stethoscope and gavel on table

12.18.20

Staffing Rates and the Law on Price Gouging

Expert

Jane Drummond

Jane Drummond

General Counsel and Vice President of Legal Affairs

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Type

Fact Sheets

Topic

  • COVID-19
  • Disease Management
  • Legal
  • Workforce

Tags

coronavirus COVID-19 fact sheet legal workforce

Issue Summary

Hospitals throughout the nation are facing unprecedented staffing costs as they recruit nurses, respiratory therapists and other needed health care workers to address COVID-19-related patient surge. As these costs strain financial resources, executives question why these abnormally high rates do not constitute unlawful price gouging. While the Missouri Merchandising Practices Act protects against price increases that take unfair advantage of emergencies, personal wage rates typically are not subject to the law. Under the existing statute, it would be difficult to bring an enforcement action for increased staffing rates.

 

Issue Analysis

In Missouri, it is unlawful to engage in “deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression or omission of any material fact in connection with the sale or advertisement of any merchandise…” Section 407.020, RSMo. Unfair practices are those that upset natural market forces for undeserved gain. Examples include buying up the supply of a necessary item to resell it at an inflated price or charging an exorbitant price for necessities during an emergency or disaster.

The law generally favors open competition in the employment marketplace, where individuals are free to command the salary the market will bear. Attempts to depress wages often are unlawful. Unless an individual or entity is engaging in fraudulent or deceptive practices, it is difficult to define a cause of action for charging wage rates employers are willing to pay.

When there is a shortage of individuals with a particular skill set, employers compete for limited supply by increasing wages or other incentives to procure that skill set over their competitors. This is a natural market reaction to supply and demand, and occurs with regularity in the employment marketplace.

Because the current agency rates are the result of genuine supply and demand issues, they do not fit the existing legal framework for price gouging. While nurses are a necessity, they offer a personal service that typically is not subject to consumer protection laws. Absent attempts to artificially alter demand for their services, commanding higher wage rates is viewed as competitive as opposed to illegal.

Several factors are influencing the high rates necessary to recruit staff. Nurses are being asked to leave their families for lengthy assignments (typically 8 to 12 weeks) during the holiday season to care for patients with a dangerous and highly infectious virus. Lodging and meals may be included in the rate. The lack of COVID-19 liability protections also may be increasing malpractice coverage afforded through agency contracts.

Current Missouri law does not address the increased cost of placing agency staff in hospitals during the COVID-19 surge. As health care workers are vaccinated, absenteeism rates should decrease, reducing the demand for additional staff. When that occurs, there should be a naturally occurring rate reduction, in accordance with general economic principles of supply and demand. With that in mind, negotiating short-term agency assignments may help ensure that hospitals are able to take advantage of falling rates as demand lessens and staffing shortages moderate in the coming weeks or months.

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