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Bar News - January 18, 2017

Health Law: Law Requires NH Health Care Facilities to Disclose Employee Performance


The health care industry is facing a shortage of qualified workers. A facility with a job opening often spends months trying to recruit qualified candidates. When a candidate looks good on paper, hiring managers check references only to hit the human resources wall constructed to protect against defamation liability: “Our company policy is to verify job title and dates of employment.”

These facilities then search the National Practitioner Data Bank, the Nurse Licensure Compact reporting database, and state licensure websites to determine whether the prospective employee has ever been subject to formal discipline by a licensing authority. When these searches come up clean, or the candidate is not subject to state licensure, these facilities are forced to take a leap of faith and hire someone with no knowledge of this employee’s past performance except for information provided by cherry-picked references.

If the employee ultimately commits malpractice, the new employer often seeks to hold the former employer accountable under misrepresentation and negligence theories. This article explores the preeminent case on this issue and a new statute enacted by the NH Legislature in 2016, which attempts to solve the problem of the so-called “name, rank, and serial number” approach to employee references in health care.

The Kadlec Case

In the seminal case of Kadlec Medical Center v. Lakeview Anesthesia Associates et al. (E.D. La. 2006), an anesthesia group terminated a physician’s employment based on allegations that he abused Demerol. Lakeview Regional Medical Center (LMC) in Louisiana revoked his medical staff privileges in turn. The physician subsequently sought employment at Kadlec Medical Center in Washington. When Kadlec called LMC for an employment reference, LMC provided dates of service only and noted that other information was not available “due to the large volume of inquiries received.” Based on the information from LMC, and references from other LMC physicians, Kadlec granted medical staff privileges to the physician.

Unfortunately, the physician subsequently botched a tubal ligation surgery he performed at Kadlec due to intoxication. The patient’s family sued Kadlec and the case settled for $7.5 million. Kadlec then sued LMC for intentional and negligent misrepresentation. LMC argued that it had no legal obligation to respond to Kadlec’s credentialing questions. The jury was not persuaded and awarded Kadlec $8.24 million in damages. Kadlec sent shockwaves throughout the medical community nationwide – despite being partially reversed on appeal – because it was the first case which held that a hospital had a duty to disclose problems with a former physician.

RSA 151:16-C

In response to the hepatitis C outbreak at Exeter Hospital in 2012 caused by a traveling technician who avoided reporting to police or his national credentialing organization, the New Hampshire Legislature passed House Bill 628 during the 2016 session. This new statute applies to health care facilities licensed under RSA 151 including, but not limited to, hospitals, long-term care facilities, ambulatory surgical centers, walk-in clinics, home health agencies, hospice houses, and laboratories. The statute does not apply to stand-alone physician practices.

House Bill 628, codified at RSA 151:16-c, provides that health care facilities licensed under RSA 151 “shall, when acting in good faith, disclose employment information regarding misconduct and competency about a health care worker upon request of a prospective or current employer.” (emphasis added). In short, this statute specifically requires facilities to disclose information regarding a former employee’s misconduct or competency. Facilities that fail to comply with this statute are subject to penalties by the NH Department of Health and Human Services, including administrative fines or adverse licensure actions.

Although many are applauding this protective legislation, some are concerned about ambiguities in the statute. For example, the statute does not define “misconduct” or “competency.” Does misconduct include a violation of an employer’s tardiness policy? Furthermore, the statute does not limit the disclosure of misconduct to that for which the employee was actually disciplined. Similarly, the statute does not limit disclosure of competency issues to those for which the employee was actually cited or placed on a plan of correction or proctoring. These undefined and amorphous terms conceivably require health care employers to disclose anything negative in the employment files of its former employees.

In addition, the statute appears to exclude a large segment of health care workers that it was seemingly designed to address – including traveling contractors who are not actually employed by facilities. Since the law refers to the disclosure of “employment information,” does this include information about a health care worker who is retained by a facility as an independent contractor? Moreover, the statute does not apply to non-employee physicians or health professionals who are members of a hospital’s medical staff and who are closely monitored by the hospital’s credentials committee for misconduct and competency.

Importantly, the law grants immunity from civil liability to facilities and their directors and employees who provide this employment information to prospective or current employers unless “it is alleged and proven that the information disclosed was false and disclosed with knowledge that such information was false.” To avail themselves of immunity protection, facilities must carefully review a former employee’s file to ensure that they are satisfied that the information is truthful before disclosing it. Otherwise, they may be subject to defamation liability.

Best Practices for Compliance

RSA 151:16-c takes effect on Jan. 1, 2017. Accordingly, health care facilities should promptly examine their internal policies to ensure compliance with this new law. They should also train HR staff members regarding their affirmative duty to disclose employment information. They should also design a process for verifying the truthfulness of potentially relevant information in a former employee’s file in order to ensure immunity under the statute. Finally, they should confer with legal counsel if they have questions about the extent of their reporting obligations or need assistance with policy drafting or review.

Jason Gregoire

Jason D. Gregoire is a health care attorney at Sheehan Phinney Bass & Green in Manchester. He represents health care facilities of all types in regulatory compliance and patient care matters.

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