New Iowa Law Will Impact Healthcare Staffing Agencies and Contracts with Healthcare Entities | Dorsey & Whitney LLP

On March 17, 2022, Iowa Governor Kim Reynolds signed the law House file 2521, “Relating to Health Care Employment Agencies, and Provideing Penalties”, which will find its place in Chapter 135Q of the Iowa Code. In general, the law does three things. First, it requires healthcare placement agencies to register with the state’s Department of Inspections and Appeals (DIA) annually and pay a $500 registration fee. Second, it details record keeping and other requirements related to agency employees, and prohibits the inclusion of certain conditions in contracts with healthcare entities. Third, it imposes penalties for non-compliance.

The law widely defines a “health care placement agency” as “an agency that contracts with a health care entity in this state to provide agency workers for the purpose of temporary hire, direct hire, or other contracts or placements of employees”. Similarly, a “health care entity” is defined as “a licensed or certified facility, organization or agency operated to provide services and supports to meet the health or personal care needs of consumers”.

Under the new law, healthcare placement agencies must:

  • Register each health care employment agency location on an annual basis with the DIA and pay a $500 registration fee;
  • Ensure that agency workers comply with all applicable requirements relating to health requirements and staff qualifications in healthcare facilities (ie.
  • Maintain records for each agency worker and report, file, or otherwise provide any required documentation to external parties or regulatory agencies that would otherwise be the responsibility of the healthcare entity if the agency worker were working directly for the healthcare entity;
  • Maintain professional and general liability insurance coverage with a minimum coverage per occurrence of $1 million and an aggregate coverage of $3 million to protect against loss, damage or expense related to a claim resulting from death or injury resulting from the negligence or malpractice of the healthcare placement agency or temporary worker; and
  • Submit quarterly financial reports to the DIA regarding amounts billed to healthcare entities.

As previously discussed, CMS’s interim final rule requiring staff to be vaccinated against COVID-19 extends to agency employees who are not directly employed by Medicare or Medicaid providers and providers (“covered health care employers”). House File 2521 appears to codify such a vaccination requirement by requiring healthcare placement agencies to ensure that agency workers comply with all applicable requirements relating to healthcare entity personnel health requirements. and document this compliance.

Also under the new law, health care placement agencies are prohibited to impose restrictions on “a temporary worker’s employment opportunities by including a non-competition clause in any contract with a temporary worker or healthcare entity”. Additionally, contracts between agencies and healthcare entities may not “require the payment of liquidated damages, employment fees, or other compensation if the agency worker is subsequently hired as an employee. of the health care entity”. In other words, healthcare placement agencies cannot require their employees to sign non-competition agreements as a condition of employment, and healthcare placement agencies cannot require healthcare entities that they pay any “finder’s fee” to hire an agency directly. employee. All contracts that violate the new Iowa Code Section 135Q are inapplicable.

Several questions remained immediately after Governor Reynolds signed House File 2521, particularly regarding its scope. On May 24, 2022, the Iowa Legislature attempted to answer one of these questions in Home file 2589 clarifying that Iowa Code Section 135Q applies retroactively to any contract concluded on or after January 1, 2019. Although Governor Reynolds has not yet signed Docket 2589, his signature is expected.

From a legal standpoint, we probably haven’t heard the end of Iowa Code Chapter 135Q and House File 2589. penalty periods and other details.

For now, Iowa Code Chapter 135Q is effective July 1, 2022. At this point, any contract between healthcare employment agencies and healthcare entities, entered into on January 1, 2019 or later, which contains any of the prohibited provisions described above, are unenforceable. From a practical standpoint, this means that healthcare entities would have to renegotiate their contracts with healthcare placement agencies. We recommend that in addition to ensuring compliance with Iowa Code Chapter 135Q, healthcare entities ensure that renegotiated contracts include language requiring agency compliance with the interim final rule. of the CMS requiring the vaccination of staff against COVID-19.

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