The Law Office of Kurt H King

September 5, 2018

Constructive Discharge of Medical Employee Applied to HIPAA Violations

An informative case regarding constructive discharge of pharmaceutical and medical employees is Smith v. LHC Group, No. 17-5850, 2018 WL 1136072 (6th Circuit March 2, 2018).  There the director of nursing reported to management certain health care fraud by co-employees.  However, the profitable fraudulent practices continued, leaving Smith the choice of turning a blind eye which could cause criminal charges against her and the loss of her nursing license, or resign.  The Sixth Circuit held that plaintiff nurse was constructively discharged, in a thorough and reasoned opinion.

The plaintiff’s case of constructive discharge would have been even stronger had she been personally instructed act in violation of law.

Note that HIPAA provides stiff fines and imprisonment for those that violate its provisions.  Under 42 U.S.C. 1320d-6, violation of HIPAA by unauthorized access to PHI carries a maximum $50,000 fine, up to 1 year imprisonment, or both.  If done for commercial advantage, the fine increases to $250,000 with 10 year imprisonment.

Sales representatives, employees, and contract workers who refuse the employer’s directions due to HIPAA violation concerns may find themselves between a rock and a hard place–eventual discharge or criminal law violations.

Kurt H. King, Missouri attorney

816.781.6000

20 E. Franklin, Liberty, Clay County, Missouri 64068

Retaliation & Discrimination, Litigation, General Matters

           

Third Party Beneficiaries in Missouri–Pharmaceuticals and Corporate Integrity Agreements

Under Missouri law, persons not a party to a contract may sue for breach of that contract where the parties to the contract intended the party performing the contract (the promisor) have a duty to third parties.  The intent of the parties to the contract is key:

“The question of intent is paramount in any analysis of an alleged third party beneficiary situation.

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The intent necessary to establish the status of a third-party beneficiary is “not so much a desire or purpose to confer a benefit on the third person, or to advance his interests or promote his welfare, but rather an intent that the promisor assume a direct obligation to him.”

Laclede Inv. Corp. v. Kaiser, 596 S.W.2d 36, 41 (Mo. Ct. App. E.D. 1980), citing Stephens v. Great Southern Savings & Loan Assn, 421 S.W.2d 332 (Mo. Ct. App. S.D. 1967).

“The intention of the parties is to be gleaned from the four corners, and if uncertain or ambiguous, from the circumstances surrounding its execution.”  Drury Company v. Missouri United School Insurance Counsel, 455 S.W.3d 30 (Mo. Ct. App. E.D. 2014) (upheld subcontractor’s right to sue, as an intended beneficiary, an insurer on its property damage policy issued to the owner of property).

“Although it is not necessary that the third party beneficiary be named in the contract, the terms of the contract must express directly and clearly an intent to benefit an identifiable person or class.”  L.A.C. ex rel. B.C. v. Ward Parkway Shopping Center Co., 75 S.W.3d 247, 260 (Mo. 2002) (young girl raped at mall sued security company for breach of its contract with the mall; held she may do so as an intended beneficiary of the contract).

The Third Party Beneficiary doctrine may apply in many different situations.  For example, a Corporate Integrity Agreement (CIA), between the pharma company and the government requiring reporting of non-compliance with  laws and regulations, may well protect the employees from retaliation for such reports and for participating in investigations regarding those reports.

Kurt H. King, Missouri Attorney

816.781.6000

20 E. Franklin, Liberty, Clay County, Missouri 64068

Employment Retaliation & Discrimination, Litigation, General Matters

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