Is That Worker an Employee or an Independent Contractor? [Video]

State agencies audit practices and businesses to ensure that they have properly classified their workers. In this video, Erin Jackson, Firmwide Managing Partner of Jackson LLP Healthcare Lawyers, discusses the importance of getting it right.

Transcript:

When bringing on a new member of your workforce, you’re faced with the choice of whether they will be an employee or an independent contractor. But is it really a choice? Or does it depend on what their role will be? You better get it right because state agencies do audit practices and all sorts of businesses to ensure that they have properly classified their workers.

I’m Erin Jackson with Jackson LLP Healthcare Lawyers, and we help practices and healthcare-related businesses navigate this process.

So, an independent contractor and an employee are not the same thing. And it tends to be more cost-effective for a practice to hire an independent contractor than hire an employee. However, because public policy generally favors people being employed, which means they get benefits, and are entitled to a variety of worker protections, the state does want to be sure that anyone who’s actually an employee isn’t being paid as an independent contractor.

So these audits might require you to hand over ledgers, payroll logs, and various sensitive documents from your practice or your business. It may even require you to be interviewed by state authorities, all to discuss the role of various independent contractors at your practice or business.

If you’re found to have misclassified someone as an independent contractor when they’re actually an employee — in the way the state determines they’re an employee — then you can face a whole host of penalties. This can include back wages. It can include unpaid unemployment, insurance premiums, all sorts of things, including financial fines. And there can even be personal liability for owners of practices or businesses who misclassified people just to save on taxes.

So it’s really important that you’re clear on the distinction between an independent contractor and an employee and you’re properly classifying and treating these people that way at work. It’s easy to fold your independent contractors in with the rest of your employees and require the same things of them, whether that’s hours, dress code, patient load, etc. But be sure that you’ve discussed with your attorney where the line is and how you’re going to be sure that you can really substantiate that an independent contractor’s work is truly that of a contractor and that you have not misclassified them as an employee.

The mere process of being audited is time-consuming and expensive enough, even if you’ve done nothing wrong. If you HAVE done something wrong, or if the state determines that these people will be better off as employees and that perhaps you’ve fudged a bit on how you’ve classified them, then you can face fines and other financial penalties that for some small practices are enough to close them down.

So if you’d like assistance with establishing either written contracts with your independent contractors and employees, workforce policies, or just clarification for management and HR on where the line is to ensure you don’t cross it, feel free to reach out to our practice. We’re happy to assist healthcare practices and businesses in any of the states in which we operate.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.