Worker Mobility, Wages, Referrals: Key Home-Based Care Legal Issues In 2023

Years before he became a powerhouse attorney for the home-based care industry, Angelo Spinola was a caregiver.

Ultimately, it wasn’t his calling, but it gave him a taste of the industry that he advocates for today.

Part of that advocacy means educating providers on today’s regulatory landscape and helping them avoid being low-hanging fruit for what he refers to as “gotcha claims.”

It isn’t always easy, especially during a time when providers are facing increased government oversight, a challenging labor market, the localization of laws and more.

In this latest episode of HHCN+TALKS, Spinola — the home health, home care, and hospice chair at law firm Polsinelli — offered a wide-ranging overview of the key legal and regulatory issues that should be front of mind for providers working in the home-based care space.

The recording and transcript of the conversation are below.

Joyce Famakinwa: Today’s guest is Angelo Spinola. He’s the home health, home care and hospice chair at law firm Polsinelli. Angelo, tell us a little bit about your career thus far.

Angelo Spinola: I have been practicing law a little more than 22 years now. I guess it’s been 23 years. Before that, I actually was a caregiver, which is one of the reasons that I love the industry so much. I helped pay my way through college, undergrad, by being a live-in caregiver. In those days, I think I got paid $150 for the weekend, a flat rate, which we all know is not allowed in today’s world, but it was great. I think I quickly learned that it takes a special person with a lot of compassion to be a caregiver, of which I am not, and I will be better served supporting the industry in what I do now in the law than as an actual caregiver. I’ve got a real passion and love for the industry and really like the compliance aspects and helping wherever I can.

Famakinwa: Before we get into the thick of today’s conversation, can you start by painting a picture of the current home-based care regulatory landscape?

Spinola: I do think that the regulatory environment is changing somewhat where we have more health care regulation in general and home-based care regulation specifically. I think one of the reasons for that is there’s a real push, and there’s been a push for several years, to try to standardize the licensure process. We know that process is very state specific. Not all states require licensure. There are different elements of licensure by state, and that creates a lot of difficulty for the multi-state providers.

That’s one of the issues. Then I think what is happening is the providers themselves have been focused on effectively creating a bar to entry, making sure that there’s at least minimum standards that will apply to others, so that you don’t have the bottom feeders who are providing poor care and not doing things the right way, and creating some issues really for the industry as a whole. We’ve seen that, for example, with the new licensing laws for non-medical and skilled care in Ohio.

We’ve seen what’s going on in New York, where New York had that moratorium for a long time, and a really robust certificate-of-need process, making it very difficult for new providers to come into the state. What New York is trying to do is really consolidate licenses to make it easier to manage the providers and have larger providers rather than a bunch of smaller providers, so I think we’re going to continue to see that trend develop over the next few years.

Famakinwa: Are there any legislative updates that providers should be aware of in your view? We’ll likely get into this more in the latter part of our conversation today.

Spinola: There are several pending proposed laws that would impact this industry specifically, and everyone was waiting to see what the outcome of the midterm elections would be and how that would impact those proposals. An example would be the PRO Act. The PRO Act would really flip union organizing on its head. And the Domestic Worker Bill of Rights, there’s a federal version of that that is sitting in the House.

Effectively, what we’ve seen with the midterms is that we’re going to remain relatively status quo, which means that Congress isn’t going to get a whole lot done. Any time there’s a disagreement between the Democrats and Republicans, which I hear happens every once in a while, we’re going to be sitting in a gridlock. What that means, I think for the rest of the Biden administration, is that you’re going to see a lot of activity at the executive branch level, and we already have seen that, and I think that’s something that Biden has probably recognized early on, that to the extent he wants to achieve anything from his agenda, that’s going to have to be done directly by the federal agencies and the executive branch.

I think, big picture, that’s what we’re going to be looking at, that and a lot of additional state and city law action, where the states are not waiting for the federal government to dictate what the rules are going to be. The state governments are going to take matters into their own hands, and when you’re in a more liberal state, we’re going to see a lot of pro-employee, pro-union legislation.

Famakinwa: I wanted to ask you about something that you and I spoke about this summer for a Home Health Care News story, and we spoke about this issue of no-hire clauses that we’re seeing in home care a lot. Typically, providers are using no-hire clauses to hold onto staff in a very challenging labor environment. When we spoke, you pointed out that government authorities are cracking down on this. What has this looked like?

Spinola: It’s been very interesting and there has been a great deal of activity around this. Traditionally, when you think about restrictions on worker mobility, preventing an employee from working for a competitor or taking clients, taking other employees, that’s normally measured through restrictive covenants, and that’s a completely state-specific area of law. Every state has different restrictive covenant rules. We have seen the states really start to button down those rules and make it harder to restrict worker mobility.

Again, it follows that blue-red dichotomy, but you’ll see states like Connecticut, California, Illinois with very challenging laws that don’t allow providers to restrict their workers very much. That’s always been the case, but the limitations are getting more severe, where you can only use certain types of agreements with people who are exempt or make a certain level or serve in a certain role for the business. That has been the trend.

What’s new is now the government is getting much more involved in what really has traditionally been a state issue. The government is taking the approach of getting into worker mobility and a lot of other things, wage fixing, everything else. On the worker mobility front, the focus has been on what they refer to as no-poach agreement, making some type of an agreement, sometimes you’ll see it between businesses or a client and the agency, where there’ll be an agreement, “If you don’t hire my employees, I won’t hire your employees,” without the employee being a party to the agreement.

That’s what the no-poach part is, is that you’re agreeing not to poach my employees, but the employee is not even aware that that agreement exists, and that used to be a pretty common term in franchise agreements, where the franchisees would agree not to hire from each other, it was part of a franchise agreement. The FTC focused on that several years ago, most franchisors eliminated those provisions.

Now what the Department of Justice is looking at, the FTC, in some cases, the DOL in coordination with the FTC, they’re looking at client service agreements and direct hire provisions in client service agreements where the agency and the client are agreeing that if the client hires that caregiver away from the agency, there would be a fee or a penalty associated with that. We’ve seen places like Connecticut and California, and in some cases, like I mentioned, even the FTC, being focused on those provisions and arguing that those provisions are really just a wolf in sheep’s clothing, another way of getting to a restrictive covenant that is banned by the state.

That’s been really fascinating. We’re working on some matters with the California DOJ right now, and I think part of the issue is that the government doesn’t understand the industry, doesn’t understand how much of an investment is being made by the agency into the caregiver and vetting the caregiver and training the caregiver. To just allow a client to take that relationship away and cut the agency out shouldn’t be permitted. We’ve got some work to do, but there’s been a lot of activity on that front, which is unique. I hadn’t seen that happen in my career, but for the last year and a half or so.

Famakinwa: You touched on this a little bit, but in October, you also spoke to [HHCN] about the Department of Labor’s proposed rule. It was to have a major impact on the test used to decide if someone’s an independent contractor or an employee under the Fair Labor Standards Act. At the time you warned providers to watch this closely. Talk to us about why this should be top of mind for providers.

Spinola: No. 1, with the changes to the independent contractor rule that are being proposed. And it’s a fascinating history, because the test that applies for DOL purposes, for FLSA purposes, Fair Labor Standards Act, which is the law that governs the payment of overtime. And if somebody is a W-2 employer or a 1099 contractor, it’s called the Economic Realities Test, and that Economic Realities Test has been around for a while.

What has happened is as different administrations have come in, they’ve attempted to modify the Economic Realities Test by either strengthening it or softening it, depending on who you’re looking at. The Trump administration tried to really soften that test and make it easier to utilize independent contractors. The real focus there wasn’t on home care, it was on the gig economy generally. Then you have Biden come in and he tried to repeal the Trump rule, which a court ruled that he could not do. They couldn’t repeal that rule, it has been in effect until this new rule comes in that is going to make it more difficult to utilize independent contractors.

Why I mentioned that is it’s something that all of the industry should focus on. Some providers are saying, “Hey, this is great. From our perspective, this is going to make it harder for registries to compete against us and offer a lower labor price point because they won’t be able to treat these workers as independent contractors and they’ll have to pay overtime,” and so on, and so forth. That Economic Realities Test, the one that we’re talking about, that’s the same analysis that applies to joint employment, and joint employment is a major initiative of the Biden administration, just like it was with the Obama administration.

We’ve seen the National Labor Relations Board propose new joint employment rules that would apply for union organizing purposes that the industry has really rallied around and focused on and opposed, but that same thing hasn’t happened with the independent contractor rule because most of the industry views that as just an independent contractor rule. They don’t realize that’s also going to impact the joint employment standard, which will have a major impact if adopted.

These rules are examples of rules that don’t require congressional approval, which also subjects them to challenge to the extent they depart too much from the actual existing standard. The reason we’re not seeing so much opposition around independent contracting is there’s not a recognition that, “Oh, that’s going to impact joint employment as well and make it harder for franchise models, staffing agencies, personal liability for owner operators.” It has some widespread effects that I don’t think have fully been recognized just yet.

That’s one to really, really keep an eye on. Not to mention the virtual marketplaces and the registries and what those standards are doing is they’re effectively changing to an indirect control model, so that when you look at the NLRB test, you compare the NLRB test with the DOL proposed rule for independent contracting and what they’re saying is that if there’s reserved authority to control a worker, reserved authority to control workers of another statutory employer, that’s enough to establish that you may be an employer, even if you’re not exercising that control, and that has not been the historical test. That’s one of the major changes there.

Famakinwa: More broadly, are we seeing an increase in government watchdogs oversight of home-based care, and if so, how?

Spinola: We certainly are. To me, this was very foreseeable. I think Biden and his advisors recognized that many of the initiatives that he would like to achieve are only going to be achieved through his own appointees through the executive branch, so what we saw is as soon as he came into office, a real focus on building up those arms of the government. You look at, for example, the DOJ. The DOJ has added a ton of investigators. I think they were targeting 120 attorneys to be added to the DOJ. I don’t know where they are on that target. 900 FBI agents. We saw what the IRS did around IRS auditors increasing those numbers, extending statutes of limitations.

One of the, I think, issues that a lot of folks are dealing with is the employee retention credit, and that program, that statute of limitations was expanded from three to five years. The DOL identified it was either 100 or 150 investigators that they wanted to add to their ranks. They’re in the process of doing that. What you’re basically seeing is Biden is building his army, and that’s the army around enforcement. The DOL in past administrations has been more focused on providing guidance, giving us guidance, saying, “Hey, this is the way to do things, not to do things.” Now, they’re out conducting investigations.

They’re out conducting investigations, that’s what the IRS is doing, it’s what the DOJ is doing. We have seen that for sure. You look at the 2021 statistics on the number of False Claim Act investigations, it’s the second-highest that we’ve had since the year 2014. And in 2021, it was $5.6 billion that was collected in settlements that were reported by the DOJ, and $5 billion of the $5.6 billion was related to the health care industry. Not only is there an increased focus on government enforcement, but it’s government enforcement specifically around health care and home-based care in a lot of these areas.

Famakinwa: What would you say that providers should be doing to make sure they’re on the right side of things?

Spinola: It’s compliance, compliance, compliance. I think one of the challenges that we’ve had in the industry and one of my real focal points for our industry is around compliance. And we have had situations, I think, because it’s a fractured industry. There are so many smaller agencies. There’s so many regulatory components and requirements, very unique labor laws that apply, and it’s a challenging environment to be compliant in the sense that there’s normally different rates of pay at issue. There are these unique regulatory obligations.

You are trying to manage a remote workforce, they’re not under your nose, they’re not showing up in a hospital like nurses do where you can manage them and see what they’re doing. There’s just so much to it. You couple that with the numbers and how small folks are, and being a little, I hope I’m not offending anybody here, but not as technologically advanced as some other industries. I think we’re getting there. We’re starting to put some tools in place, but we haven’t traditionally had the most sophisticated tools.

It’s created a lot of compliance issues, and I think that’s one of the reasons there is so much of a focus on our industry, is that there is a belief within some arms of the government that home care doesn’t really want to get it right. That it doesn’t matter how much guidance they put out there. And when you look at the Department of Labor, when the Department of Labor changed the exemptions for live-in and companionship in 2015, they put out a ton of guidance, FAQs, webinars, they hosted meetings, white papers to explain what the rules are, how to do travel time, you name it, they’re putting out a lot of guidance.

I know from talking to some of the careerists there, that they feel that there are at least some providers that don’t care. That it’s not that they’re unaware, it’s that they’re unwilling. That was what I was talking about before when we were talking about the regulatory environment and providers actually saying, “Hey, when it comes to licensing, when it comes to minimum standards, we want that. We want there to be a cost for you to buy into our state and to have a license because we want to get rid of riff-raff that’s going to drag the industry down for everyone.”

We’ve seen so much focus on the industry. I think that we’re going to see that continue for at least the next several years until the government starts to feel that we’re paying attention and it’s more going to be of a, “Hey, we’re going to slap a hand, we’re going to put out a press release and tell all of your peers what we did to you and how much we recovered in civil money penalties,” and in some cases, with the DOJ, you see that they’re moving for criminal sanctions, they’re looking for jail tim, for wage fixing type things and antitrust issues, things like that. They’re trying to make an example out of some within the industry to see if that will have a bigger impact than the guidance that has been provided in prior years.

Famakinwa: The localization of laws when it comes to home-based providers, what they can and can’t do has been a pain point. Can you give an example of how this has become troublesome?

Spinola: Just to recap the localization of laws, what that means, is, again, because of the gridlock in Congress, we have seen states, and not only states, but cities and municipalities pass all their own laws. They’re passing their own laws, and in many cases, those laws are industry agnostic, a paid sick leave requirement that will apply to everyone. Those things get covered a little bit better in the press by attorneys, by legislators. You hear about that more.

If there was going to be a federal minimum wage increase, we would know, we’d hear about that. In addition, you have this industry focus where there are laws that are not only local, but narrow in the sense that they only apply to home care. An example of that, we talked about minimum wage generally. New York just increased the minimum wage by $3 only for home care, and you don’t hear a lot of coverage about that, which means that it doesn’t always filter down to the provider.

The provider ends up in a situation where something has changed, law has changed, the provider doesn’t know, and now you’ve got the plaintiff’s bar coming in, sometimes the government, but generally in those situations it’s lawyers that represent the caregivers, bringing suits saying, “Hey, you didn’t do this right,” and the provider is left flatfooted — didn’t even know that it happened. One of our initiatives is really to try to track the industry-specific stuff that is happening and make sure everyone is aware of it.

Otherwise, you end up in a situation with, I call them “gotcha claims,” where the provider gets hit on something that they didn’t even realize was going to be an issue. You asked for some specific examples. I mentioned the New York minimum wage applying to domestic workers only, and we’ve had a lot of providers thinking that that’s only for Medicaid providers and not private pay, which isn’t true. They’re confused about how that impacts things like spread of hours, and the fringe benefit payments that are required in New York leads to a lot of complication.

In addition to laws like that, you’ve got things like the Domestic Worker Bill of Rights that are being passed at a state and at city level. Seattle has got one. Philadelphia has got one. Chicago has got one, or Cook County. New Jersey has one that’s proposed. The Domestic Worker Bill of Rights, just like the federal one that’s stuck in Congress right now, that’s probably not going anywhere anytime soon, even though Kamala Harris is one of the sponsors of that. At a state level, at city level, these things are passing.

Again, providers, they’re not always aware of them, and some of the requirements are things like a day of rest or notice provisions for live-ins before you terminate their employment or employment agreements or paid sick time or meal and rest break requirements with penalties associated with them. Say a California provider, they’re used to that stuff, but somebody in New Jersey, or somebody in one of these other states that isn’t accustomed to needing to have an employment agreement with their workers, they might not do that.

Wage theft notices, these sort of things where you’re either doing them right or you’re not, what you’ve got on your pay stub, you’ve either got it right or you don’t, and it leads to what’s effectively strict liability situations where there’s a fine every time you fail to provide the agreement or the notice, or you’ve got a pay stub that’s issued with the wrong information on it, that’s a violation, there’s a fee that associates with it, and those fees multiply very quickly and add up to a whole lot of money and those providers get remarkably frustrated when they learn that, “You’re telling me, if I had just provided this form, or I had notified an employee of what the wage scale is of the job, what the range is of what they’d get paid, that I wouldn’t have $3 million in liability?”

It’s a challenging thing. And to get back to your prior question of what do you do, if you are being attacked on all sides, you’ve got the government over here and the plaintiff’s lawyer is over there, and the union is over here and they’re trying to make a lunch of you, what you’ve got to do is you’ve got to focus in on what steps you need to take to make sure that you don’t fall victim to these kind of issues. Let me make sure that I’m aware, I understand what the laws are in my state, in my city, at a federal level, that I’ve done everything I can to protect my organization. I’m not that low-hanging fruit that these folks will pick off, that’s going to be somebody else, maybe a competitor.

Famakinwa: I wanted to ask you, what are some other key legal issues that home-based care providers should be paying attention to, and why?

Spinola: Another one that we’ve seen an increased focus on is the referral relationships. I think that there’s a rise again of state law that is broader than federal law, so I think a lot of providers believe that as long their reimbursements are not funded by a government program, they don’t need to worry about how their referral relationships are set up, and that really isn’t true in several states.

Florida is a great example of that, where there are some really draconian penalties for certain types of referral relationships. I think that’s a focus, anything that is happening right now across other areas where we’ve seen the government involved. I briefly mentioned wage fixing. There were some providers in Maine that were prosecuted criminally when the Medicaid rates went up.

I think it was four businesses, they worked amongst themselves, allegedly, this was the claim, to maintain the same wage rate, and basically said, “Our margins aren’t high enough. If you agree not to pay your employees more, we’ll do the same thing,” and now you end up in a wage fixing dilemma. Those are the kind of things that the government is looking at. Worker mobility, wages, referrals, false claims, antitrust, those kinds of issues.

I want to mention the employee retention credit because that’s a very big thing in our industry. It’s the concept that you can get credit against the taxes that you’re paying to, or on behalf of employees payroll taxes to the extent you were subject to a government shutdown during COVID, or your revenues were reduced by a certain percentage.

The way most providers are qualifying for ERTC credits is through the government shutdown and you’ve got these vendors out there that are assisting the provider in applying for those credits and taking a contingency fee, or a pretty significant fee to provide those services. And the IRS has been pretty vocal about those vendors, about the plan to investigate several of those vendors, to make sure that what they’re doing is on the up and up, because they have a financial incentive to help a provider apply for those credits in some instances, at least from the IRS’ perspective, when they don’t actually qualify.

Then that’s where you saw the statute of limitations move from three to five years, that’s a really clear indication of what the IRS plans to do here. They’re going to be investigating. They’re going to investigate and determine who actually qualified for that credit and who didn’t, and if you didn’t qualify, there’s going to be penalties that apply. I think that we’re going to see an increase in those kinds of investigations.

In many cases, we have had a government shutdown that partially or fully affected the ability to provide care and run the business, but you want to make sure that you’ve got good guidance on that, good evidence to establish, “Here’s where the government shutdown occurred. This is how it affected my business. This is the time period that I’m applying for the credit when we were shut down,” and make sure that you can connect all the dots so that if the IRS does come back and investigate, that you’ve got the backing for the application and I would not solely rely on a vendor who’s applying for the credit to do that. I think that’s an area where you need attorney support, or, in some cases, accountants can do it.

Famakinwa: In your view, what are some of the more common and avoidable mistakes that you see home-based care providers make?

Spinola: Going back to those “gotcha claims,” those are the ones that frustrate me the most, and I think maybe talking for a second about how it is that these cases come about. I’ve got 10 different class actions in California, all about the same thing. It’s three or four law firms that are bringing those cases and they’re generally uninformed about the industry. They’re looking for meal and rest break penalties.

What happens is a plaintiff’s lawyer will pick up on a theory, a lot of times it’s a new area of law that not everybody is focused on, then they’ll apply that theory across everybody in the business. That’s actually how I got into this business at first, was in home health pay per visit claims. One firm got really heavy into pay per visit. Everybody was paying the same way on pay per visit and they’re mixing hourly and flat rates in some form or fashion. We would always talk about that being a compliance concern to our client base and they’d say, “That’s what everybody does. Everybody does it that way.”

Same thing with day rates for live-in, I think we’re getting better. I think we’ve probably at least got more than half the industry over to hourly pay, but for years and years, the argument was that’s how everybody does it. What that creates, when you have a plaintiff who comes up with an idea of a case, now they have a cottage industry. Oh, and that’s what happened with pay per visit, these really reputable attorneys out of D.C., came after Gentiva for it. Then after Gentiva, they went after Amedisys, and then after Amedisys, it was Maxim and LHC Group. Just about every home health provider has been through that drill.

Now, everybody’s on salary, plus we’re doing it in a compliant way, but that spread through the industry like a wildfire because the plaintiff’s lawyer doesn’t have to do anything. Once they’ve researched the issue and had some success on one case, figured out that they’ve got a pain point on one case, all they have to do now is change the names. We see that all the time with wage theft notices with background checks that we’re using the right consents and notices for background checks, the pay stub stuff.

Those are the ones that really frustrate me because they’re not difficult to resolve, you just have to know about them. On-call premiums and putting them in the regular rate for overtime purposes. Things like that. That’s a review of your pay codes and determining, “Hey, what pay codes do you exclude from overtime with non-exempt employees, and are they all excludable, or are some of them non-discretionary bonuses?” Generally, a lot of things can’t be excluded, so it’s just steps like that, really taking a proactive approach to analyzing your own business.

Do effectively what would be like due diligence in a transaction, do that now before somebody finds one of these things, which is there for everybody. Very, very rarely will I look at a business and not find some problems, and I just think that sometimes we have such a focus on our operation, which obviously are extremely important, that we miss some of what should be low-hanging fruit, something that can be resolved. One more pitch I will say on compliance that I always say to my business people that are listening in, because we’ve got, there’s always three kinds of people in an audience. One hears you and they go out and do it immediately.

They say, “Okay, I do not want to be one of those examples. I’m going to go, I want an internal audit. I want you guys to look at this. I want you to fix anything that’s broken, or at least identify it so we can come up with a schedule to fix it.” Then others that are on the fence, and then a third group, they’ll never do it, no matter what you say, no matter what you do, you can’t get them to focus on it. Their view is, “Look, if you’re going to get me, you’ll get me, I’m not doing it.”

What I always tell that group, because generally, those are the entrepreneurs, “You are going to have to look at this sooner or later. You can do it with me now, or whoever, or when you go to sell your business, we’re going to come in representing the buyer and we’re going to do the exact same thing, we’re going to run through, look at all these issues and say, ‘Okay, here’s a liability. Here’s a liability.’ We’re going to map it out and figure out what is the risk here, what’s the exposure, and that’s going to either change the enterprise value of the transaction, or there’s going to be an escrow that rolls off over time or some kind of indemnification, but these things that we’re talking about, you are going to have to deal with them at some point or another, and our hope and goal is that providers will look at these issues before the cloudy day, before the storm. What ordinarily happens is it comes at the end.