If you’re like many healthcare organizations across the U.S., you may be guilty of misclassifying your healthcare workers as independent contractors. However, this blunder can be detrimental to your organization for multiple reasons – many of which healthcare leaders are not informed or educated about. Even with strict legislation in place on the state and federal levels, facilities continue to misclassify employees in an effort to save money and reduce expenses. In particular, nurses tend to often be misclassified as independent contractors, even though they typically do not meet the criteria assigned to this status. Organizations that follow legal guidelines in the hiring and employment of independent contractors and nurses will avoid potentially costly legal battles. Fair and ethical employment practices afford every individual at the organization equal pay and advancement opportunities.
Keep reading to learn about the differences between independent contractors and healthcare workers, as well as common misclassification pitfalls and their legal consequences.
Independent Contractors vs. Healthcare Workers
First, it’s important to understand the primary difference between an independent worker and a healthcare worker. An independent worker is essentially an employee who is employed independently from the facility, meaning they are not entitled to traditional benefits (such as healthcare or dental insurance), and the healthcare practice is not responsible for payroll taxes, unemployment benefits, or workers’ compensation costs associated with the worker. On the other hand, a healthcare worker is somebody who’s fully employed with a facility and receives all benefits associated with being a full-time, permanent employee. The most distinguishable difference is that an independent contractor is typically sourced from a staffing agency, while a permanent healthcare worker is often hired directly within an organization to fulfill a full-time role. For example, a nurse who’s hired from a healthcare staffing firm to work in a short-term, temporary capacity at a hospital may be considered an independent contractor. However, a nurse who is employed on a full-time basis within the same facility is considered a permanent nurse. While some independent contractors are eventually hired as full-time employees, they should not be classified as permanent healthcare workers within a facility unless this occurs.
Legal Consequences of Misclassification
As many healthcare facilities are increasingly leaning on independent contractors to fulfill staffing demands, it’s become a common practice across the medical industry to misclassify these workers. Unfortunately, there are many costly legal consequences for healthcare facilities that misclassify their employees. Here are some of these consequences:
- Wage law violations. Employers that misclassify employees often incur major penalties with regard to unpaid overtime costs and minimum wage deficits.
- Workers’ compensation violations. Penalties can occur as a result of a violation of workers’ compensation insurance laws and liability for unpaid premiums.
- Tax violations. Failure to withhold state and federal payroll taxes, including social security and Medicare tax payments, can be a major legal concern.
- I-9 violations. Failure to comply with I-9 regulations can result in many liabilities.
- Benefits plan violations. In the case of misclassification, employees may be improperly excluded from their entitled benefits, such as pensions, healthcare insurance, and paid family leave.
- FMLA Act violations. When employees are not given their proper classification, there may be a violation of the federal Family and Medical Leave Act (FMLA), according to the law’s rules and guidelines.
- Age discrimination liability. Age discrimination is more prevalent when employees are misclassified as independent contractors, often as a result of the invalidation of releases and waivers of employees aged 40 and over.
Why Healthcare Organizations Misclassify Employees
There are many reasons why healthcare organizations misclassify employees; however, many facilities engage in this illegal behavior to improve their bottom line and increase revenue. Through improper classification, facilities do not pay required taxes and benefits, taking a major risk in incurring a series of lawsuits, penalties, and employment liabilities claims. Misclassification issues can result in widespread problems for a hospital, from collective class action lawsuits to major monetary damages.
While there’s no exact defined distinction between an “employee” and an “independent contractor,” facilities must adhere to all local, state, and federal guidelines regarding employment and staffing. For instance, for federal tax purposes, the IRS carefully outlines what’s categorized as an “independent contractor” and “employee.” Compliance professionals in healthcare who are educated about tax laws have the necessary background knowledge to ensure their facility adheres to required tax regulations. This is one example of how knowledge at the leadership level is key for preventing devastating legal consequences in a healthcare setting.
By educating your compliance and human resources team about the negative effects of employee misclassification, you can proactively avoid complications with the law and ensure your organization is following proper labor and employment practices within all departments of your facility.
Final Thoughts: It’s Not Worth It!
Ultimately, healthcare leaders who understand the serious ramifications that can ensue from misclassifying employees will make the most lawful employment decisions for their facilities.
If you’re involved in employment and labor law at your healthcare organization, it’s in your best interest to educate yourself about the types of violations included in this article – and the negative impacts they can have on your facility in the long run. Through sustained legal and ethical practices, you can take the necessary steps to set your healthcare organization up for long-term success.
As you navigate various employment law matters, BOS Medical is here to help you find the best nursing talent to meet your organization’s needs. Known as a top medical and nursing staffing agency in Georgia, we specialize in staffing nursing professionals in all capacities, including temporary and direct hire placements. Contact Nurse Staffing Agencies in Georgia to find great talent for your healthcare facility, or complete the form below!