Technology and Trends in the Healthcare Industry, Part II: Answers on Independent Contractor Status for Healthcare Employers

With the rise of apps and websites providing on-demand healthcare, there is little doubt that the use of independent contractors is a hot topic in the healthcare industry. The ability of skilled professionals to freelance is an issue vital to a healthcare industry that is expected to face a shortage of qualified providers over the next 20 years. Shortages have already led to the creation of services, such as Nomad Health, that connect freelance doctors (and, soon, nurses) looking for part-time opportunities to hospitals searching for part-time independent contractors.

As with all trends, litigation has followed. Lawsuits challenging healthcare workers’ independent contractor status continue. A recent case in Illinois highlights the challenges healthcare employers face when trying to properly classify their workers. In Nixon v. Advocate Health & Hospital Corp., the plaintiff alleged that she was misclassified as an independent contractor. Her allegations were tested under three different tests to determine her employment status: the IRS’s 20-factor test; the Fair Labor Standards Act’s (FLSA) “economic realities” test; and the Illinois Unemployment Insurance Act’s “ABC” test. The multitude of tests under which a worker’s employment status might be analyzed leaves employers in a precarious position. How should an organization classify its workers?

Healthcare employers that engage independent contractors may soon have some help based on signals coming from the U.S. Department of Labor (DOL). Recently, the DOL’s Wage and Hour Division reinstated the issuance of opinion letters aimed at providing employers with fact-specific answers to wage and hour issues. In restoring the process, Labor Secretary Acosta emphasized the department’s commitment to helping employers comply with regulations and concentrate on creating jobs. The DOL went as far as to create a webpage to help facilitate opinion letter reviews and requests. The move has spawned numerous new requests for opinion letters in the last 90 days, as well as requests to reinstate 18 rescinded opinion letters from the last administration. The reinstated opinion letter process could be a useful tool moving forward for healthcare employers seeking guidance on properly classifying workers in the vastly changing medical service landscape.

The DOL’s responsiveness to employer comments also seems to be increasing. In September, the home-care registry industry asked the DOL to ease investigations regarding classifications of workers engaged by home care registries. In 2013, the DOL had identified the healthcare industry—particularly registries—as a prime target for misclassification abuse and began an initiative to focus investigations on ensuring that healthcare workers were properly classified. As part of that initiative, the DOL began enforcing a rule in late 2015 that required payment of overtime and minimum wages to home healthcare providers. However, the rule included an example of a structure that would allow registries to retain their caregivers’ exemption status—guidance that went largely ignored in the enforcement of the rule.

In the summer of 2017, a coalition of healthcare registries requested that the new administration suspend the open investigations and clarify how the healthcare industry could utilize independent contractors under the existing regulations. Although the DOL has yet to respond to the consortium’s specific request, it has signaled a softening of its position on misclassification by rescinding a 2015 memo providing that most workers be classified as employees rather than independent contractors. With the change in administrations, these types of requests may fall on friendlier ears and lead to more guidance and certainty for the healthcare industry.

As the DOL continues to build its staff and establish its views on independent contractors, healthcare providers should remain alert to changing attitudes toward independent contractor classifications. Prior to classifying a worker as an independent contractor, employers still need to ensure compliance with the FLSA multi-factor test applicable to such a classification. That test his unlikely to change in the immediate future, but any updated guidance from the DOL on the interpretation of that test may be persuasive in convincing courts that workers have been classified correctly. Healthcare employers will benefit from continued vigilance with respect to the DOL’s position on investigating the classification of healthcare workers and its future guidance clarifying such classifications.

Part one of this two-part blog series on technology and trends in the healthcare industry focuses on the pros and cons of offering telemedicine benefits to employees.