In Clarke v. AMN Services, LLC, dba Nursechoice (February 8, 2021), the federal appeals court over California and other western states ruled AMN’s set “per diem” (per day) payments, aimed at reimbursing home health personnel for their overnight hotel and other expenses, are to be treated as wages. Accordingly, AMN also should have included those reimbursement amounts in calculating the “regular rate” for overtime pay for a broad class of workers, a not-so-little mistake that result in huge liabilities from the related Labor Code violations, interest and civil penalties that can follow.

Two AMN employee groups were involved:

• those working temporary assignments near their home base; and
• those working assignments more than 50 miles from home, requiring overnight accommodations. Each group received the same per diem. However, AMN treated the local group’s payments as incentive wages, subject to employment taxes, while it regarded the long-distance group’s payments as non-wage (and untaxed) expense reimbursement

The Ninth Circuit court saw no basis for treating the payments differently. If per diem was a wage for some, it was a wage for all. The court also pointed to:

• ANM’s reduction of the per diem for missing a shift for any reason, indicating the payment was tied to hours worked rather than expenses incurred;

• Allowing the long-distance employees to “bank” per diem received for extra work hours and to use that accumulation to cover missed time, again signaling payment by the hours worked; and

• Not requiring the long-distance group to provide expense documentation and not tying payments to actual amounts expended.

Take-Aways:

employers paying a flat rate per diem to cover expenses should review such practices against this decision, preferably with an experienced a management-side employment attorney, to ensure consistency and legal compliance. Management does not want to repeat AMN’s experience, losing a class action suit seeking collection of significant unpaid overtime, interest and penalties.

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also:

• What’s New In 2021: Reimbursing Employee Personal Vehicle Use: IRS Mileage Rate Decreasing 1.5 Cents (December 29, 2020)
• The Basics of Overtime: Five Rules for California (April 27, 2018)

Helena Kobrin
April 29, 2021