Health Law Daily Deducting union dues from paychecks did not violate Medicaid statute
Monday, August 31, 2020

Deducting union dues from paychecks did not violate Medicaid statute

By Jeffrey H. Brochin, J.D.

The Medicaid statute does not confer a private right upon providers to prevent the union from taking a portion of the receivables.

A federal court in California has granted the motions to dismiss filed by the SEIU state employees’ union and by the State Controller of California in a lawsuit brought by Medicaid providers who challenged the deduction of SEIU union dues from their paychecks. The providers did not give notice of revocation of their union membership during the prescribed revocation period, and later claimed that the deductions violated their First Amendment rights as well as rights allegedly conferred under the federal Medicaid statute. However, no state action was found to apply to the union, and Congress did not intend to confer upon the providers a private right preventing third parties from taking a portion of their receivables (Polk v. Yee, August 24, 2020, Mueller, K.).

Providers as state employees. In California, personal care providers servicing persons with disabilities who are enrolled in the state’s Medicaid program called In-Home Support Services (IHSS) are paid by the State Controller, and therefore California law deems them to be public employees for unionization purposes. SEIU Local 2015 (Union or SEIU) is the exclusive bargaining representative for IHSS providers in 47 California counties. The providers consented to a dues deduction agreement that authorized the state to deduct union dues from their paychecks for a certain period. The agreements made the deduction authorization irrevocable except during an annual period ranging from ten to thirty days, during which a provider could send a revocation notice to SEIU.

The providers all notified SEIU that they no longer consented to the dues deduction, but did so outside of the revocation period. The State Controller continued to deduct union dues from their paychecks, allegedly without their consent. The providers filed suit pursuant to 42 U.S.C. § 1983 on behalf of themselves and two putative classes, alleging deprivation of their First Amendment rights, and in response both defendants moved to dismiss, which the court granted.

Acting under color of state law. The court began its analysis by noting that to state a claim under §1983, a complaint must first show that the conduct complained of was committed by a person acting under color of state law, because constitutional standards are invoked only where the state is responsible for the complained-of conduct. A court decides whether a party was acting under state law by using a two-part test. First, the court asks whether the claimed deprivation has resulted from the exercise of a right or privilege having its source in state authority; and, second, the court asks whether defendant may be appropriately characterized as state actor. State action can exist only when both questions are answered in the affirmative.

No state action found. The Supreme Court has articulated four tests for determining whether a nongovernmental person’s (such as SEIU) actions amount to state action: (1) the public function test; (2) the joint action test; (3) the state compulsion test; and (4) the governmental nexus test. Because the providers only cited the joint action test, the court limited its analysis to that test. SEIU argued that the providers failed to state a valid §1983 claim against the union, because the state’s ministerial processing of voluntary dues deductions did not transform the union’s private dues authorization agreements into state action.

The court agreed, finding that although there was a connection between the alleged constitutional violation and the state action, the providers did not plead facts to show that the union acted in concert with the state to cause the deduction of Union dues without a valid waiver. Accordingly, SEIU was found not to be a state actor under §1983, and all three of the §1983 claims against it were dismissed.

No private right conferred via Medicaid Act. The providers further alleged that the conduct of the union and the state violated 42 U.S.C. § 1396a(a)(32), a provision of the Medicaid Act that prohibits payment under the plan for any care or service provided to an individual, to anyone other than such individual or the person or institution providing such care or service. Both the state and the union argued that the providers failed to state a cognizable claim because §1396a(a)(32) does not create a privately enforceable right. It was intended to avoid a scenario in which a provider would assign their receivables to a financial middleman who would receive payment via the discounting of claims.

The court found that Congress never intended the non-assignment language to create a private right for providers. In the statute, neither the individual nor the provider is the subject of the provision, and the statute is not phrased to affirmatively guarantee anything to either. Such an absence of rights-creating language suggests that Congress did not intend that the provision in question benefit providers, and Congress’s purpose, to curb Medicaid costs and fraud by preventing factoring of Medicaid receivables, further supports that conclusion. Accordingly, the court dismissed the claims against the union and the state because the providers had no enforcement rights under the Medicaid Act.

The case is No.: 2:18-cv-02900-KJM-KJN.

Attorneys: William L. Messenger, National Right to Work Legal Defense Foundation for Delores Polk. Rebekah Millard, Freedom Foundation for Scott Ungar. Jeffrey A. Rich, Office of the Attorney General, for Betty Yee.

MainStory: TopStory CMSNews EmploymentNews MedicaidNews

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