Stipends paid to medical residents to provide on patient care and other medical services for 40 or more hours per week as part of an accredited graduate medical education program are wages paid to employees for Federal Insurance Contributions Act (FICA) payroll taxes purposes and do not qualify as exempt from FICA tax or withholding as student stipends according to January 11, 201 U.S. Supreme Court ruling in Mayo Foundation v. U.S. Joining a growing series of rulings enforcing changing treatment of doctors and other healthcare workers, the decision is the latest reminder to health care providers and others of the need to critically review and update as necessary their organizations existing worker and wage characterization in light of evolving interpretations and the growing success of regulators and private plaintiffs in challenging these classifications.
In Mayo Foundation, the U.S. Supreme Court denied the plea of Mayo Foundation For Medical Education And Research (Mayo) that it overrule an Internal Revenue Service (IRS) Regulation that provides that medical students or others providing full-time services as part of their course of instruction do not qualify as “students” for purposes of the “student” exemption of Code § 3121(b)(10) regardless of whether “the services performed . . . may have an educational, instructional, or training aspect.” See Treas. Reg. §31.3121(b)(10)–2(d)(3)(iii). Mayo Foundation, the Supreme Court ruled against Mayo Foundation. It ruled the IRS’ regulation construing Code § 3121(b)(1) as inapplicable to medical students or other workers providing full-time services as part of a residency or other educational program should stand as Congress has not directly spoken to foreclose that interpretation and because the Treasury Department’s rule is a reasonable construction of what Congress has said.
Beyond its specific holding, the Mayo Foundation decision also serves as another reminder that health industry and other employers should not take the defensibility of their worker classification and associated income and payroll tax, employee benefit, employment and other practices for granted.
Recent developments send a clear message that health industry and other employers must remain constantly diligent about confirming and documenting the defensibility of their worker classifications and other associated practices in light of evolving rules and standards, enforcement, the growing frequency and success of regulators and private plaintiff challenges, and changing workforce practices of workers generally, and health care employers specifically. See e.g. Review of Worker Classification Needed As Classification Scrutiny Rises;Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay.
The IRS, Department of Labor and other federal and state regulators are stepping up scrutiny of and enforcement of worker classifications and claims of exemption from applicable employment, tax and other requirements. In light of these and other developments, health industry and other employers should take reasonable steps to guard against these and other growing risks of worker misclassification and associated non-compliance. Health industry practices have been specifically targeted as part of many of these regulatory initiatives.
To minimize their potential exposure, health industry and other employers should consult with qualified legal counsel for advice within the scope of attorney-client privilege concerning the need to audit or otherwise act to strengthen the defensibility of their existing worker classification, employee benefit, fringe benefit, employment, wage and hour, and other workforce policies to mitigate exposures to potential IRS, Labor Department or other risks of worker misclassification or the handling of associated payroll, employment or other responsibilities.
For Help With Investigations, Policy Updates Or Other Needs
If you need assistance in conducting a risk assessment of or responding to IRS, Labor Department or other legal challenges to your health care organization’s existing workforce classification or other health care related risk management or compliance concerns, please contact the author of this update, attorney Cynthia Marcotte Stamer.
Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, the former Board Compliance Chair of the National Kidney Foundation of North Texas, and Board Certified In Labor & Employment Law, Ms. Stamer has more than 23 years experience advising health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers and other health industry clients to establish and administer compliance and risk management policies and to respond to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. You can get more information about her health industry experience here. If you need assistance with these or other compliance concerns, wish to inquire about arranging for compliance audit or training, or need legal representation on other matters please contact Ms. Stamer at (469) 767-8872 or via e-mail here.
About Solutions Law Press
Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:
- Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes
- Health Care Fraud Enforcement Packs New Heat
- President Signs Long-Sought Red Flag Rule Exemption Into Law
- Quality, Recordkeeping & Unprofessional Conduct Lead Reasons For Medical Board Discipline of Physicians
- CMS Finalizes Calendar Year 2011 Physician Fee Schedule & Other Medicare Part B Payment Policies
- DEA Cautions Practitioners Must Restrict Delegation of Controlled Substance Prescribing Functions, Urges Adoption of Written Policies & Agreements
- Avoiding Post-Holiday Celebration Sexual Harassment & Discrimination Liability
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- 2011 Standard Mileage Rates Announced
- Update Employment Practices To Manage Genetic Info Discrimination Risks Under New EEOC Final GINA Regulations
- EEOC Attacks Medical Leave Denials As Prohibited Disability Discrimination
- New Insured Group Health Plan Non-Discrimination Rules Create Significant Liability For Employers & Insurers; Prompt IRS Also To Review Self-Insured Group Health Plan Rules
- Affordable Care Act’s Health Plan External & Internal Review Safe Harbor & Other Regulations Require Health Plan Updates
- New Rule Requires Federal Government Contractors To Post New “Employee Rights Under The National Labor” Poster
- Employers Concerned About New Union Powers As NLRB Orders Union Elections In 31 California Health Care Facilities To Proceed
- CMS Delegated Lead Responsibility For Development of New Affordable Care Act-Required Medicare Self-Referral Disclosure Protocoll
- HHS announces Rules Implementing Tools Added By Affordable Care Act to Prevent Federal Health Program Fraud
- OIG: Texas Overbilled Medicaid for Medical Transportation Costs
- DMEPOS Suppliers Face 9/27 Deadline To Meet Tightened Medicare Standards
- HHS Announces Adjustments to Federal Medical Assistance Percentage (FMAP) Rates
- CMS Publishes Corrections To Proposed 2011 Physician Fee Schedule Rules
- Medicare Changing How It Pays For Outpatient Dialysis
- Rite Aid Agrees to Pay $1 Million to Settle HIPAA Privacy Case As OCR Moves To Tighten Privacy Rules
- CMS Adopts ESRD Facility Prospective Payment System & Proposes New Quality Incentive Program
- CMS Rule Clarifies When Outpatient Services Subject to 3-Day Rule & Finalizes FY 2011 Inpatient Payment Rates
- New Affordable Care Act Mandated High Risk Pre-Existing Condition Insurance Pool Program Regulations Set Program Rules, Prohibit Plan Dumping of High Risk Members
If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here. For important information concerning this communication click here.
THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.
©2011 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press. All other rights reserved.
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