Judge orders UI Hospitals to compensate thousands of workers for late pay

IOWA CITY — A federal judge has ruled the University of Iowa Hospitals and Clinics not only violated wage laws by paying workers late, but it did so intentionally and must pay “liquidated damages” to over 8,000 current and former UIHC employees.

Although attorneys for the state argued that UIHC shouldn’t have to pay affected employees additional damages because it eventually paid them what they earned, U.S. District Court Judge Stephanie Rose wrote in her ruling Tuesday that UIHC must be penalized to stop future infractions.

“By allowing employees to collect liquidated damages from employers for intentional untimely payments of wages,” Rose explained, her interpretation of the law “carries out the statute’s express purpose of preventing this type of conduct.”

Attorneys now must collect wage data on the thousands of employees affected by the class-action lawsuit to determine a total judgment amount, according to attorney Nate Willems, representing the UIHC workers.

“Judge Rose’s decision today represents a significant win for all workers in Iowa, and state employees in particular, who are forced to wait weeks and sometimes months for the wages they have earned, which is a hardship wage laws like the (Iowa Wage Payment and Collection Law) are designed to prevent,” Willems said in a statement.

Officials with the Iowa Board of Regents — named as the lawsuit’s defendant for its role overseeing UIHC — declined to comment Wednesday on the judge’s order.

Several UIHC employees filed the initial lawsuit in 2019, and Rose last year certified it as class-action, granting class status to three groups — including employees who worked for UIHC since fall 2017 and weren’t paid until more than 12 days after the end of the period in which they earned their wages, as required by state law.

The lawsuit contended UIHC was compensating employees for overtime or extra time hours later than the Iowa wage law allows.

A year after the lawsuit was filed, administrators made substantive changes to its pay practices.

Former UIHC Chief Executive Officer Suresh Gunasekaran in August 2020 announced staff nurse and other select professional classifications would move from a six-week pay schedule to a four-week schedule, while employees paid on a monthly basis would transition to a biweekly schedule. Gunasekaran gave several reasons for the changes, including the “timeline and requirements of pending litigation” and to “align with Iowa Code.”

In defending itself before the court, UIHC presented several arguments, including “qualified immunity,” a legal doctrine shielding government officials from civil suits. Rose denied the board such immunity in this case, a decision the state is appealing.

The state’s lawyers also argued its workers are bound by two documents — an offer of employment letter and a collective bargaining agreement — allowing UIHC to pay them later than outlined in Iowa Code.

The offer letters each include language stating employment is governed by the UI operations manual — a separate document that states, “your paycheck on the first of each month is for your salary earned the previous calendar month,” according to court documents.

But the judge ruled the offer letter doesn’t constitute a “clear and explicit written agreement” to modify protections in Iowa law.

“A party must explicitly intend to waive a statutory right,” according to Rose’s order. “There is no explicit statement regarding waiver of the (Iowa Code) provisions in the offer letter.”

UIHC essentially conceded that point, she said, because it never argued the offer letters explicitly say how wages are paid but rather "indirectly reference a few sentences in a document that is hundreds, if not thousands, of pages long.“ Plus, Rose wrote of the UI operations manual, “It did not provide these documents to plaintiffs.”

She also slammed the university for failing to produce offer letters it said it gave to several of the plaintiffs — inferring violations of state record retention rules.

“The incomplete production of the written agreements is troubling,” according to Rose. “Defendant’s failure to produce the agreements suggests it did not maintain the required records. Not complying with the statute’s record-keeping requirement undermines defendant’s argument that it intended the agreements to vary the timing provisions of Iowa Code.”

As for arguments collective bargaining agreement permits employees to be paid later, Rose ruled the language “is too vague to vary the twelve-day requirement set forth by Iowa Code.”

To the employee argument that UIHC paid wages late on purpose, Rose found it did — rejecting the state’s defense that the university didn’t mean to break the law.

“Defendant maintains it had a good faith, but mistaken belief that it was paying wages ‘consistent with the (Iowa wage law),’ which is sufficient to stop the imposition of liquidated damages,” according to the judge. But she went on to say, “A party’s good faith, but mistaken belief about its legal duties does not excuse non-compliance with the law.”

Plus, Rose wrote, she’s seen evidence UIHC knew its obligations and wasn’t performing them. “This evidence is enough for a jury to find defendant was aware it owed wages to plaintiffs by a certain date and chose to not pay them in a timely fashion,” she wrote.

The judge, however, denied the employees’ request for damages for late-paid vacation and sick leave payouts for departed employees — saying UIHC has a clear policy around how that’s done and the workers didn’t show evidence they received payouts in an untimely manner.

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com