Publications

06.29.2022

Illinois has passed a law, HB 4666 (the “Law”), set to become effective on July 1, 2022^[1] (the “Effective Date”), that will impose numerous heightened compliance standards on medical staffing agencies (“Agencies”) operating within the state of Illinois. Under the Law, an Agency means “any individual, firm, corporation, partnership, or other legal entity that employs, assigns, or refers, nurses or certified nurse aides (“CNAs”) to a health care facility for a fee.”^[2] The Law, among other things, includes heightened license application and disclosure requirements to the Illinois Department of Labor (the “Department”), prohibits Agencies from negotiating certain terms of employment with nurses and CNAs, increases penalties for violations, and provides new required provisions in contracts between Agencies and health care facilities (“Facilities”). Under the Law, Facilities includes “any facility licensed, certified, or approved by any State agency and subject to regulation under the Assisted Living and Shared Housing Act or the Illinois Public Aid Code.”^[3]

HEIGHTENED STANDARDS

Application and Renewal of Licenses

The Law implements heightened license application and renewal requirements for becoming able to operate an Agency in Illinois. In addition to pre-existing requirements, an application must contain the additional following information:

1. Evidence of general and professional liability insurance in the amounts of at least $1,000,000 per incident (up from previous amount of $500,000) and $3,000,000 in aggregate (up from previous amount of $1,000,000) and workers’ compensation coverage for all nurses and CNAs employed, assigned, or referred by the Agency to a Facility;^[4] and
2. Copies of all currently effective contracts with Facilities.^[5]

In order to renew a license, at least 90 days prior to license expiration, the licensee must submit:

1. An attestation detailing the number of contracted shifts, number of shifts missed, number of shifts fulfilled for the three (3) quarters preceding the application date;^[6] and
2. An application which meets the requirements of the Nurse Agency Licensing Act.^[7]

If the application is approved, the license shall be renewed for an additional one-year period.^[8]

Application for Employment

The Law also implements heightened employment application requirements. In addition to pre-existing requirements, prior to employing, assigning, or referring a CNA, the Agency must review the information provided on the Health Care Worker Registry to verify that the certification is valid. Prior to employing, assigning, or referring a CNA to a position at a health care employer or long-term facility as defined in the Health Care Worker Background Check Act, the Agency must review the information provided on the Health Care Worker Registry to verify that the CNA is not ineligible for the position pursuant to Section 25 of the Health Care Worker Background Check Act.^[9]

For an Agency, knowingly employing, assigning, or referring to a Facility a nurse or CNA with an illegally or fraudulently obtained or issued diploma, registration, license, certificate, or background study constitutes negligent hiring by an Agency and is a violation of this Law.^[10] Updated penalties for violations of this Law are discussed subsequently in this Memorandum.

Operation of Agencies

The Law implements heightened standards for operating Agencies as well. In addition to pre-existing requirements, the applicable standards for Agencies in conducting their day-to-day operations include the following requirements:

1. The maintenance and submission to the Department of copies of all contracts between the Agency and Facility to which it assigns or refers nurses or CNAs and copies of all invoices to Facilities personnel.^[11] Executed contracts must be sent to the Department within five (5) business days of their effective date and are not subject to disclosure under the Freedom of Information Act. No less than 100% of the nurse or CNA hourly rate shall be paid to the nurse or CNA employee;^[12]
2. The development of personnel policies for nurses or CNAs employed, assigned, or referred to Facilities, including a personal interview, a reference check, an annual evaluation of each employee, and periodic health examinations^[13];
3. Each Agency must also now ensure that its employees meet minimum continuing education standards in addition to licensing, training, and orientation standards for which those employees are licensed or certified;^[14]
4. Agencies are prohibited from recruiting potential employees on the premises of a Facility,^[15] whereas before they were only technically prohibited from requiring their employees to recruit for them at their respective Facilities as a condition of employment;
5. Agencies are prohibited from entering into covenants not to compete with nurses and CNAs. A covenant not to compete entered into on or after the Effective Date between an Agency and a nurse of CNA is illegal and void. Agencies are also prohibited from contracting with any employee or Facility to require the payment of liquidated damages, conversion fees, employment fees, buy-out fees, placements fees, or other compensation if the employee is hired as a permanent employee of a Facility;^[16]
6. Agencies must submit a quarterly report to the Department, who will then publish by county in which the work was performed the average amount charged to the Facilities by Agencies for each individual worker category and the average amount paid by the Agency to each individual worker category.^[17] The Department shall publish on its website the reports yearly by county^[18] and shall compel production of the maintained records, as required here, by the Agencies.^[19] The report must include each health care entity with whom the Agency contracts that includes all of the following by provider type and county in which the work was performed:
   1. A list of the average amount charged to the Facility for each individual employee category;^[20]
   2. A list of the average amount paid by the Agency to employees in each individual employee category;^[21] and
   3. A list of the average amount of labor-related costs paid by the Agency for each employee category.^[22]

INVESTIGATIONS AND PENALTIES

The Department has the right, at any time, and upon receiving a complaint from any interested person, to investigate any person licensed or applying for a license under this Law suspected of violating any provisions of the Law (except for Section 14.3, which is discussed subsequently in this Memorandum). The Department must investigate any person who operates or advertises an Agency without being licensed under the Law. The Department will also establish a system of reporting complaints against an Agency and publish on its website how an “interested party” (a Facility, Agency, or an employee of a Facility or Agency) may submit a complaint of a violation of this Law to the Department.^[23]

In addition to implementing the more detailed complaint and investigation system, the Law also provides that any licensee or applicant who violates any provision of this Law shall be subject to a civil penalty of $10,000 per occurrence payable to the Department.^[24] This is a significant increase from the previous penalty of $1,000 per occurrence.

An entirely new penalty implemented by this Law provides that any Agency that has been found not to have paid an employee 100% of the hourly wage rate identified in the contract between such Agency and Facility shall be liable to the employee for the actual amount of underpayment, plus damages of 5% of the amount of the underpayment.^[25]

CONTRACTS WITH HEALTH CARE FACILITIES

Contracts in General

An entirely new Section of this Law was added (Section 14.3), providing that a contract entered into on or after the Effective Date between an Agency and Facility must contain the following provisions:

1. A full disclosure of charges and compensation.^[26] A disclosure shall include:
   1. A schedule of all hourly bill rates per category of employee;
   2. A full description of administrative charges; and
   3. A schedule of rates of all compensation per category of employee, including, but not limited to, hourly regular pay rate, shift differential, weekend differential, hazard pay, charge nurse add-on, overtime, holiday pay, and travel or mileage pay;
2. A commitment that nurses or CNAs employed, assigned, or referred to a Facility by the Agency perform any and all duties called for within the full scope of practice for which the nurse or CNA is licensed or certified;^[27] and
3. No less than 100% of the nurse or CNA hourly rate shall be paid to the nurse or CNA employee.^[28]

Right to State Action

A party’s failure to comply with the above requirements shall be a defense to the enforcement of any such contract, and any Facility or Agency aggrieved by a violation of above shall have a right of action in a State court, and a prevailing party may recover for each violation:

1. Liquidated damages of $1,500 or actual damages, whichever is greater;^[29]
2. Reasonable attorney’s fees and costs, including expert witness fees and other litigation expenses;^[30] and
3. Other relief, including an injunction, as the court may deem appropriate.^[31]

Less Department Oversight

The circumstances governed by Section 14.3, regarding contracts between Agencies and Facilities, are not subject to certain powers that can otherwise be used by the Department in other Sections of this Law, meaning that the Department may not:

1. Investigate any person licensed or applying for a license under this Law suspected of violating Section 14.3 of this Law;^[32]
2. Issue and cause to be served on any person an order to cease and desist from violation of Section 14.3 of this Law and to take any further action that is reasonable to eliminate the effect of the violation of Section 14.3 of this Law;^[33] or
3. Petition the court for an order enjoining any violation of Section 14.3 of this Law.^[34]

CONCLUSION

The goal of the Law is to “critically protect temporary nurses and nurse aides’ right to change jobs or get hired directly by a healthcare facility” and “increase stability and transparency in the healthcare industry in the state.”^[35] On the other hand, these new heightened license application and disclosure requirements to the Department, prohibited terms of employment with nurses and CNAs, increased penalties for violations, and required provisions in contracts between Agencies and Facilities under this Law will materially affect any Agency’s business operations. The Law does not clearly address more complex relationships in this industry where there are more parties involved than just one Agency and one Facility.  For example, uncertainty still remains regarding disclosure and reporting requirements when an Agency does not have any contract with a Facility, but instead only has a contract in place with a Managed Service Provider (commonly known as an “MSP”). On the bright side, the Law does not impose any retroactive duties before the Effective Date, which would have been a costly hit for any Agency.  For now, as of the Effective Date, these newly-implemented requirements and regulations are the new standard for all Agencies operating in Illinois.

*Special thanks to Summer Associate John Lukowski for his help in writing this article.

[1] HB 4666, 102nd Gen. Assemb. § 99 (2022).

[2] Id. § 3.

[3] Id.

[4] Id. § 5(8).

[5] Id. § 5(8.5).

[6] Id. § 7.

[7] Id.

[8] Id.

[9] Id. § 13(b).

[10] Id. § 13(d).

[11] Id. § 14(a)(2).

[12] Id. § 14(a)(3).

[13] Id.

[14] Id. § 14(c).

[15] Id. § 14(f).

[16] Id. § 14(g).

[17] Id. § 14(h).

[18] Id. § 14(i).

[19] Id. § 14(j).

[20] Id. § 14(h)(1).

[21] Id. § 14(h)(2).

[22] Id. § 14(h)(3).

[23] Id. § 14.1(a).

[24] Id. § 14.1(c).

[25] Id. § 14.1(d).

[26] Id. § 14.3(a)(1).

[27] Id. § 14.3(a)(2).

[28] Id. § 14.3(a)(3).

[29] Id. § 14.3(b)(1).

[30] Id. § 14.3(b)(2).

[31] Id. § 14.3(b)(3).

[32] Id. § 14.1(a).

[33] Id. § 14.1(b).

[34] Id.

[35] Editor.  (2022, June 2).  Illinois Governor Signs Law Adding Regulations to Healthcare Staffing Firms.  Staffing Industry Analysts.  https://www2.staffingindustry.com/Editorial/Daily-News/Illinois-governor-signs-law-adding-regulations-to-healthcare-staffing-firms-61832.