National Association of Locum Tenens Organizations, February Multiview Briefing: National Relations Labor Board & 1099s

NRLB & Locum Tenens
How a National Labor Relations Board ruling could impact locum tenens staffing companies. What “Independent Contractor” Means to the IRS A closer look at what defines an independent contractor for tax reporting purposes, and locum tenens companies.

A new year brings a new tax season. From a business perspective, that means issuing the necessary documentation so individuals can file their personal income tax returns. For employers of traditional full-time employees, this almost always results in completing a Form W-2. As you know, though, the locum tenens arrangement does not fit into this classification. Locum tenens professionals are usually deemed independent contractors—they are neither employed by the staffing companies placing them in assignments nor the healthcare facilities utilizing their services. Normally in these circumstances, the IRS requires a Form 1099-MISC for any individual who accrued at least $600 for “services performed by someone who is not your employee.”

That’s been the standard for years. But a decision by the National Labor Relations Board (NLRB) last summer has put the independent contractor classification under greater scrutiny. In the BrowningFerris Industries of California case, the NLRB deduced that even though Browning-Ferris Industries contracted with workers through another party, the company exercised enough control or influence over where and how those workers carried out duties that it actually qualified as a joint employer. In its finding, the NLRB asserts that, under the National Labor Relations Act, when two or more employers exert significant control over the same employees and they share or co-determine matters governing essential terms and conditions of employment, they are joint employers.

The distinction between securing independent contractors to aid facilities and becoming a joint employer is an important one. Incorrectly classifying individuals as independent contractors could result in companies being mandated to assume payroll taxes and extending employee benefits, both retroactively and moving forward. The government can levy fines and penalties, too.

So, how can you tell if there’s “significant control” or if you “share or co-determine matters governing essential terms and conditions of employment” as a locum tenens staffing company? The following bullet points should help distinguish the differences.

Definition of independent contractors

• Generally speaking, independent contractors do not join a company’s payroll, and therefore, are compensated in gross terms. In other words, locum tenens physicians, physician assistants, and nurse practitioners are paid in full for the hours they log on assignment. There are no state, federal, FICA, or other deductions withheld. This annual amount is then reported back to the individuals and the IRS on Form 1099-MISC in Box 7.
• Workers are awarded wide latitude or significant independence in determining how to carry out professional activities. In terms of locum tenens, this means neither the staffing company nor the contracting facility will specifically dictate how providers care for patients. Of course, there are medical standards as well as legal and institutional protocols to which locum tenens providers must adhere, but these typically should not exceed the independence they have to assess and treat patients.
• Independent contractors do not receive training in how to carry out professional duties from contracting organizations. Labor law analysts suggest that the more detailed instructions on how to do a job function a temporary worker is given, the more an employer may be judged to be exerting control.
• An independent contractor relationship is not open-ended. There is a definitive end date, such as the conclusion of a locum tenens assignment.
• Agreements between providers and staffing companies explicitly define individuals as independent contractors. That said, analysts caution against solely relying on this terminology because courts can vary in how much weight is afforded to the language.

Definition of joint employers

• To be considered a joint employer, both organizations exercise dominating control over the essential terms and conditions of employment.
• Earnings are subjected to taxes and reported on the IRS Form W-2.
• If the staffing company and contracting employer share authority over labor relations, then it’s most likely a joint employer relationship.
• Joint control over wages or working conditions can be defined in the following ways:
  1. The work takes place on the premises of the company;
  2. A company has power to fire, hire, or modify employment conditions;
  3. Employees perform specialty jobs within a production line;
  4. The employee lacks authority to refuse to work for the company.

The locum tenens industry is unique in many ways, even in comparison with other temporary staffing agencies. Because providers are not employees of locum tenens agencies, the risk of being identified as a joint employer is lessened. Additionally, locum tenens staffing companies meet several other independent contractor criteria. However, if you have questions or wish further clarification, confer with an IRS representative, labor law expert, or tax specialist.