Force Account Labor & Equipment, Section 705

Appeal Brief

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

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 from January 20, 2020, to May 11, 2023. As a result, North Memorial Health Care (Applicant), a private nonprofit (PNP) that operates multiple medical care facilities, requested Public Assistance (PA) reimbursement of $358,098.75 for incentive opportunity premium pay (premium pay) it paid to its staff from January through March 2022.[1] In support of its claim, the Applicant provided its February 2018 Collective Bargaining Agreement (Agreement) with the SEIU Healthcare of Minnesota, which specified work hours and overtime requirements, provided for an annual percentage increase for wages, authorized weekend premium pay, and stated that a higher hourly rate may be paid “if the Hospital so desires.”[2]The Applicant also provided an August 2, 2019 incentive premium pay memorandum (predisaster labor policy). The predisaster labor policy specified tiered premium pay rates, stipulated that premium pay “may be initiated and approved by on-call leadership to assure appropriate staffing to meet our customer needs on a shift by shift basis” and “if deemed necessary, management has the right to discontinue the incentive trial.”[3] The Applicant also included a chart and two tracking documents, a guidance document, and memoranda dated August 26 through December 29, 2021, temporarily increasing the predisaster labor policy premium pay hourly rates during the incident period.[4]

In a February 8, 2024, Determination Memorandum, FEMA denied $287,298.75 of the Applicant’s funding request, finding it represented ineligible labor costs that were paid at a higher premium pay rate than the rates authorized in the Applicant’s Agreement or provided for in the Applicant’s predisaster labor policy. However, FEMA approved and obligated $70,800.00 in premium pay based on the hourly rate authorized in the predisaster pay policy. 

First Appeal

On April 7, 2024, the Applicant appealed the denial of the $287,298.75 for costs associated with the higher premium pay rate. The Applicant stated that during the COVID-19 emergency, certain shifts became very hard to fill and it used a higher premium pay rate to ensure adequate staffing to treat COVID-19 patients. The Applicant maintained that its claimed premium pay costs were eligible because it followed its predisaster pay policy, and the costs were reasonable based on the extenuating circumstances during the COVID-19 emergency. The Applicant claimed that the predisaster labor policy premium pay rate served as a minimum rate prior to the pandemic and it had at times increased the rate when shifts were hard to fill, as it did during the incident period in accordance with its predisaster labor policy. 

On April 8, 2024, the Minnesota Department of Public Safety (Recipient) forwarded the Applicant’s appeal with its support. 

On September 20, 2024, the FEMA Region 5 Regional Administrator denied the appeal. FEMA found the Applicant did not demonstrate that any of the $287,298.75 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 beoffered or paid to employees and further noted that the policy lacked specific staffing thresholds or other defined criteria for activating premium pay. 

Because the Agreement and the Applicant’s predisaster labor policy did not meet FEMA requirements, FEMA also found it erred in previously approving and obligating $70,800.00 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.[5]

Second Appeal

On November 15, 2024, the Applicant submitted its second appeal, asking FEMA to reimburse all of the denied $358,098.75 in premium pay costs and asserting that the costs are tied to a written predisaster, non-discretionary labor policy. The Applicant contends that, although its predisaster labor policy states that it may be initiated and approved by the department leadership on a shift-by-shift basis, this does not render the policy discretionary as the Applicant’s decisionmakers had no choice but to initiate the policy during the pandemic. The Applicant claims that if it did not initiate the policy and pay the tiered premium rates to its hospital staff, and at times increase rates beyond those minimum rates, it would not have been able to keep its doors open.

Further, the Applicant disputes FEMA’s first appeal findings. It 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 transmitted the Applicant’s appeal to FEMA with its support. 

Discussion 

Force Account Labor & Equipment Costs 

FEMA is authorized to provide assistance for emergency protective measures to save lives and protect public health and safety.^[6] In response to COVID-19, certain labor costs associated with medical staff providing treatment to COVID-19 patients may be eligible.^[7] 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.^[8]Costs must be directly tied to the performance of eligible work and adequately documented.^[9] 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.^[10]

The Applicant is requesting reimbursement of premium pay costs paid to its staff during the disaster. However, the Applicant did not demonstrate that either its predisaster Agreement or its written labor policy sets non-discretionary criteria for when it activates premium pay. The Agreement stipulates that the Applicant may choose to activate its premium pay on a shift-by-shift basis, based on the judgment of on-call leadership. Additionally, if deemed necessary, management has the right to discontinue premium pay, further demonstrating the discretionary nature of both the Agreement and the predisaster labor policy and showing neither was uniformly applied. Although this type of flexibility may be necessary to meet the fluctuating circumstances of a hospital, the Applicant’s predisaster Agreement and its labor policy do not satisfy FEMA’s policy criteria. Thus, the Applicant’s premium pay costs totaling $358,098.75 are ineligible for PA reimbursement.^[11]

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.[12] Section 705 of the Stafford Act does not apply to nonprofit subrecipients.[13]

The Applicant asserts that section 705(c) of the Stafford Act bars FEMA from seeking reimbursement of the originally approved $70,800.00. However, FEMA policy clarifies that section 705 does not apply to PNP subrecipients.^[14]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.