Orthopedic Medical Legal AdvisorPublication Exclusive

Residency training: New grounds for legal liability

While the health care landscape has undergone many changes in the past 20 years, one area of change that is particularly noticeable relates to resident training. The traditional role of the resident physician was that of a student or apprentice, who accepted the unquestioned authority of the supervising attending, usually in a high-powered academic institution where norms and traditions were rarely, if ever, questioned. Times have changed, and physicians today are well aware of resident work-hour restrictions, and the distinctions that apply to resident education vs. service, as promulgated by various regulatory bodies.

We examine a U.S. Supreme Court decision that was issued in 2011, and a series of lawsuits that followed at one academic institution that illustrate the changing landscape as it relates to resident training, employment status and the legal rights that derive from it.

Under the Federal Insurance Contributions Act (FICA), students and their educational employers were exempt from paying Social Security taxes. In 2004, the Treasury Department issued a rule declaring that anyone working more than 40 hours per week was ineligible for this exemption. The Mayo Foundation sued to challenge this rule, and to get a refund of the taxes it had paid on behalf of its medical residents, arguing that residents were students and should not be considered employees under FICA.

B. Sonny Bal

B. Sonny Bal

The U.S. District Court ruled in favor of Mayo Foundation, but on appeal, this decision was reversed. The case ended up in the Supreme Court where a unanimous court upheld the Treasury Department’s statutory authority to collect FICA taxes on salaries paid to residents. This decision would cost residency programs about $700 million annually in additional taxes, and would also impact individual resident salaries since they were now liable for FICA taxes.

The significance of the ruling was that the Treasury Department’s rule that treats medical residents as full-time employees who are not exempt from the payment of payroll taxes was held to be a valid interpretation of federal law.

Residents as plaintiffs

Christyna Faulkner began her residency at Dartmouth-Hitchcock Medical Center (DHMC) in the radiology program in July 2008. She was required to take overnight call as part of her job. When she began the program, she told her supervisors that she had severe and chronic insomnia. At the time, the sleep medicine director had diagnosed Faulkner with “chronic insomnia” and “shift work sleep disorder,” recommending that the program not assign Faulkner to overnight calls. Accordingly, for several months, Faulkner was excused from overnight calls, but later, she had to take up call duties regardless.

The insomnia worsened and Faulkner’s physician said she should take a medical leave. Shortly before she was supposed to return as a resident, Faulkner was terminated from the program. She filed a lawsuit against DHMC and four supervising physicians, alleging that their conduct had violated the Americans with Disabilities Act by discriminating against her medical condition and terminating her as a result. Her attorney remarked that Faulkner was a victim of “the idiotic medical culture requiring the overnight calls, the macho atmosphere that accompanies it and Dartmouth’s pigheaded refusal to accommodate a condition, which could be easily accommodated.”

Faulkner tried to gain admission into several other radiology residency programs and asked for supporting letters from her supervisors. Her lawsuit alleged that the supervisors prejudiced her efforts to secure a position elsewhere by telling other program directors her medical condition had an impact on her performance and by telling them about the ongoing litigation against DHMC. Faulkner also claimed she was harassed by other residents and attending physicians at DHMC, since they had knowledge of her disability, and her inability to make overnight calls. She claimed to have been intimidated, harassed and threatened at DHMC by her faculty and peers.

Faulkner’s lawsuit coincided with several others filed by other former residents against DHMC. Jennifer Connors, a former resident in the psychiatric department, claimed she was discriminated against due to her attention-deficit hyperactivity disorder. Former resident Jeffrey Isaacs sued DHMC and its Board of Trustees, alleging coercion, stress and abuse from working 18-hour shifts and 90-hour weeks, in violation of federal regulations. He said his complaints led to his termination, resulting in mental shock that required a hospital admission. Former surgery resident Thersia Knapik sued the hospital after she was fired. Knapik was purportedly terminated for reporting a fellow surgical resident for ethical violations; the hospital claimed that the documents pertaining to that fellow resident were privileged and that Knapik should not have disclosed their content to a fellowship program.

Lawrence H. Brenner

Lawrence H. Brenner

All the lawsuits filed against DHMC alleged forms of discrimination or abuse, in the setting of an insular, detached academic culture. Counsel for Faulkner remarked that “These unnecessary, lengthy overnight shifts, especially for people with disabilities, are no different than hazing you may have seen 20 years ago in frats and sororities. It’s outdated and anachronistic, and it’s time for the Dartmouth community and medical community to come together to question the ethos of treatment in such a shabby manner.”

Aftermath

The Mayo Foundation decision may have cleared the pathway for residents and fellows to commence wrongful termination lawsuits when they are terminated from their residency programs or fellowships. Even before this ruling, the North Carolina Appellate Court held that a resident could bring a legal action against a family practice program when that resident alleged that his residency was wrongfully extended. The court based its decision on the failure of the family practice program to provide the resident with a rotation in obstetrics and gynecology as specified in the resident’s contract.

Residents and fellows have a dual status. They are both employees providing health care services and physicians-in-training. The Mayo Foundation decision classifies them as principally employees and secondarily as trainees. Their employment status gives rise to lawsuits based upon breach of the employment contract and or wrongful termination.

There is one important caveat; these lawsuits are not typically based on requesting the court to overturn a decision about the residents’ or fellows’ performance. Rather, these employment lawsuits are based upon the failure of the teaching institution to comply with the due process provisions of the residents’ or fellows’ contract. These provisions are essential and material elements of the contract. The courts will generally allow the institutions to design their own due process requirements provided they meet standards of objectivity and fairness. Sometimes these due process provisions appear within the contract itself, or the contracts will incorporate by reference external documents, such as a residency handbook that details the procedures to be followed prior to termination.

It is paramount that residents and fellows be provided due process. The potential negative impact of wrongful termination includes the inability to the resident or fellow to become a member of a specialty, join a medical staff, or become licensed, resulting in damages that are easily calculable and understandable by a jury. It is, therefore, important for all attendees, chiefs and chairmen to be familiar with the due process provisions of the contract and to follow them. Finally, these lawsuits can create substantial exposure if the court allows consequential damages. Consequential damages are damages that are awarded for the long-term impact that wrongful termination would have on a resident or fellow’s career.

For more information:

B. Sonny Bal, MD, JD, MBA; and Lawrence H. Brenner, JD, are partners in the law firm of BalBrenner/Orthopedic Law Center and are the exclusive providers of loss prevention, risk management and quality improvement services for the Orthopedic Physician’s Insurance Company. Brenner can be reached at lbrenner@balbrenner.com.

Disclosures: Bal and Brenner have no relevant financial disclosures.

While the health care landscape has undergone many changes in the past 20 years, one area of change that is particularly noticeable relates to resident training. The traditional role of the resident physician was that of a student or apprentice, who accepted the unquestioned authority of the supervising attending, usually in a high-powered academic institution where norms and traditions were rarely, if ever, questioned. Times have changed, and physicians today are well aware of resident work-hour restrictions, and the distinctions that apply to resident education vs. service, as promulgated by various regulatory bodies.

We examine a U.S. Supreme Court decision that was issued in 2011, and a series of lawsuits that followed at one academic institution that illustrate the changing landscape as it relates to resident training, employment status and the legal rights that derive from it.

Under the Federal Insurance Contributions Act (FICA), students and their educational employers were exempt from paying Social Security taxes. In 2004, the Treasury Department issued a rule declaring that anyone working more than 40 hours per week was ineligible for this exemption. The Mayo Foundation sued to challenge this rule, and to get a refund of the taxes it had paid on behalf of its medical residents, arguing that residents were students and should not be considered employees under FICA.

B. Sonny Bal

B. Sonny Bal

The U.S. District Court ruled in favor of Mayo Foundation, but on appeal, this decision was reversed. The case ended up in the Supreme Court where a unanimous court upheld the Treasury Department’s statutory authority to collect FICA taxes on salaries paid to residents. This decision would cost residency programs about $700 million annually in additional taxes, and would also impact individual resident salaries since they were now liable for FICA taxes.

The significance of the ruling was that the Treasury Department’s rule that treats medical residents as full-time employees who are not exempt from the payment of payroll taxes was held to be a valid interpretation of federal law.

Residents as plaintiffs

Christyna Faulkner began her residency at Dartmouth-Hitchcock Medical Center (DHMC) in the radiology program in July 2008. She was required to take overnight call as part of her job. When she began the program, she told her supervisors that she had severe and chronic insomnia. At the time, the sleep medicine director had diagnosed Faulkner with “chronic insomnia” and “shift work sleep disorder,” recommending that the program not assign Faulkner to overnight calls. Accordingly, for several months, Faulkner was excused from overnight calls, but later, she had to take up call duties regardless.

The insomnia worsened and Faulkner’s physician said she should take a medical leave. Shortly before she was supposed to return as a resident, Faulkner was terminated from the program. She filed a lawsuit against DHMC and four supervising physicians, alleging that their conduct had violated the Americans with Disabilities Act by discriminating against her medical condition and terminating her as a result. Her attorney remarked that Faulkner was a victim of “the idiotic medical culture requiring the overnight calls, the macho atmosphere that accompanies it and Dartmouth’s pigheaded refusal to accommodate a condition, which could be easily accommodated.”

Faulkner tried to gain admission into several other radiology residency programs and asked for supporting letters from her supervisors. Her lawsuit alleged that the supervisors prejudiced her efforts to secure a position elsewhere by telling other program directors her medical condition had an impact on her performance and by telling them about the ongoing litigation against DHMC. Faulkner also claimed she was harassed by other residents and attending physicians at DHMC, since they had knowledge of her disability, and her inability to make overnight calls. She claimed to have been intimidated, harassed and threatened at DHMC by her faculty and peers.

PAGE BREAK

Faulkner’s lawsuit coincided with several others filed by other former residents against DHMC. Jennifer Connors, a former resident in the psychiatric department, claimed she was discriminated against due to her attention-deficit hyperactivity disorder. Former resident Jeffrey Isaacs sued DHMC and its Board of Trustees, alleging coercion, stress and abuse from working 18-hour shifts and 90-hour weeks, in violation of federal regulations. He said his complaints led to his termination, resulting in mental shock that required a hospital admission. Former surgery resident Thersia Knapik sued the hospital after she was fired. Knapik was purportedly terminated for reporting a fellow surgical resident for ethical violations; the hospital claimed that the documents pertaining to that fellow resident were privileged and that Knapik should not have disclosed their content to a fellowship program.

Lawrence H. Brenner

Lawrence H. Brenner

All the lawsuits filed against DHMC alleged forms of discrimination or abuse, in the setting of an insular, detached academic culture. Counsel for Faulkner remarked that “These unnecessary, lengthy overnight shifts, especially for people with disabilities, are no different than hazing you may have seen 20 years ago in frats and sororities. It’s outdated and anachronistic, and it’s time for the Dartmouth community and medical community to come together to question the ethos of treatment in such a shabby manner.”

Aftermath

The Mayo Foundation decision may have cleared the pathway for residents and fellows to commence wrongful termination lawsuits when they are terminated from their residency programs or fellowships. Even before this ruling, the North Carolina Appellate Court held that a resident could bring a legal action against a family practice program when that resident alleged that his residency was wrongfully extended. The court based its decision on the failure of the family practice program to provide the resident with a rotation in obstetrics and gynecology as specified in the resident’s contract.

Residents and fellows have a dual status. They are both employees providing health care services and physicians-in-training. The Mayo Foundation decision classifies them as principally employees and secondarily as trainees. Their employment status gives rise to lawsuits based upon breach of the employment contract and or wrongful termination.

There is one important caveat; these lawsuits are not typically based on requesting the court to overturn a decision about the residents’ or fellows’ performance. Rather, these employment lawsuits are based upon the failure of the teaching institution to comply with the due process provisions of the residents’ or fellows’ contract. These provisions are essential and material elements of the contract. The courts will generally allow the institutions to design their own due process requirements provided they meet standards of objectivity and fairness. Sometimes these due process provisions appear within the contract itself, or the contracts will incorporate by reference external documents, such as a residency handbook that details the procedures to be followed prior to termination.

 

It is paramount that residents and fellows be provided due process. The potential negative impact of wrongful termination includes the inability to the resident or fellow to become a member of a specialty, join a medical staff, or become licensed, resulting in damages that are easily calculable and understandable by a jury. It is, therefore, important for all attendees, chiefs and chairmen to be familiar with the due process provisions of the contract and to follow them. Finally, these lawsuits can create substantial exposure if the court allows consequential damages. Consequential damages are damages that are awarded for the long-term impact that wrongful termination would have on a resident or fellow’s career.

For more information:

B. Sonny Bal, MD, JD, MBA; and Lawrence H. Brenner, JD, are partners in the law firm of BalBrenner/Orthopedic Law Center and are the exclusive providers of loss prevention, risk management and quality improvement services for the Orthopedic Physician’s Insurance Company. Brenner can be reached at lbrenner@balbrenner.com.

Disclosures: Bal and Brenner have no relevant financial disclosures.