, or just bring in a healthy lunch now and then, you will see increased productivity, less absenteeism and happier employees.