It is hard to think of a time the legal landscape for temporary clinical staffing firms was more fluid or complex. With a new state-level staffing law seemingly every month, regulatory scrutiny over employee (mis)classification, claims of wage/price fixing, and the dozens of class actions alleging wage and overtime violations, there is no shortage of challenges.
Staffing firms must confront this ever-evolving and often bumpy terrain diligently before it makes their growth journeys even more difficult. There are two particularly rocky areas firms need to navigate carefully for compliance: IRS Accountable Plan rules and the Clarke v. AMN Services decision.
IRS’s Accountable Plan Rules
Employers can provide eligible employees with lodging as well as meals and incidental payments on a nontaxable basis if conditions set by the Internal Revenue Code’s accountable plan rules are met. For purposes of this article, the relevant requirement is the business connection requirement, which basically states nontaxable per diems can only be provided if the expenses are incurred in furtherance of the employer’s business (and are not incurred for personal reasons).
Clarke v. AMN Services
In Clarke v. AMN Services, the Ninth Circuit found that the per diems AMN provided to its traveling clinicians should have been included in the calculation of overtime pay. The court employed a “function test” to determine that AMN’s per diem payments functioned like wages for hours worked and not like expense reimbursements. As a result, AMN should have included those payments in the “regular rate of pay” when calculating overtime.
While the court engaged in a “case-specific inquiry” that looked at several factors related to AMN’s per diem payments, the court found AMN’s policies, methods and calculation for recoupment of per diems when clinicians missed all/or part of a scheduled shift to be one important factor in coming to its decision.
The “Rock” and the “Hard Place”
The Clarke decision “narrows the path” for firms to comply with the IRS’s accountable plan rules. Like AMN, many firms recover per diems when a clinician misses scheduled work because that day’s per diems lack the necessary business connection required by the IRS’s accountable plan rules; but in a post-Clarke world, recouping per diems creates potential risk that all per diems function like wages because of their connection to an employee’s labor.
While each company will need to confront its own system and resource limitations when designing strategies to address these behemoth opposing risks, here are some guiding principles for staffing firms to follow:
Per diems are not wages or compensation. For many firms, this is a cultural shift from the “all-in pay” days of yesteryear. How your staff thinks and talks about per diems must change.
Create easy-to-understand internal per diem policies and protocols that relate to your ways of working. Ensure you have clear rules that govern how you deliver dollars to clinicians, and it is not just an abstract set of declarative statements. The staff on the front lines of enforcement must be able to understand how these rules impact their job.
Communicate, train and make compliance an enterprise-wide commitment. Your policies that govern per diem and pay mean nothing if they live only in an online ShareFile system. You must partner with training, recruitment, client sales, payroll, legal, marketing, and FP&A to ensure all critical stakeholders understand the policies and how they can live them out within their unique function. Make them champions of enforcement!
Govern yourself. Periodically review and audit your practices, marketing materials and training to ensure compliance.
Know thyself. There’s no one way to set up per diem and wage compliance. Work with outside experts in tax and wage and hour law to develop policies that work for your unique way of operating. Then, commit to 100% compliance with those policies.
The only constant is change. This is a fluid area of law. Internal stakeholders need to be looking “out” at the legal and compliance landscape while also looking “in” at your operations to ensure you are aligned with your organization.
This article does not constitute legal advice. Organizations should consult with counsel when creating their own policies.
