Disclaimer
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.
Privacy Policy
View our privacy policy.
Hospital Faces Religious Discrimination Claims for Firing Vegan Employee Who Refused a Flu Shot
/in Nondiscrimination, Interpreters and Translatorsby Kim Stanger, Holland & Hart LLP
Cincinnati Children’s Hospital, like many others around the nation, has adopted a policy requiring employees to get a flu shot. A federal court in Ohio just decided that the religious discrimination lawsuit brought by a vegan employee should go forward, at least for now. The ruling allows former employee, Sakile Chenzira, to proceed with her case against the Hospital alleging that the Hospital discriminated against her based on her religious beliefs when it discharged her for refusing a flu vaccination. Chenzira v. Cincinnati Children’s Hosp. Med. Ctr., No. 1:11-CV-00917 (S.D. Ohio Dec. 27, 2012).
Refusing vaccine leads to termination. Chenzira had worked as a customer service representative for the Hospital for more than ten years. As a practicing vegan, Chenzira does not ingest any animal or animal by-products. Chenzira claims that prior to 2010, the Hospital accommodated her request not to receive flu vaccinations because they contained animal by-products. In December of 2010, however, the Hospital terminated Chenzira for refusing the flu vaccine.
Vegan Files Lawsuit Alleging Religious Discrimination and Wrongful Discharge. Chenzira alleges that the Hospital discharged her based on her religious and philosophical convictions as a vegan. She filed a lawsuit in federal court in Ohio asserting three claims, including religious discrimination in violation of Title VII of the Civil Rights Act of 1964.
Hospital Argues Veganism is Not a Protected Religion. The Hospital asked the Court to dismiss Chenzira’s claims in their entirety. As to the religious discrimination claims, the Hospital argued that veganism is not a religion and therefore, cannot be the basis for a discrimination claim. In the Hospital’s view, veganism is a dietary preference or social philosophy. In fact, it found no other cases in which veganism was the basis for a religious discrimination claim. Chenzira, however, argued that her vegan practice constituted a moral and ethical belief that she sincerely held with the strength of traditional religious views. On a motion to dismiss, Chenzira was not required to “prove” her case, but only allege a claim that was plausible on its face. The Court ruled that it was plausible that Chenzira could believe in veganism to the extent necessary to equate to a traditional religious belief. The Court denied the Hospital’s request to throw out the religious discrimination claims.
Defense of Religious Discrimination Claims Will Proceed. The Hospital may have lost the first battle on the religious discrimination claims but it hasn’t lost the war. Chenzira must actually establish that her belief in vegan practices rises to the level of a traditional religious belief. In addition, as the Court pointed out, the Hospital may justify its termination of Chenzira based on patient safety or other overriding reasons. The Court’s ruling, however, keeps Chenzira’s religious discrimination claims based on her veganism alive – at least for now.Hospitals and other health care employers have regularly defeated employee lawsuits challenging mandatory immunization policies, primarily because the employers have carefully crafted those policies to recognize religious and disability-based exceptions. We will continue to watch the Cincinnati Children’s case and let you know if veganism gets a shot in the arm from this federal court.
For questions regarding this update, please contact:
Kim C. Stanger
Holland & Hart, 800 W Main Street, Suite 1750, Boise, ID 83702
email: kcstanger@hollandhart.com, phone: 208-383-3913
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.
Paying for Call Coverage
/in Contracts & Transactions, Fraud and Abuseby Kim Stanger, Holland & Hart LLP
Hospitals increasingly pay physicians and other practitioners to participate in call coverage for emergency services. Last week, the Office of Inspector General (“OIG”) issued Advisory Opinion No. 12-15, which reminds providers of fraud and abuse parameters applicable to call coverage agreements.
Permissible Arrangements. Federal law does not require compensation for call coverage, nor does it prohibit paying for call so long as the compensation is not offered to improperly induce referrals for federal healthcare program business. The OIG recognizes that paying for call may be necessary to obtain services that may otherwise be unavailable because of, e.g., the lack of specialty services in an area or local physicians’ reluctance to take call because of practice demands, time commitments, or the probability of rendering uncompensated care. The key is to ensure that any call compensation paid (1) represents fair market value for actual and necessary services, (2) does not take into account the volume or value of referrals or other business generated between the parties, and (3) was not intended to maintain or generate future referrals from the physician for non-emergency patients. Common payment structures include hourly or “per diem” payments to be available for call, payment for time or services actually provided in response to call in exchange for assignment of the physician’s professional fees, etc.
Problematic Arrangements. Call compensation that exceeds fair market value or pays physicians for unnecessary or illusory services may amount to illegal kickbacks and/or Stark law violations. According to the OIG, suspect arrangements include:
Regulatory Compliance. Whatever its terms, the arrangement must be structured to satisfy Stark and Anti-Kickback Statute (“AKS”) technical requirements. For example, if the compensation is to be paid to a physician who is not employed by the hospital, the arrangement must satisfy the following:
(See 42 C.F.R. §§ 411.357(d) and (l), and 1001.952(d)). Most call coverage arrangements will not satisfy an applicable AKS safe harbor because, e.g., the aggregate compensation is not set in advance. It is important that the parties consider and document the legitimate reasons for the call coverage arrangement, e.g., the hospital’s need for the contracted services, the financial or professional burden on physicians absent call compensation, and the physician’s reluctance to provide needed coverage absent call compensation that reflects fair market value for services actually provided.
For questions regarding this update, please contact:
Kim C. Stanger
Holland & Hart, 800 W Main Street, Suite 1750, Boise, ID 83702
email: kcstanger@hollandhart.com, phone: 208-383-3913
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.
Employee Education Subsidies: Tax Implications
/in Employee Benefits, EmploymentBy Kevin Selzer, Holland & Hart LLP
Educational reimbursement programs are a common employee benefit among health care organizations. Programs can be established to assist employees in paying for tuition, books and fees in the pursuit of continuing education while on the job. If your organization sponsors such an arrangement, is it getting the best bang for its buck? If structured correctly, these arrangements can provide tax-favored benefits from both an employee and employer perspective.
Generally, if an organization pays for an expense on behalf of an employee, the tax rules require the employee be taxed on the amount paid by the organization. If an educational assistance program meets certain requirements, however, the benefits may be tax free to the individual and the employer can avoid paying FICA and FUTA taxes on the value of the expense. There are currently two tax-favored structures available to health care organizations regarding educational assistance.
The first is a formal educational assistance program, often called a 127 plan, named after the section of the Internal Revenue Code which gives it beneficial tax treatment. Generally, a 127 plan must:
Educational coursework reimbursed under a 127 plan does not have to be work-related but sports, games or hobby-related courses are generally not eligible (unless part of a degree program). Both graduate and undergraduate programs are currently eligible under a 127 plan. In addition, there may be other important provisions that should be included in the written plan to reflect the mutual understanding of the terms between the parties, although not necessarily required from a tax perspective.
The second tax-favored arrangement is an educational reimbursement working condition fringe benefit. Unlike a 127 plan, this type of arrangement does not require a written plan document, does not have an annual dollar limitation and discrimination is not an issue, but the types of eligible activities are narrower in scope. The educational course is required to be job-related and either (1) expressly required by the employer or by law to remain in the occupation, or (2) maintains or improves job skills for the occupation.
Note that the employer-provided tax benefits under Section 127 are slated to expire on December 31, 2012 unless Congress acts to extend Section 127 as it has done for many years (sometimes retroactively).
If you would like more information on implementation of or compliance with these programs, or would like to discuss the specifics of your organization’s arrangements and ways to make them more tax favorable, please contact the Holland & Hart Employee Benefits Practice Group at 303-295-8094, or alternatively at kaselzer@hollandhart.com.
For questions regarding this update, please contact
Kevin Selzer
Holland & Hart, 555 17th Street, Suite 3200, Denver, CO 80202
email: kaselzer@hollandhart.com, phone: 303-295-8094
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.
Carving Out Federal Programs Does Not Preclude Anti-Kickback Liability
/in Fraud and Abuseby Kim C. Stanger, Holland & Hart LLP
The federal Anti-Kickback Statute (“AKS”) prohibits offering, paying, soliciting or receiving remuneration to induce referrals for items or services payable by federal health care programs unless the transaction fits within a regulatory safe harbor. 42 U.S.C. § 1320a-7b. AKS violations are felonies, resulting in penalties of $25,000 per violation and up to 5 years in prison in addition to civil penalties. AKS violations are now also False Claims Act violations, resulting in additional civil penalties.
To avoid AKS concerns, some transactions have been structured to carve out federal health care programs, e.g., remuneration is paid for non-Medicare or Medicaid business, but the remunerative arrangement does not apply to items or services payable by Medicare or Medicaid. The theory is that because the remuneration does not apply to federal healthcare programs, the AKS does not apply.
The Office of Inspector General (“OIG”) recently reaffirmed that such “carve out” arrangements do not necessarily protect the participants from AKS liability:
OIG Advisory Opinion No. 12-06 at p.6-7. Accordingly, the OIG declined to render a favorable opinion as to an arrangement that would have allowed certain payments for only those patients referred for non-federal program business.
Unless the transaction can fit within one of the AKS regulatory safe harbors in 42 C.F.R. § 1001.952, the test for an AKS violation remains whether “one purpose” of a transaction is to induce referrals for items or services payable by Medicare, Medicaid or other federal health care programs. United States v. Greber, 760 F.2d 68 (3d Cir. 1985), cert. denied, 474 U.S. 988 (1985). While carving out federal programs may help, it does not insulate participants from AKS violations. Healthcare providers and other potential referral sources or recipients may want to review any “carve out” arrangements to ensure that they truly satisfy the AKS.
For questions regarding this update, please contact
Kim C. Stanger
Holland & Hart, U.S. Bank Plaza, 101 S. Capitol Boulevard, Suite 1400, Boise, ID 83702-7714
email: kcstanger@hollandhart.com, phone: 208-383-3913
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.
Restrictive Covenants in Idaho
/in Contracts & Transactions, Employee Benefits, Employmentby Kim C. Stanger, Holland & Hart LLP
In this time of healthcare consolidation, many if not most employment or contractor agreements with healthcare professionals contain clauses that prevent the professional from competing with or soliciting patients from the employer for a certain period of time after termination. The status of such non-competition or non-solicitation clauses (“restrictive covenants”) is somewhat ill-defined in Idaho.
Unlike some states, restrictive covenants involving physicians and other healthcare professionals are not per se illegal in Idaho, but they must satisfy the requirements for a valid non-competition clause. Intermountain Eye & Laser Centers, P.L.L.C. v. Miller, 142 Idaho 218, 127 P.3d 121 (2005). Traditionally,
Covenants not to compete … are ‘disfavored’ and ‘strictly construed’ against the employer. Non-competition provisions must be reasonable, which is to say they must not be more restrictive than necessary to protect a legitimate business interest, must not be unduly harsh and oppressive to the employee, and must not be injurious to the public.
Id. 142 Idaho at 224, 127 P.3d at 127. Non-competition clauses may not be enforced if doing so would unduly restrict access to needed health care. Dick v. Geist, 107 Idaho 931, 693 P.2d 1133 (Ct. App. 1985).
In 2008, Idaho enacted a statute intended to define the parameters of enforceable restrictive covenants. Under the statute:
A key employee or key independent contractor
1
may enter into a written agreement or covenant that protects the employer’s legitimate business interests and prohibits the key employee or key independent contractor from engaging in employment or a line of business that is in direct competition with the employer’s business after termination of employment, and the same shall be enforceable, if the agreement or covenant is reasonable as to its duration, geographical area, type of employment or line of business, and does not impose a greater restraint than is reasonably necessary to protect the employer’s legitimate business interests.
I.C. § 44-2701. “Legitimate business interests” include, but are not limited to:
an employer’s goodwill, technologies, intellectual property, business plans, business processes and methods of operation, customers, customer lists, customer contacts and referral sources, vendors and vendor contacts, financial and marketing information, and trade secrets…
Id. at § 44-2702(2). Section 44-2704 creates a rebuttable presumption that a non-competition or non-solicitation agreement is reasonable and enforceable if (1) it only restricts competition in the line of business conducted by the key employee while working for the employer, (2) it has a term of eighteen months or less, and (3) it is restricted to the geographic areas in which the key employee provided services or had a significant presence or influence. Id. at § 44-2704(2)-(5). Terms in excess of 18 months require additional compensation. See id. at § 44-2701.
Although the statute sets forth general parameters, it does not definitively resolve the validity of any particular restrictive covenant. By its express terms, compliance with the statutory standards only creates a presumption of validity. Theoretically, a party could rebut the presumption by establishing that a particular restrictive covenant is unreasonable as to duration, geography or scope, or that it otherwise “impose[s] a greater restraint than is reasonably necessary to protect the employer’s legitimate business interests.” Id. at § 44-2701. Conversely, the status of non-compliant covenants is unclear. Since compliance with the statutory standard creates a statutory presumption of validity, does non-compliance create a presumption that the restrictive covenant is unenforceable? Although that would seem to be the logical result, it is not clear how courts would apply the standard.
Traditionally, Idaho courts have been remarkably hesitant to modify (i.e., “blue pencil”) an unreasonable restrictive covenant to make it enforceable, opting instead to forego enforcing unreasonable covenants. See, e.g., Insurance Ctr., Inc. v. Taylor, 94 Idaho 896, 899, 499 P.2d 1252, 1255 (1972); Pinnacle Performance, Inc. v. Hessing, 135 Idaho 364, 370, 17 P.3d 308, 315 (App. 2001). However, § 44-2703 now expressly authorizes courts to “blue pencil” unreasonable agreements. It is not clear whether the newly confirmed authority contained in § 44-2703 will motivate courts to modify overly-broad restrictive covenants so as to make them enforceable.
Finally, § 44-2701 applies to employment or contractor agreements. It is not clear to what extent a court might apply it to restrictive covenants in other types of arrangements, e.g., purchase agreements for practices. In the past, courts have been more willing to enforce broader restrictive covenants in purchase agreements given the nature of the transaction.
Until we receive further clarification from a court, employers who wish to maximize the chances that the restrictive covenant will be enforced should structure their restrictive covenants in services contracts to comply with the § 44-2704 standards.
Endnotes
1Per the statute,
“Key employees” and “key independent contractors” shall include those employees or independent contractors who, by reason of the employer’s investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer, and as a result, have the ability to harm or threaten an employer’s legitimate business interests.
I.C. § 44-2702(1).
For questions regarding this update, please contact
Kim C. Stanger
Holland & Hart, U.S. Bank Plaza, 101 S. Capitol Boulevard, Suite 1400, Boise, ID 83702-7714
email: kcstanger@hollandhart.com, phone: 208-383-3913
This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.