Force Account Labor & Equipment, Section 705

Appeal Brief

Summary Paragraph

The coronavirus (COVID-19) pandemic resulted in a major disaster declaration for the state of Minnesota, with an incident period of January 20, 2020, through May 11, 2023. North Memorial Health Care (Applicant), a Private Nonprofit (PNP) that operates eligible medical care facilities, requested reimbursement for Core Needs Incentive (CNI) premium pay it paid to its nurses from April to June 2022. The CNI is part of the Applicant’s 2019 predisaster collective bargaining agreement (Employment Contract) with the Minnesota Nurses Association (MNA). The CNI required both the Applicant and the MNA to agree to and approve premium pay before the Applicant could offer it. In a Determination Memorandum, FEMA denied $3,160.00 of the Applicant’s funding request, finding it represented ineligible labor costs that were paid at a higher hourly rate than the Applicant’s predisaster labor policy authorized. However, FEMA approved the premium pay the Applicant paid at the authorized $60.00 hourly rate. Accordingly, FEMA obligated $167,295.00 to the project. The Applicant appealed the denial of the $3,160.00. The Minnesota Department of Public Safety (Recipient) transmitted the Applicant’s appeal with its support, stating the $60.00 hourly rate was merely a minimum. On September 19, 2024, the FEMA Region 5 Regional Administrator denied the appeal. FEMA found the Applicant did not demonstrate that its predisaster pay policy set non-discretionary criteria for premium pay. Thus, FEMA stated it would deobligate the previously approved funds. FEMA also found that section 705(c) of the Stafford Act did not bar the recovery because it does not apply to PNPs. The Applicant submitted a second appeal, arguing that its labor policy was non-discretionary, and asserting that section 705 bars recovery of the funds paid through the Recipient.

Authorities

• Stafford Act §§ 403(a)(3), 705(c).
• 2 C.F.R. § 200.403(g), 44 C.F.R. § 206.225(a)(1).
• PAPPG, at 21, 23-24, 133.
• FP 205-081-2, at 1; FP 104-21-0004, at 4.
• Maple Grove Hospital Corp., FEMA-4531-DR-MN, at 4; Ore. Shakespeare Festival Ass’n, FEMA-4499-DR-OR, at 3.

Headnotes

• The eligibility of premium pay costs is based on the applicant’s predisaster written labor policy, provided the policy meets certain FEMA criteria.
  • The Applicant has not demonstrated it provided premium pay in accordance with a predisaster written labor policy that meets FEMA requirements.
• Section 705(c) of the Stafford Act provides that a state or local government is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if the payment was authorized by an approved agreement specifying the costs.
  • Section 705(c) of the Stafford Act does not apply to PNPs.

Conclusion

FEMA finds the claimed premium pay costs were not provided under a labor policy that meets FEMA policy requirements. In addition, section 705(c) of the Stafford Act does not apply. Therefore, this appeal is denied.

Appeal Letter

Appeal Analysis

Background

The coronavirus (COVID-19) pandemic resulted in a major disaster declaration for the state of Minnesota, with an incident period of January 20, 2020, through May 11, 2023. As a result of the COVID-19 pandemic, North Memorial Health Care (Applicant), a Private Nonprofit (PNP) that operates multiple eligible medical care facilities, requested Public Assistance (PA) reimbursement for $170,455.00 for Core Needs Incentive (CNI) premium pay it paid to its nursing staff from April to June 2022. The CNI is part of the Applicant’s predisaster collective bargaining agreement (Employment Contract) it signed with the Minnesota Nurses Association (MNA) in June 2019. The Employment Contract required both the Applicant and the MNA to agree to and approve premium pay before the Applicant could offer it. The Employment Contract specified the hourly rate of pay for CNI shifts to be $60.00. 

In a Determination Memorandum, which the Applicant received on February 15, 2024, FEMA denied $3,160.00 of the Applicant’s funding request, finding it represented ineligible labor costs that were paid at a higher hourly rate than the $60.00 authorized in the Applicant’s Employment Contract, which the Applicant submitted as its predisaster labor policy. FEMA found the Applicant’s predisaster labor policy did not provide for the increased premium pay rate. However, FEMA approved the premium pay that the Applicant paid at the $60.00 hourly rate authorized in the predisaster pay policy. Accordingly, FEMA obligated $167,295.00 to the project. 

First Appeal

On April 7, 2024, the Applicant appealed the denial of the $3,160.00 for the premium pay paid at rates higher than the $60.00 the Employment Contract authorized. The Applicant stated that during the COVID-19 emergency, certain nursing shifts became very hard to fill so that the Applicant used its CNI premium policy to pay a higher premium pay rate to ensure adequate staffing to treat COVID-19 patients. The Applicant asserted that the higher premium pay was reasonable due to the extenuating circumstances during COVID-19. The Applicant claimed that, in practice, the CNI rate served as a minimum rate even prior to the pandemic and that the Applicant had at times increased the rate above what was stated in the Employment Contract when shifts were hard to fill. In support, the Applicant provided memoranda from 2015-2019, before the incident period, showing it applied flexible premium pay rates. 

The Minnesota Department of Public Safety (Recipient) transmitted the Applicant’s appeal with its support, stating the premium pay rate of $60.00 was merely a minimum rate and the Applicant could increase the rate in response to extenuating circumstances, consistent with its long-standing practices. 

On September 19, 2024, the FEMA Region 5 Regional Administrator denied the appeal. FEMA found the Applicant did not demonstrate that any of the premium pay costs were tied to a predisaster labor policy that was uniformly applied and contained non-discretionary criteria that outlines when premium pay will be paid to employees. FEMA found the Applicant’s predisaster labor policy was subject to managerial review and approval before any premium pay could be offered or paid to employees and further noted that the policy lacked specific staffing thresholds or other defined criteria for activating CNI pay. 

Because the Applicant’s predisaster labor policy did not meet FEMA requirements, FEMA also found it erred in previously obligating $167,295.00 for the premium pay costs capped at the predisaster rates. Because section 705 of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act does not apply to PNPs, FEMA found the Stafford Act did not bar it from recovering the previously awarded funds of $167,295.00.

Second Appeal

On November 15, 2024, the Applicant submitted a second appeal, asking FEMA to reimburse all of the denied $170,455.00 premium pay request. The Applicant argued its predisaster labor policy was uniformly applied and non-discretionary, and that the CNI provision was only activated upon the occurrence of an objective “trigger” event. First, the Applicant states that its predisaster labor policy was uniformly applied because the Applicant categorically paid the CNI rate it was contractually obligated to provide, even if it sometimes paid more than that. Second, the Applicant states that its predisaster labor policy sets non-discretionary criteria, and it cites to four events, any one of which automatically triggers the premium pay. The Applicant also states that, upon activation of the CNI provision, it has no discretion to pay less than $60.00 per hour. The Applicant disputes FEMA’s first appeal findings and also asserts that section 705 of the Stafford Act applies and bars deobligation of the funds because, even if the Applicant is a PNP, the funds were paid through the Recipient, which is a state government.

On January 10, 2025, the Recipient forwarded the Applicant’s second appeal to FEMA with its support.

Discussion

Force Account Labor & Equipment

FEMA is authorized to provide assistance for emergency protective measures to save lives and protect public health and safety.^[1] In response to COVID-19, certain labor costs associated with medical staff providing treatment to COVID-19 patients may be eligible.^[2] FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s predisaster written labor policy, provided the policy: (1) does not include a contingency clause that payment is subject to Federal funding; (2) is applied uniformly regardless of a Presidential declaration; and (3) has set non-discretionary criteria for when the Applicant activates various pay types.^[3]Costs must be directly tied to the performance of eligible work and adequately documented.^[4] It is the applicant’s responsibility to provide documentation to substantiate its claim as eligible and to clearly explain how those records support its appeal.^[5]

The Applicant is requesting reimbursement for premium pay costs paid to its employees during the disaster. However, the Applicant did not demonstrate that its predisaster written labor policy sets non-discretionary criteria for when it activates premium pay. The Employment Contract, signed in June 2019, requires both parties to the contract to agree that there is a need for the CNI before the pay is offered to nursing staff.[6] In addition, the CNI activation triggers for the premium pay, which include (A) percent of open shifts from master schedules; (B) unusual number of leaves of absences (LOAs); (C) unusual number of pools on one or more units; and (D) sustained census levels at peak levels, are broad and lack specific, defined criteria, such as numerical or percentage thresholds.[7] The activation of the CNI pay is not automatic, and the policy as written does not establish clear, objective triggers for when the Applicant would activate the premium pay. Instead, the triggers for activating the premium pay are subjective and require pre-approval, further demonstrating the discretionary nature of the policy.[8] Likewise, the Applicant chose to increase the premium pay rates after the disaster, which further demonstrates the discretionary nature of the labor policy. Although this type of flexibility may be necessary to meet the fluctuating circumstances of a hospital, the Applicant’s predisaster labor policy does not satisfy FEMA’s policy criteria. Thus, the Applicant’s premium pay costs totaling $170,455.00 are ineligible for PA. 

Section 705 

Section 705(c) of the Stafford Act provides that a state or local government is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if: (1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.[9] Section 705 of the Stafford Act does not apply to nonprofit subrecipients.[10]

The Applicant asserts that section 705(c) of the Stafford Act bars FEMA from seeking reimbursement of the originally approved $167,295.00. However, FEMA policy clarifies that section 705 does not apply to PNP subrecipients.^[11]Consequently, FEMA is not barred from recovering the previously obligated funds.

Conclusion

The claimed premium pay costs were not provided under a labor policy that meets FEMA policy requirements. In addition, section 705(c) of the Stafford Act does not apply. Therefore, this appeal is denied.