The default rule in Washington is that employment of an unspecified duration is at will. An employer can terminate an employee without just cause, for just about any reason. This doctrine, popular in the nation in the late 1800s, has been gradually eroded away by legislation and caselaw. Employees are protected by federal legislation such as the Civil Rights Act and the Americans with Disabilities Act, and by state statutes such as the Washington State Law Against Discrimination [RCW 49.60] and the nonretaliation requirements of the Local Government Whistleblower Protection Act [RCW 42.41] and the Worker's Compensation statute [RCW 51.48].

If a public employer creates a property interest in a job, then the employee has due process rights under the United States Constitution and the employer must implement procedural safeguards before terminating the employee. Property interests can be created either from state law that specifically sets forth termination proceeding requirements for the job in question, or from other sources such as collective bargaining agreements which most public hospital districts have.

There is no statutory provision at the state level which removes public hospital district employees from their at will employment status. Washington state has a Civil Service Statute which creates a property interest in civil service jobs, but this provision does not apply to public hospital district employees.

On the other hand, as local government entities public hospital districts can pass legislative resolutions. This arguably qualifies as an "independent" governmental source that can create a property interest. This means that when the public hospital district passes resolutions regarding employment policies, those resolutions are a potential source of liability.

To err on the side of caution, when a public hospital district passes board resolutions regarding employment procedures, it should strive for uniform application of the employment procedures among its hospitals and clinics.

Aside from constitutional due process rights, Washington courts have recognized two judicially-created exceptions to the at will doctrine: express or implied agreements and the public policy doctrine. Private employers are subject to these at will exceptions, and even in the absence of statutorily created property rights, public hospital districts can be liable under these theories as well.

Public hospital district employees can obtain a property right In their jobs if there has been an express or implied agreement that the employment will be for cause. As an example of express agreements, unionized employees are protected if there is a "just cause" provision in their collective bargaining agreement, and individual employees may have specifically negotiated for just cause employment in their employment contracts. Sometimes even if the individual employee has not negotiated for just cause employment, courts will find an implied contract between the employer and employee.

An implied contract may be created in multiple ways. If a public hospital district makes representations then that may create an implied contract. For example, the PHD might make promises in the personnel manual regarding just cause employment. If procedures are formulated which may imply a just cause relationship, the PHD should include language which makes the at will relationship clear. As discussed below, Washington courts have also held that if an employee provides some additional form of consideration, then that may create an employment contract that is terminable only for just cause.

"Consideration" is a legal term that refers to something that someone gives to someone else to make a contract binding. For example, a person could promise to pay someone in exchange for the other person's promise to build a house. The promise to pay would constitute sufficient consideration to make the contract binding and enforceable if the other person accepted the offer.

An employee can provide some additional consideration that indicates an intent that an employment contract not be terminable at will. The courts consider whether the employee's actions would normally have been made if there wasn't something more than an at-will employment offer. For example, in a Washington case the court held that a corporate plant manager had provided additional consideration where he invested $9,900 into the corporation, loaned the corporation $31,758, divested himself of partnership interest, and contributed his expertise to the corporation for 5 years before he was terminated.

Another exception to at will employment which has been established in caselaw is the public policy doctrine. Regardless of how many at will employment disclaimers the public hospital district may have, if it terminates an employee in contravention of a legislatively or judicially recognized public policy then that termination is unlawful. This situation most commonly arises where there is a discharge based on an employee's refusal to do an unlawful act (such as refusing to lie in a government investigation), the employee exercises a statutory right (such as filing a worker's compensation claim), the employee fulfills a public obligation (such as jury duty), or the employee protests or reports unlawful conduct. The reporting of unlawful conduct is discussed below in the context of whistleblowing.

Public hospital districts may be removed from their status as at will employers by statutorily or legislatively created property interests in the job. This is an exception to at will employment that is restricted to public employers, since it is based on constitutional rights. In addition there are judicially created exceptions to at will employment that are not dependent on the public status of the employer, and thus apply to both public and private employers. As summarized by the Washington Supreme Court,

Although at will employment is the general rule, there are obviously many exceptions. A public hospital district will be best off including specific language of at will employment to safeguard its interests, but when making decisions proceed on the assumption that employment is not at will.

Termination of an employee for "whistleblowing" is unlawful and likely falls under the public policy exception to at will employment. In any case, a Washington state statute, the Local Government Whistleblower Protection Act, expressly forbids discharge of a local government employee on the basis of whistleblowing activity. Retaliatory discharge may raise freedom of speech constitutional considerations as well.

Public hospital district employees are protected from retaliatory action by their employer if they report to the state auditor with a good faith belief that there was improper governmental action, such as. (1) a violation of state law or rule, (2) abuse of authority, (3) gross waste of public funds, or (4) substantial and specific danger to public health/safety. The procedural safeguards for reporting actions and for protection against retaliatory action must be posted in an accessible place. In addition, in 1995 the Washington state legislature clarified the consequences of not formulating such a procedure. If a public hospital district fails to implement a reporting policy, local government employees now have the option of reporting alleged improper government actions directly to the county prosecuting attorney or state auditor, with the local government responsible for costs incurred by state auditor investigations. [RCWs 42.41.010 and 42.41.020 (ii)]

For unlawful retaliatory actions under the Whistleblower Protection Act, public hospital district employers may be required to reinstate the employee with or without back pay, assume whatever injunctive relief is necessary to restore the employee's position and prevent recurrence of retaliation, and perhaps most importantly, pay costs and attorneys' fees as well as a potential penalty against each retaliator of up to $3,000. General economic damages and emotional distress are not covered.

There is some protection for employers in that the employee must show a link between his or her report and the retaliatory action, and conversely the employer can prove the action was not taken because of the employee's report. In addition, the courts will consider the extent of the employer's wrongdoing, and under [Dicomes v. State, 113 Wn.2d 612 (1989)], the alleged improper actions of the employer must be illegal in fact for employer liability, else the employee's whistleblowing activity is not protected under the statute.

Whistleblowing raises First Amendment considerations of free speech, where the PHD might restrict the employee's freedom to report actions by threatening retaliatory behavior. The First Amendment has been applied to states and state agencies through the Fourteenth Amendment.

The Washington Supreme Court has outlined a four step process to determine if there has been a free speech violation. First, the employee must show that the speech was a matter of public concern. In determining whether an employee is whistleblowing on a matter of public concern, the courts consider whether the public may reasonably be expected to have a legitimate interest in the information. Whether it is a matter of public concern is determined by the content, form, and context of the statement in question. Thus a public hospital district should evaluate whether the employee is making the statements for self serving personal reasons, or whether the statement is being made out of concern for a public issue. For example, a public employee discharged for making statements to the public about racial discrimination in the workplace would be more likely to have first amendment protections than an employee discharged for complaining to coworkers about unfair treatment based on a personality conflict with his or her supervisor.

Second, the interests of the employee as a citizen should be balanced against the interest of the public employer in promoting efficient public services. This is affected by how important the public concern is, and how much the speech touches on that public concern.

Third, the employee must show the speech was a substantial or motivating factor in the employer's adverse decision. Fourth, if the above three steps are proven then the employer must show it would have made the same decision in the absence of the employee's statement. [Binkley v. Tacoma, 114 Wn.2d 373 (1990)]

Damages are recoverable from a municipality under 42 USC section 1983 which provides remedies for "deprivation of any rights, privileges, or immunities secured by the Constitution...." [Monell v. Dept. of Social Services, 436 U.S. 658 (1978)] Unlike private persons, in a section 1983 action a municipality is not liable for actions by its employees unless there is an official municipal policy which caused a deprivation of constitutional rights. The U.S. Supreme Court also ruled that municipalities are not liable for punitive damages. Thus, PHDs are protected to a certain extent, although a successful plaintiff would likely recover damages for back pay, reinstatement, and/or attorney fees.

Compensation is governed at the federal level by the Fair Labor Standards Act (FLSA) and at the state level by the Minimum Wage Act [RCW 49.46]. The Minimum Wage Act looks very similar to the FLSA and is primarily concerned with jobs that are on a 40 hour workweek schedule. If there is a conflict between state and federal law, the version which favors the employee takes precedence [RCW 49.46.120].

In 1986 the United States Supreme Court held that minimum pay and overtime provisions of the Fair Labor Standards Act (FLSA) apply to states and political subdivisions, including public hospital districts. [See also Chapter 2, Section G, Public Employee Wage and Hour Laws, Generally]

Of those employees eligible for overtime compensation, the FLSA allows hospital and nursing home employees, by agreement, to receive time and one-half compensation for hours worked in excess of 8 hours daily and 80 hours during 14 consecutive days, as opposed to the standard 40 hours over 7 days. Many hospital employees work varying hours due to the nature of their jobs. For example, nurses might work irregular hours depending on the flow of patients. The 80 hour period provides more flexibility than the 40 hour workweek, and in the long run can save employers money in overtime paid.

Employees of local governments, including public hospital district employees, can receive compensatory time off instead of overtime compensation at a rate of not less than one and one-half hours for each hour worked overtime. It must be provided for in a collective bargaining agreement or other agreement between the hospital and employee representatives, or else in an agreement between employer and employee before performance of the work. In addition, there is a maximum compensatory time of 240 hours that can be accrued after April 15, 1986, after which the employee must be paid overtime compensation for additional overtime hours of work. [See also Chapter 2, Section G]

In general, any employee who does not work in a bona fide executive, administrative, or professional capacity is entitled to overtime pay. Two factors in classifying employees as exempt from overtime compensation are whether one would expect that type of job to be paid on a salary basis (versus at an hourly rate) and whether the primary job duties involve the regular exercise of discretion (i.e., are more executive or administrative in nature).

Public hospital districts can make pay deductions for employee absences of less than a day without impacting overtime exempt status, even though that is arguably more like hourly pay than a salary arrangement. This rule is the net result of a series of federal court decisions and congressional law-making in the last few years.

In 1990 the Ninth Circuit Court of Appeals (under which Washington state falls) ruled that if public employees could potentially have pay deducted for absences of less than a day, then that suggested the employees were not paid on a salary basis and might remove the employees from the managerial/administrative exception. This was a major upset for public employers, who in the interest of cost savings often have a provision to deduct pay for part-day absences.

This was further complicated by the new Family Medical Leave Act (FMLA) which allowed pay deductions for part day leaves without losing exempt status if the employee was absent because of a serious health condition. Thus an employer could be faced with two different pay results depending on whether the employee was covered by the FMLA or not.

In response to this situation, the regulations implementing the FLSA were amended so that public employees are not removed from exempt status because of unpaid partial leaves if they otherwise qualify for the executive/administrative exemption. This is now the current state of the law. [29 U.S.C. section 541.5d]

New legislation provides more incentives for public hospital districts as municipal corporations to participate in state programs. Public hospital districts can now join state retirement systems without having to pay employer contributions for the years prior to their participation. [RCW 41.40] Public hospital districts are also eligible for state deferred compensation plans. [RCW 41.04.250 ; see also Chapter 2, Section I, State Provided Benefits]

Public hospital districts can also take advantage of health insurance offered by the Health Care Authority. [RCW 41.05] In this area it is worth mentioning that if a public hospital district offers a health insurance plan, under RCW 41.04.180 it is required to offer two alternative health insurance plans to its employees.

An additional state resource for public hospital districts is the State Office of Personnel which offers its services to local governments.

An employer generally has more responsibilities and potential sources of liability when the person working for the employer is an employee rather than an independent contractor. However, it is important to note that in constitutional claims public hospital districts are not liable for unlawful actions of an employee unless there is an official policy by the PHD that caused a deprivation of constitutional rights. [See also the First Amendment discussion above re: 42 USC 1983 liability]

An employee/independent contractor distinction is also made for employment tax purposes. There is generally more tax responsibility where the worker is an employee, such as for income taxes, Social Security and unemployment taxes. Violators can be assessed penalties, back taxes, and interest on back taxes.

The IRS has a 20 step test for separating employees from independent contractors. The general rule is that an individual is an independent contractor if the PHD has the right to control or direct the result of the work but does not have the means and methods of accomplishing the result. If, for example, the public hospital district is confronted with a physician who wishes to be treated as an independent contractor, the PHD should first examine their relationship under the IRS factors to determine whether that classification is appropriate. Where the employer is in doubt it can file Form SS-8 for the IRS to make a determination.

Section 530 of the 1978 Revenue Act protects employers from the penalties of misclassification under limited circumstances. The employer must have a history of classifying the workers and other workers in similar positions as independent contractors, treating them consistently as such for all periods after 1977. There must also be a reasonable basis for the classification, such as reliance on a prior judicial ruling, reliance on past audits, or industry practice. If a public hospital district acquires a clinic, on the other hand, it may find that the physicians must be considered employees since there is no historical independent contractor relationship with the physicians in the newly acquired clinic.

An issue that arises with all employees of public hospital districts is the state constitutional prohibition against gifts of public funds [see also Chapter 2, Section H, and Chapter 6, Topic IV: "Change and PHD Law"]. Article VIII, section 7, of the Washington state constitution states, "No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm...."

A public hospital district may wish to provide incentives to physicians, or perhaps give a one-time hospital-wide bonus to its employees. Any time a public hospital district makes an unusual payment to any employee, it should make sure that the payment is an established part of the employment contract. If the employees do not have a contractual right to receive it, then the public hospital district will be constitutionally liable for making a gift of public funds.

However, when a public hospital screens physician applicants, RCW 70.44.060 (9) allows the hospital to pay certain expenses in the interviewing process, such as the expense of flying to the interview site [See also Chapter 2, p. 34].

RCW 70.44.070 specifically allows superintendents to receive "compensation" as opposed to a "salary" for the position. This means that superintendents have greater leeway in terms of the type of compensation they can receive. Thus a nonmonetary form of compensation would not typically violate the prohibition against gifts of public funds, so long as it was set by resolution of the board of commissioners. [See also Chapter Two, Section I: Setting Salaries and Wages]

Like most states, Washington state does not have a "medical practice act" per se. Rather, courts have derived prohibitions from statutory licensing requirements which prohibit the practice of medicine without a license. [RCW 18.71.021] The unlicensed practice of medicine is a gross misdemeanor. [RCW 18.130.190 (7)] Under the corporate practice of medicine doctrine, as adopted in California and a few other states, a corporation or other entity is not a licensed individual, and thus it would be illegal for a corporation to hire a physician, because it would be practicing medicine through the physician. The theory is that the commercialization of medicine could adversely affect the physician-patient relationship, among other things.

PHDs look to RCW 70.44 to find authority for their actions. The public hospital district statute that authorizes hiring is RCW 70.44.060 (10), giving public hospital districts the power to "make contracts, employ superintendents, attorneys, and other technical or professional assistants and all other employees...." While it would seem that this clearly contemplates physicians, that occupation is not explicitly named. No Washington court has ruled on whether physicians would be included under the authority granted by RCW 70.44.060 (10).

When physicians serve on the board of commissioners this raises the conflict of interest concerns of RCW 42.23 . This issue is addressed in Chapter Two, Section H: Medical Staff Conflicts of Interest and more extensively in Chapter Two, Section K: The Code of Ethics and Conflicts of Interest.