Emergence of the healthcare industry as the country’s largest employer presents new challenges and considerations for employers

BY LARIZA HEBERT, Associate, Fisher Phillips, Houston

For the first time in the United States history, healthcare surpassed every other industry and has become the nation’s largest employer. Many factors may have contributed to this development: the country’s aging population, the continued growth of medical spending, consistent Government support through Medicaid and Medicare programs, or the fact that other industries, such as state-side manufacturing, are withering. As recently as 2000, manufacturing employed 7 million more employees than healthcare. Similarly, in the late 2000s, retail employed 2.5 million more employees than healthcare. Between 2010 and 2016, healthcare employment grew by 1.7% annually, the same pace as national employment growth. Regardless of the reasons, healthcare employment and the demand for qualified workers continues to grow quickly. Consequently, amidst the demand to fill positions, all providers must remain mindful of other employmentrelated concerns.

Growing practices must be mindful of federal requirements and compliance. As the healthcare employment landscape keeps changing and expanding, some physician practices or dental offices, for example, are choosing to merge into larger practice groups. These growing healthcare practices must be mindful that hiring just a few more employees may subject them to federal laws that had not been applicable to them before. Growing healthcare employers must be mindful that once they employ a particular number of individuals – the number varies among statutes - they become subject to certain federal laws, since most that govern the employment relationship are triggered by the employer’s headcount. State law includes similar thresholds. For example, once a practice employs 15 (or more) individuals, it must comply with Title VII of the Civil Rights Act of 1964 (Title VII), the Americans with Disabilities Act (ADA), and the Genetic Information Nondiscrimination Act. Similarly, when a practice employs 20 (or more) individuals, it must comply with the Age Discrimination in Employment Act (ADEA). The Family and Medical Leave Act (FMLA) applies once a practice employs 50 (or more) individuals. Depending upon the employer’s prior practices, any one of these statutes can create new duties or requirements that must be addressed in handbooks, policies and procedures. These thresholds are obviously easy to cross when practices merge. In the midst of handling the many logistical changes involved, it can be easy to overlook this critical aspect of the change.

The requirements associated with these laws usually include, at minimum, notice postings, recordkeeping, and other affirmative obligations. Title VII, FMLA and the Fair Labor Standards Act (FLSA) all require employers to post notices prominently in the workplace, informing employees of their rights under each law. Additionally, the FMLA and ADA require employers to create and distribute workplace policies and forms to facilitate compliance with the laws. Of course, they also formally prohibit certain types of discrimination or interference when employees’ exercise their rights. And they establish affirmative duties that, at minimum, require more formally documented communications with employees who may need leave or accommodation. Under some circumstances, they require employers to grant jobprotected leaves and accommodations to assist qualifying employees.

These examples are, of course, not exhaustive of every obligation that an employer must fulfill under these laws, but they illustrate demands that busy practices must address when expanding during this healthcare employment boom. Besides complying with various state and federal employment laws, growing practices should be aware of other claims which can arise if a practice “rushes” to grow its workforce.

Attempt to avoid “rushing” growth of a practice.

The healthcare employment boom has not resulted from the number of physicians and dentists who are in practice. In fact, that number has been reliably consistent in recent years. Instead, the job boom comes from the need to add other workers, including nonclinical staff. In 2016, the medical industry employed 22 times as many non-physician and non-dentist workers as physicians and dentists themselves. A whopping 37% of these employees were nonmedical workers (e.g., office assistants); 17% were registered nurses; and 46% were other healthcare workers (e.g., technicians, assistants, home health aides).

As a result, the industry is experiencing more evolution and diversity in job positions, roles, and duties. Problems can, therefore, emerge when a practice must rush to merge or grow, particularly if management does not invest enough time into the screening and hiring process. The cost of replacing an employee who does not work out can be 20 to 40% of the cost of the basic annual salary for that position. If the separation is contentious and litigation ensues, both the hard and soft costs can obviously skyrocket.

Additionally, a rushed hiring decision can result in legal claims such as negligent hiring and retention. These claims are recognized in almost every state. Negligent hiring occurs when an employer hires an incompetent or unfit employee that it knows, or should know (by reasonable care), was incompetent or unfit, created an unreasonable risk of harm to others. Negligent retention occurs when an employer is aware or should be aware of concerns regarding an employee, indicating likely incompetence or unfitness to perform his job, but the employer doesn’t take sufficient corrective action.

Lawsuits arising from these claims can be staggering, as to both the facts alleged and the verdicts rendered. For example, in 2010, a jury in another state awarded over $12 million in a negligent hiring case against a nursing home whose employee assaulted an elderly resident. Settlement statistics for healthcare employers in negligence hiring case are also daunting—the average settlement in negligent hiring cases is $1 million.

The most important element in a negligent hiring and retention claim is foreseeability. Did the healthcare employer know, or should the employer have foreseen the likely misconduct by its employee? Even though healthcare employers normally conduct background checks on applicants, problems can still slip through the cracks if the employer does not carefully check the results of those checks. Interestingly, federal laws also govern the way these checks may be conducted and to at least some extent, how that information may be used. Nevertheless, it is the employer’s’ duty to wade through these requirements and avoid hiring workers whose history suggests that they would likely pose unreasonable risks to patients, co-workers or others.

Employers should also ensure that they verify an applicant’s credentials, including; educational history, license and certifications, investigate employment history, and contact the applicant’s references. In most situations, the more information obtained, the long as a qualified individual thoughtfully reviews that information before extending a job offer. Again, these steps require an investment of time, which should pay off by increasing productivity and reducing risks. As referenced above, one challenge that healthcare employers face is balancing the risk for negligent hiring with the requirements on laws prohibiting discrimination. Other laws may also be applicable. For example, Austin’s Ban the Box ordinance essentially prohibits employers from asking job applicants about their criminal history on a job application. It also prohibits obtaining a criminal background check on an applicant until after making a conditional job offer. If a practice has operations in multiple locations, it is important to know that many other cities have also adopted Ban the Box laws. Even seeking or referring to background information from publicly accessible social media sites can create risks. Thus, employers must be aware of potential discrimination complaints that can sometimes arise from such searches.

Thoughtful, proactive planning is an employer’s friend.

As discussed above, even though rapid growth can be a great thing, it also raises many considerations related to management of a growing workforce. Therefore, when planning and implementing growth plans, it pays big dividends to consider new or notso- obvious legal issues that can arise when rapidly increasing the size of an employer’s workforce.