What Happens When Nurses Are Misclassified as Independent Contractors?
By G Hatfield
CNOs everywhere are strategizing how to fill workforce gaps left by the nursing shortage.
While navigating recruitment and staffing challenges, it’s important to look at how nurses will be brought on and integrated into the workforce. Part of this process involves making sure nurses fall under the proper worker classification, and ensuring that the hospital or health system remains in compliance with legal requirements for classification.
While nurses are often classified as full-time employees, some are designated as independent contractors, which depends on several factors, according to Richard Reibstein, head of Locke Lord‘s New York labor and employment practice and co-head of the firm’s independent contractor compliance and misclassification practice.
“There is no one particular situation where nurses can be legitimately classified as independent contractors,” Reibstein said. “Rather, there are many different situations, and the facts are critical in determining if you are in sync with the law or out of compliance and facing IC misclassification liability.”
Why independent contractors?
According to Reibstein, a nurse could be classified as an IC if their work is unsupervised or unassigned, they are not told how to perform services, they can determine their own schedule, negotiate their pay, and incur their own expenses.
Other factors include whether the nurse is free to accept or decline engagements and whether they have the right to work with multiple agencies or health systems. However, Reibstein explained, some states have more restrictive law tests for ICs than others.
“What is most important is a state-of-the-art analysis of these and other factors in view of applicable law,” Reibstein said. “We look at more than 48 different factors to assess whether a worker is likely to be properly classified.”
Reibstein emphasized that there are both upsides and downsides to classifying nurses as ICs, depending on the needs of a health system. The upside for IC classification, according to Reibstein, is that health systems need to worry less about compliance with the applicable federal, state, and municipal labor and employment laws that apply to employees.
However, the downside of IC classification has the potential to impact standards of care delivery.
“The downside is that the health care system engaging a nurse as an independent contractor cannot direct or control the manner in which the nursing services are being performed,” Reibstein said, “if direction and control [are] important.”
What about misclassification?
It’s critical that CNOs and other healthcare executives ensure that any nurses or clinicians treated as ICs must be classified properly, or there can be steep consequences.
According to Reibstein, health systems can face investigations and litigation in situations where misclassification occurs.
To avoid these issues, Reibstein said health systems should structure their relationships with ICs in a manner that maximizes compliance with the applicable IC laws, and they should strive to meet as many as two or three dozen criteria for IC compliance.
Health systems must also document and implement the IC relationship in a compliant manner, Reibstein explained, and customize the IC relationships to meet their business model and objectives, so that the outcomes are sustainable.
“One-size-fits-all approaches are usually ill-fitting,” Reibstein said, “and what may work for one health care system may not work effectively for another.”
G Hatfield is the CNO editor for HealthLeaders.