Westlaw News

Staffing firm's per diem payments were compensation, not reimbursements: 9th Circuit

Per diem payments that a healthcare staffing agency gave to traveling workers to cover expenses on top of their normal wages were compensation that should have been included in calculating overtime premiums, a U.S. appeals court said on Monday.

A unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals said that because the payments AMN Services LLC made to nurses and technicians changed based on how much they worked, and not the expenses they incurred, they were part of the workers’ “regular rate of pay” under the federal Fair Labor Standards Act and California law.

The court reversed a federal judge in Los Angeles and revived a 2016 certified class action by two former AMN employees who said they were owed additional overtime pay.

The American Staffing Association, a trade group representing 1,500 staffing firms, said in a 2020 amicus brief backing AMN that healthcare staffing firms are able to ameliorate nursing shortages by hiring traveling nurses. But that would be untenable if companies such as AMN are unable to offer nurses non-taxable stipends to cover travel and lodging, the group said.

San Diego-based AMN, a subsidiary of AMN Healthcare Services Inc, and its lawyers at Akerman did not respond to requests for comment. Nor did Kye Pawlenko of Hayes Pawlenko, who represents the named plaintiffs.

According to filings in the case, AMN paid workers who traveled more than 50 miles from home for jobs an hourly rate along with a $245 weekly “per diem” designed to cover housing, meals and travel costs.

AMN would deduct a portion of the per diems when workers missed shifts, unless they had “banked” hours by working overtime. And for workers who did not travel to their jobs, AMN simply included the per diem as part of their regular wages, according to court filings.

The named plaintiffs in Monday’s case claimed in their lawsuit that because the per diems did not reflect their actual travel expenses, they should have been regarded as compensation and included in their regular rate of pay.

Both the FLSA and California law define the regular rate as “all remuneration for employment paid to, or on behalf of, the employee,” excluding expense reimbursements. The FLSA requires that workers be paid 1-1/2 times their regular rate of pay for overtime hours.

U.S. District Judge Dale Fischer in Los Angeles in 2017 certified statewide and nationwide classes.

But in 2019, he granted summary judgment to AMN, finding that the per diem payments were based on federal reimbursement rates and could reasonably be expected to reimburse clinicians for travel expenses.

The plaintiffs appealed, and the 9th Circuit on Monday reversed. The court said Fischer had improperly focused on the amount of the payments, rather than how the payments functioned.

And the fact that AMN provided per diems to workers who did not travel “confirms that the payments do function as compensation — namely, as a bonus for good work attendance,” Circuit Judge Marsha Berzon wrote.

The panel included Circuit Judges Daniel Collins and Bobby Baldock of the 10th Circuit, who sat by designation.

The case is Clarke v. AMN Services LLC, 9th U.S. Circuit Court of Appeals, No. 19-55784.

For the plaintiffs: Kye Pawlenko of Hayes Pawlenko

For AMN: Sarah Kroll-Rosenbaum of Akerman