Home Health & Hospice Week

Look beyond the Medicare rules.

Comp time is a popular way for home health agencies to handle employees who have to do extra work--but be sure you know what you're doing, or you could be taking a risk in using it.

A recent Provider Reimbursement Review Board case highlights this troublesome area, notes attorney Liz Pearson with Pearson & Bernard in Covington, KY.

Using comp time rather than overtime for salaried employees is very tricky, Pearson points out. "This practice ... is in fact not a common accepted occurrence in the home health industry," Pearson says. "Not in 1994 and not now--especially for owners."

If you want to use comp time, proceed with caution, experts urge. Consider these pointers:

• Watch out for exempt pitfalls. "There is usually not much trouble with comp time for exempt employees," says attorney John Gilliland II with Gilliland Markette & Milligan in Indianapolis, referring to employees who are exempt from minimum wage and overtime pay under Department of Labor definitions.

"But employers need to recognize they are essentially creating another form of vacation," he cautions. "A comp time program has all the same issues as does a vacation plan."

Pearson warns it can still be dangerous. "Payment of wages by salary is supposed to be for ALL hours worked ...quot; regardless of the quantity--in a workweek," she stresses.

You can rely on a rarely used "escape hatch" that allows you to pay a salaried employee extra for extra work, she acknowledges. "But it must really be extra work not just extra hours for normal work," she emphasizes.

• Beware non-exempt problems too. "It is very difficult to grant compensatory time in lieu of overtime pay to nonexempt employees," Gilliland warns. "There are a number of conditions that must be met for it to be valid and, even then, it may very well be prohibited under state law."

"The use of comp time is tricky and not accepted by the [DOL] as a way to reimburse for overtime pay," Pearson says.

• Cross-check Medicare rules and your own manual. Review your own employee manual and Provider Reimbursement Manual rules to avoid getting hung up by your own incomplete or misleading language, recommends attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC.

"In this case, a careful reading and editing of the employee handbook might have eliminated the ambiguous language," Hamme says. The handbook could have spelled out when the agency allowed financial compensation for comp time.

Instead, P-B's handbook language "left the potential impression that such time would only be recognized by compensatory days off and not through any financial compensation" at all, even at death, termination, retirement, etc., Hamme notes.

• Heed tax issues. Granting comp time can create major tax headaches. That's probably why P-B's employee handbook read the way it did, legal experts suggest.
 "If a comp time or vacation plan allows an employer to choose cash or time off, the time becomes taxable income to the employee even though the time is not taken," Gilliland explains. "The employee can be in the difficult position of having taxable income he or she doesn't receive." Employers don't often give employees the right to choose cash over time off.

• Realize public employers have special rules. City, county and other government agencies will have to abide by special wage and hour rules governing the accrual and use of comp time, Gilliland reminds.

• Comply with all the rules. Don't limit your comp time worries to Medicare reimbursement requirements, the legal experts suggest. There are many tax, labor and other rules and regulations that will apply that you must take into consideration.

For example, furnishing a better benefit package to highly compensated employees is prohibited by ERISA, Pearson offers.