February 17, 2021: Written By: Christopher M. Leddy, Esq.
Healthcare Staffing companies, in particular, routinely provide base pay as well as per diem expenses (i.e. food and lodging) as part of their total compensation package when recruiting and hiring travel nurses. In fact, for many travel nurses, the payment of the per diem expenses is part of the allure, as per diem payments are typically tax-free. Likewise, employers may benefit from such an arrangement (if done within the constraints of the law) as it permits payment to travel nurses that may otherwise be taxable and subject to various wage and hour restrictions, including, overtime.
However, in the recent 9th Circuit decision of Clarke v. AMN Services LLC, the Court, in reversing a lower court’s decision in favor of the employer, stated not so fast, the per diem payments there should have been classified as compensation and not tax-free benefits because the payments were compensation for work rather than as reimbursement for expenses incurred by the travel clinicians.
The Court, in reaching its decision, relied on, amongst other guidance and case law, 29 C.F.R. § 778.224(a), which states that payments excludable from wages “do not depend on the hours worked, services rendered . . . or other criteria that depend on the quality or quantity of the employee’s work.”