Healthcare leaders throughout the U.S. are asking many questions about the evolution of the workforce and the gig economy. What are today’s hiring best practices? Would it be wise for your facility to use a staffing solution that treats clinical professionals as independent contractors? How is this different from hiring W2 employees?
These Department of Labor (DOL) classifications have significant, important distinctions, and there are potential risks to using clinicians hired as 1099 independent contractors who may not actually qualify for this status under the law. Here’s what you need to know.
What Is a 1099 Contractor?
A 1099 independent contractor is a legal classification determined by key characteristics between the individual candidate and the client or business they serve. These individuals are typically called freelancers or self-employed professionals outside the healthcare industry.
These contractors manage their personal taxes, benefits, and liability insurance. This gives them significant control of their work, with the ability to decide their hours and tasks, plus using their own equipment and technology.
Recent years have seen the arrival of online platform agencies in healthcare, encouraging nurses and clinical staff to work as independent contractors. However, this leaves them lacking overtime pay, retirement benefits, workers’ compensation, and liability insurance.
What Are the Risks of Hiring 1099 Contractors?
Healthcare leaders should always seek legal counsel if considering hiring a 1099 contractor, as there can be a gray area in what circumstances someone qualifies as an independent contractor versus when they must be classified as a W2 employee. The risk doesn’t come from hiring a 1099 contractor but rather using a 1099 contractor who was misclassified.
The DOL recently announced partnerships with the IRS and the National Labor Relations Board to investigate and prosecute employers with misclassified workers.
- Misclassified clinicians don’t have insurance that would cover them in case of a malpractice or negligence claim.
- Clinicians may take legal action if they believe they should be paid overtime for working 50+ hours a week.
- Incorrectly claiming that clinicians are independent contractors means the platform agency (and you) are not paying for overtime or supplying workers’ compensation or unemployment benefits, nor are you likely to ensure that proper recordkeeping is taking place.
Besides federal worker misclassification, the other risk for employers is potentially violating your state’s rules on independent contractors. State laws can be more “employer-friendly,” or they may be more “employee-friendly.” This can get complicated and have legal and financial implications for your organization.
As a healthcare leader, you can mitigate the risks of hiring 1099 contractors by partnering with a workforce solutions partner that treats all its clinical professionals as W2 employees. You don’t need to worry about unintentional misclassification, giving you significantly more protection from all inherent risks; wage and hour disputes, tax implications, malpractice claims, worker injury, etc.
It’s important to remember that just because a contract states that the parties consider their temporary clinicians as independent contractors does not make it so—and we’re seeing more and more litigation over this issue in our industry.
What You Should Consider When Hiring 1099 Contractors
To ensure they feel comfortable using a contractor rather than a W2 employee, any healthcare organization should sit down with their legal counsel and carefully review applicable state and federal laws related to worker classification.
You’ll also want to consider that clinicians don’t always know the right questions to ask to ensure they’re both legally and ethically protected. They also often don’t know that by the end of the year, the higher pay they enjoyed turns into a massive tax bill they weren’t prepared for. Being classified as a W2 employee protects them against financial emergencies should they be injured on the job or experience a period of unemployment.
Matchwell Founder and Medical Solution’s EVP of Per Diem and Local Workforce Strategies, Rob Crowe, believes that healthcare organizations deserve to access clinicians directly and transparently with a W2 model, which is what led him to start Matchwell; an agency alternative in the Medical Solutions family of brands that matches clinicians with top healthcare facilities looking for local and per diem talent.