Health care employers continue to face heightened scrutiny of their wage and hour practices. Hospitals, physician groups, long-term care facilities, rehabilitation providers, home health agencies, and other health care organizations operate around the clock and often rely on complex scheduling and compensation structures. Those operational realities can create compliance challenges under the Fair Labor Standards Act (FLSA) and corresponding state laws – even for well-intentioned employers with dedicated human resources teams.
The health care industry remains an enforcement priority for the U.S. Department of Labor's Wage and Hour Division (WHD). The WHD's fiscal year data shows that, in FY 2025, the WHD instituted 2,370 compliance actions across the health care industry, collecting $53,291,920 in back wages on behalf of 32,884 employees and assessing $4,687,560 in civil monetary penalties. These figures do not even account for the millions in settlements and judgments paid as a result of private litigation asserting FLSA violations.
In light of continued enforcement activity, health care employers should proactively assess their wage and hour compliance programs. The following three issues should be part of any regular compliance audit.
1. Automatic Meal-Break Deductions Require Oversight
Meal-period compliance ranks among health care's most common wage and hour issues. Patient emergencies, staffing shortages, admissions, discharges, charting responsibilities, and other clinical demands at times interrupt meal periods.
Many health care employers use automated payroll systems that deduct a meal period from employees' recorded time on the assumption that employees are taking a meal break. While automatic deductions are not inherently unlawful, they can create problems when employees regularly work through all or part of their meal periods.
When interrupted meal breaks are not accurately reported and paid, employers may face allegations of unpaid overtime and off-the-clock work. Rather than eliminating automatic deductions altogether, health care employers may wish to evaluate whether they have:
- a simple, clear, and easily accessed process for employees to report missed or interrupted meal periods;
- confirmations through the timekeeping system that employees received an uninterrupted meal period;
- supervisor training regarding meal-period reporting;
- periodic audits of exception reports; and
- documentation confirming employees are paid when deductions should be reversed.
The focus should be on ensuring the payroll system reflects actual working time. If employees are compensated for all hours worked and can meaningfully report missed or interrupted meal periods, automatic meal deductions can remain a lawful and efficient payroll practice.
2. Off-the-Clock Work Remains a Significant Risk Area
In certain situations, employees may perform work before clocking in, after clocking out, or during unpaid periods. Failing to capture time spent on principal job duties that are compensable, integral, and indispensable may create significant FLSA liability, particularly across large workforces and extended periods. Common examples may include:
- reviewing patient information before a shift;
- completing charting after a shift ends;
- responding to work communications outside scheduled hours;
- attending required meetings or training; and
- performing patient handoff activities.
Health care organizations often prohibit off-the-clock work, but policies alone do not eliminate risk if managers know or reasonably should know that such work is being performed. This issue is particularly challenging in environments where employees are highly committed to patient care and may perform tasks without first seeking approval.
Employers should consider whether their supervisors are trained to recognize and address off-the-clock work and know how to actively enforce related policies. Employers should ensure timekeeping systems accurately capture all compensable work time and instruct employees to clock in when they begin work – not when their "scheduled" shift begins.
3. Shift Differentials and the Regular Rate of Pay
One of the most common overtime calculation mistakes involves the "regular rate of pay." To attract and retain staff in a competitive labor market, many health care organizations pay:
- night-shift differentials;
- weekend premiums;
- on-call pay;
- longevity pay; and
- various incentive payments.
Under the FLSA, many forms of additional compensation must be included in the employee's regular rate when calculating overtime. Shift differentials and other premium payments frequently cause overtime calculation errors. Health care employers should periodically review whether their payroll systems properly account for all compensation that must be incorporated into the regular-rate calculation. Even minor calculation errors can become significant when applied across multiple facilities, departments, or years.
Practical Takeaways
Health care employers do not necessarily need sweeping policy changes to reduce wage and hour risk. Instead, targeted reviews of existing practices are often the most effective compliance efforts.
Organizations should consider:
- conducting periodic wage and hour audits;
- reviewing meal-break deduction procedures;
- evaluating timekeeping practices for potential off-the-clock work; and
- testing regular-rate calculations involving shift differentials, incentive pay, and other additional pay.
As health care staffing challenges persist, proactive wage and hour compliance reviews can help employers avoid costly disputes and ensure employees are compensated accurately for all hours worked.
For any questions about best practices for wage and hour compliance and best practices, please contact the authors, Dean J. Shauger and Alexis C. Hivner, or any member of the Labor & Employment Group.