Month: November 2023

Legal memo proposes how DOL can protect healthcare workers and patients from restrictive labor practices

WASHINGTON, DC — Today, Governing for Impact (GFI), Towards Justice (TJ), the Student Borrower Protection Center (SBPC), and the American Economic Liberties Project (AELP) issued a memo urging the Department of Labor (DOL) to prohibit employers from issuing restrictive employment contracts on their workers that would require them to pay their employer if they resign, are terminated, or attempt to find another job.

Stay-or-pay contracts force workers to pay their employers if they leave – or are fired from – a job within a certain time frame. Used in tandem with, or in lieu of, non-compete clauses, which prohibit employees from obtaining a new position in their given industry, stay-or-pay contracts have been shown to reduce workers’ mobility and stifle competition. The threat of financial penalties upon resignation or termination dissuades workers from speaking up about unsafe working conditions, which, in the healthcare industry, can lead to increased rates of employee burnout, more toxic work environments, higher incidence of medical error, and poorer patient outcomes.

“The healthcare industry’s use of stay-or-pay contracts has led to egregious violations of worker rights and dangerous increases in workplace and patient safety, ” said Reed Shaw, Policy Counsel at Governing for Impact. “The Department of Labor has a responsibility to take immediate steps to protect our nation’s healthcare workers, whether they are trained here or abroad.”

Stay-or-pay contracts are increasingly common among healthcare employers that recruit foreign-educated nurses (FENs) to work in the United States. These exploitative agreements often require FENs to commit to a single employer for 18 months to three years. If the FEN leaves the employer before the time is up, the employer charges a “breach fee,” which can amount to tens of thousands of dollars. This type of employer practice exploits an already vulnerable workforce, as employers also often mislead FENs as to the immigration consequences if they leave their jobs. 

Stay-or-pay contracts also have adverse impacts on U.S. nurses, who may be forced to accept lower wages and poor working conditions from employers who know that they can always turn to a vulnerable and captive foreign-born workforce instead.

In the legal memo, GFI and its partner organizations recommend that the DOL uses its authority under the Immigration and Nationality Act (INA) to update labor certification regulations to prohibit employers from subjecting their workers to stay–or-pay contracts. The DOL has issued several similar regulations in the past, including, for example, prohibiting immigrant workers from paying the costs of their own labor certification.

About Governing for Impact

Governing for Impact (GFI) is a regulatory policy organization dedicated to ensuring the federal government works for working Americans, not corporate lobbyists. The policies we design and the legal insights we develop help increase opportunity for those not historically represented in regulatory policy implementation work: working people. For additional information about GFI, please visit https://governingforimpact.org/.

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Advocacy groups are lobbying the Department of Health and Human Services to ban health care facilities from using noncompete agreements if they receive Medicare or Medicaid funding.

Noncompete agreements, common in the health care industry, prevent doctors from quitting and going to work for rivals. A similar contract provision, known as “stay-or-pay,” requires workers to pay their employer if they leave their job before a set date.

Legal memo proposes how HHS can protect healthcare workers and patients from the harms of such contracts

WASHINGTON, DC — Today, Governing for Impact (GFI), Towards Justice (TJ), the Student Borrower Protection Center (SBPC), the American Economic Liberties Project (AELP), and the AFT Healthcare labor union issued a memo urging the Department of Health and Human Services (HHS) to issue a new Condition of Participation (CoP) that would ban non-compete clauses and “stay-or-pay” contracts at facilities that receive Medicare and Medicaid funding.

Stay-or-pay contracts force workers to pay their employers if they leave – or are fired from – a job within a certain time frame. Used in tandem with, or in lieu of, non-compete clauses, which prohibit employees from obtaining a new position in their given industry, stay-or-pay contracts have been shown to reduce workers’ mobility and stifle competition. The threat of financial penalties upon resignation or termination dissuades workers from speaking up about unsafe conditions for themselves and their patients and increases rates of employee burnout and toxic work environments, which can lead to medical error.

“Stay-or-pay contracts have contributed to dangerous conditions and pose significant risks to patients and to healthcare workers across the country, ” said Reed Shaw, Policy Counsel at Governing for Impact. “HHS has the authority to act to make our hospitals and other healthcare facilities safer. ”

Non-compete and stay-or-pay contracts are most frequently used in less desirable hospitals with unsafe working or patient care conditions. HCA Healthcare, the largest for-profit healthcare employer in the world with 184 hospitals and 2,000 sites of care in the US and UK, is one example.  

Although the company claims to have ceased the practice, as recently as 2022, newly hired registered nurses at a number of HCA Healthcare hospitals were required to sign contracts that obliged them to take out a $10,000 promissory note for training program costs. Similar contracts are used at Tenet Healthcare and MedStar Health, for which the payback amounts range from $5,000 to $50,000. 

In the legal memo, GFI and its partner organizations explain how the Centers for Medicare and Medicaid Services at HHS could invoke its statutory authority to regulate the use of traditional non-compete clauses and stay-or-pay contracts in the healthcare industry. HHS has issued numerous rules to update CoPs in the past for facilities that accept Medicare and Medicaid, in response to issues like technological advancements and staffing issues. 

The Supreme Court recently affirmed HHS’ authority to set Medicare CoPs in Biden v. Missouri, in which the court upheld the administration’s vaccine requirement for healthcare workers. A CoP rule that would disallow or regulate stay-or-pay agreements for healthcare workers would be well in line with the scope of the HHS Secretary’s CoP-setting authority “in the interest in the health and safety” of patients.