Iowa Department of Inspections and Appeals Clarifies Rule for New Iowa Staffing Agency Law

On November 30, 2022, the Iowa Department of Inspections and Appeals (“IDIA”) published final rules regarding Iowa’s new law (Iowa Code § 135Q.2) related to health care employment agencies.  In August, Baird Holm first reported on the new requirements and limitations for health care employment agencies doing business in the state of Iowa.

With these new regulations and some recent announcements, the IDIA provides some clarification on definitions, requirements, and processes under the new law. 

Defining Terms

Iowa Code § 135Q.2 defines “health care employment agencies” and “health care entities” broadly, pulling nearly all health care staffing agencies into the ambit of the legislation.  IDIA’s rules, however, note certain exceptions.

For example, the definition of “health care employment agency” does not include a recruitment firm that contracts with a health care entity to “identify and screen potential candidates for hire.”  Further, certain licensed groups of physical therapists (under Iowa Code Chapter 148A), occupational therapists (under Iowa Code Chapter 148B), or speech pathologists or audiologists (under Iowa Code Chapter 154F) do not fall within the scope of a “health care employment agency.”

The final rules clarified that “direct services” includes “services performed by registered nurses, licensed practical nurses, certified nurse aides, certified medication aides, and medication managers.”  The definition specifically excludes:

1. the practice of medicine and surgery or osteopathic medicine and surgery by an individual licensed under Iowa Code chapter 148 or 148C—excluding all physicians and physician assistants; or
2. the practice of nursing by an advanced registered nurse practitioner or an advanced practice registered nurse licensed under Iowa Code chapter 152 or 152E.; or
3. any janitorial, housekeeping, laundry, and meal preparation services.

Registration

Under Iowa Code § 135Q.2 and the new final rules, health care employment agencies operating in Iowa must annually register and pay a registration fee.  A health care employment agency who began operations on or after July 1, 2022 must have registered with the IDIA 30 days prior to operation.  Initially, those agencies in operation prior to July 1, 2022 were required to register with the IDIA before January 4, 2023.  However, the IDIA announced that it will be extending a 30-day grace period in which all existing health care employment agencies must complete their registration.  Accordingly, all health care employment agencies operating in Iowa should ensure their registration is complete through February 4, 2023.

The IDIA provided an electronic registration system available here.  If registering via the online form, agencies should record the submission number to include with the registration fee when mailing a check to the IDIA.  As a reminder, registration is $500 for each health care employment agency location operating in Iowa.

The final rules also state that registration forms and accompanying materials will be open and available for inspection, although any confidential information will be redacted.  It is unclear, however, exactly how IDIA plans to make such information available if, for example, a party wishes to verify an agency’s registration and “good standing” with the state.

Record Retention

Iowa Code § 135Q.2 directs health care employment agencies to verify agency workers’ compliance with employment standards–which includes completing criminal, dependent adult abuse, and child abuse background checks; verifying workers’ education, training, and continuing education requirements; and ensuring completion of required health screenings or physical examinations.

Health care employment agencies are also tasked with maintaining records “for each agency worker and [to] report, file, or otherwise provide any required documentation to external parties or regulators which would otherwise be the responsibility of the health care entity if the agency worker was employed by the health care entity.”

Reporting

Health care employment agencies are also tasked with submitting quarterly reports to IDIA.  This report must include:

1. A detailed list of each health care entity participating in Medicare or Medicaid with whom the agency has contracted over the prior quarter;
2. A detailed list of the average amount charged by the health care employment agency to the health care entity participating in Medicare or Medicaid over the prior quarter, broken down by provider type (e.g., hospital, nursing facility) and each individual agency worker category (e.g., certified nurse aide, registered nurse, licensed practical nurse) within that provider type; and
3. A detailed list of the average amount paid by the health care employment agency participating in Medicare or Medicaid to agency workers over the prior quarter, broken down by provider type (e.g., hospital, nursing facility) and each individual agency worker category (e.g., certified nurse aide, registered nurse, licensed practical nurse) within that provider type.

These reports are due on a quarterly basis in accordance with the schedule below:

The IDIA stated it will distribute additional information at a later date regarding how this data should be submitted.

Prohibited Contract Clauses

Iowa Code § 135Q.2 prohibits health care employment agencies from “Restricting in any manner the employment opportunities of an agency worker by including a non-compete clause in any contract with an agency worker or health care entity.”

This means generally that non-competes are not allowed in employment agreements between the covered agency and the agency worker nor agreements between health care entities and agencies.

The Final Rules include one minor exception when all of the following apply:

1. the contract is for the purpose of placing an agency worker the agency assisted in obtaining authorization to work in the United States;
2. the contract contains an initial contract term of no less than 24 months and has a total duration, including any renewals or extensions, of no longer than 36 months; and
3. the contract requires the agency worker to work at a single health care entity for the duration of the contract.

It is important to note that the prohibited clauses are dependent on meeting the definition of “agency worker.”  Iowa Code § 135Q.1 defines “agency worker” to include those individuals providing “direct services” or “nursing services” which has limitations.  Iowa Code § 135Q.1 excludes from nursing services “the practice of nursing by an advanced registered nurse practitioner or an advanced practice registered nurse licensed under chapter 152 or 152E.”  Additionally, the law and Final Rules specifically exclude the practice of medicine and surgery or osteopathic medicine and surgery, physician assistants, and advanced registered nurse practitioner from “direct services”  (see “Defining Terms” section above).  As a result, individuals falling under these exclusions (where § 135Q.2 does not apply) may still be subject to non-compete clauses.

Next Steps

IDIA’s final rules provide some guidance, but there are still many unanswered questions. As a reminder, parts of this new law (namely the prohibited contract clauses) reaches agreements entered on or after January 1, 2019, which adds a complicated crinkle to compliance efforts.

Employment agencies and health care entities alike should be proactive in compliance efforts and review existing contracts for compliance.