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Managing Risk in These Days of Mental Health Reform

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  1. Managing Risk in These Days of Mental Health Reform David C. Lindsay DLindsay@KilpatrickStockton.com (919) 420-1811

  2. North Carolina DMA Changes • Terminations, Layoffs & Wage Reductions • Wage and Hour Issues • Internal Investigations and Legal Privilege

  3. The NC Division of Medical Assistance (DMA) is responding to legislative budget cuts: • Elimination of paraprofessional level of community support, and denial of Medicaid or N.C. funds to pay for this level of service • Slot freeze in the Community Alternatives Program for Disabled Adults (CAP/DA) • Suspension of New Enrollment for Community Support Services

  4. DMA changes will impact employees: • Layoffs • Terminations • Demotions • E.g. reassigning paraprofessional employees • Wage Reductions

  5. Layoffs – how to stay legal • It’s a two-step process • First, develop the business case • Then establish clear criteria for identifying the individuals affected • Run a disparate impact analysis • Determine if any protected category (age, sex, race, national origin, color, disability, etc.) is affected disproportionately • If so, review decisions and consider alternatives

  6. Layoffs – minimizing the risk • Obtaining a release of legal claims • Must offer something of value • Release must meet the requirements of the Older Workers Benefit Protection Act • If worker is over 40, must be offered 21/45 days to consider and 7 days to revoke acceptance • Must be instructed of right to seek legal counsel

  7. If you have a severance policy or plan, consult it and ensure compliance • May have ERISA protections • If not, review severance amounts for consistency • Fairness • Risk of discrimination suits

  8. WARN Act • Applies if mass layoff or plant closing • Mass layoff – if affects at least 50 and at least a third of facility/work group • Plant closing – closing a facility and displaces at least 50 employees • Can be aggregated in 30- or 90-day period • Must give 60-days notice • Penalties: Pay for the 60-day notice period plus attorney’s fees

  9. Furloughs – Quite common in this recession • Areas to watch: • Wage and hour implications • avoid improper deductions for salaried employees • Unemployment implications • Use of vacation/paid days off

  10. Pay reductions • Be wary • Employment contracts may guarantee amounts • Exempt employees must still earn at least $455 a week ($23,600 a year) • Wage and hour lawsuits are one of the fastest growing areas of employment litigation

  11. Watch for union activity • Employees in uncertain times may seek protection from outside sources • Train managers on the warning signs • Loyal employees tell you that others are talking union • Good employees suddenly become rude or insubordinate • Strangers on or around company premises • Employees start using union buzz words like “collective bargaining,” “organizing,” “protected activity,” “knowing one’s rights,” threats to go to the Labor Board, etc. • Make sure to communicate with employees

  12. Fair Labor Standards Act (FLSA) pitfalls • Employees vs. independent contactors • Exempt vs. non-exempt employees • Primary job duties must fall into exemption • Professional, Executive, or Administrative • Must be paid on salary basis • Guaranteed salary • No deductions for quantity/quality of work performed • Salary must be at least $455 per week • Off-the-clock work • Travel time, waiting time, on-call time, meal and break time, donning and doffing • Recordkeeping • Required Posting

  13. Effect of FLSA violations • Department of Labor (DOL) audits & fines • Civil liability • Wage and hour class action lawsuits are on the rise • Highly technical violations can result in massive liability • even in cases in which complying with the FLSA would not have been more expensive for the employer

  14. How best to avoid FLSA liability? • Maintain records in accordance with the FLSA • Educate human resources employees and supervisors • Supervisor knowledge of off-the-clock time can be attributed to the company • Conduct internal wage and hour audit • Better for your company to discover its own errors than the Department of Labor or a class of employee-plaintiffs • Conduct audit through attorneys to provide attorney-client privilege and/or work-product protection

  15. Investigations

  16. Investigations • Mental health arena is heavily regulated • Every provider faces situations where things go wrong and investigations are required • Abuse and neglect • Potential Medicaid fraud • Physical assault and/or harassment • Often, investigations uncover damaging information • When is an Investigative Report Privileged? • Peer Review -- Statutory Privilege • Work-Product Doctrine

  17. Peer Review – Statutory Privilege • N.C. Gen. Stat. §§ 122C-30(b) (facilities for mentally ill, developmentally disabled, or substance abusers), 131D-21.2(b) (adult care homes) • Protect peer review materials involving mental health providers, adult care homes • Identical to hospital peer review statute • Not complete protection for materials considered by a review committee

  18. Peer Review – Statutory Privilege (Cont.) • What information is protected? • Documents reviewed by the committee • Committee’s findings and opinions • QA action plans and trend reports (including medication error trend analysis) • Records of committee conference calls and meetings

  19. Peer Review – Statutory Privilege (Cont.) • What information is not protected? • “information, in whatever form available, from original sources other than the medical review committee” is discoverable notwithstanding presentation to the medical review committee • Reports or records of data outside the QA committee or review committee • State and internal incident reports • Internal and external audits (unless ordered by a review committee) • Reports generated in the ordinary course of business

  20. Peer Review – Statutory Privilege (Cont.) • Basically, materials are not protected if they would have existed in the absence of a peer review proceeding: • Evidence cannot be admitted relating to the proceedings themselves (what was said, what was determined, etc.) • But, information that existed independent of the proceeding does not become privileged simply because it was presented to the committee • Armstrong v. Barnes (N.C. App. 2005) – Doctor unable to protect information regarding his abuse of drugs because details presented to a medical credentialing committee; doctor an “original source” of the information • Akin to attorney-client privilege

  21. Work-Product Doctrine • Greater protection, more limited circumstances • Three-part test: • (1) material consists of documents or tangible things • (2) which were prepared in anticipation of litigation or trial • (3) by or for another party or its representatives which may include an attorney or agent

  22. Work-Product Doctrine (Cont.) • When are materials prepared “in anticipation of litigation”? • “prepared under circumstances in which a reasonable person might anticipate a possibility of litigation” – N.C. Supreme Court • Protects materials produced by attorney, consultant or agent • Does not protect materials prepared in the “ordinary course of business”

  23. Work-Product Doctrine (Cont.) • Won’t protect state and internal incident reports from production • Protects non-routine reports • Serious incidents may warrant use of in-house or outside counsel • Increases chance of work-product protection • If report prepared as part of provision of legal advice, may be protected

  24. Recommendations • Training – train employees on preparation of incident reports and audits • Be factual • No speculation or unnecessary prejudicial statements • Label protected records – “Privileged and Confidential” • Judicious use of counsel – may provide attorney-client privilege or work-product protection

  25. QUESTIONS?

  26. Managing Risk in These Days of Mental Health Reform David C. Lindsay DLindsay@KilpatrickStockton.com (919) 420-1811