A new Department of Labor (DOL) bulletin was released and the target is home health and home care agencies. Field Assistance Bulletin 2018-4 provides guidance on who is and who isn’t an employee of a home health or home care agency under the fair Labor Standards Act.
The Obama’s administration 2015 and 2016 initial ruling was overturned by the current DOL Secretary under the Trump Administration in a three sentence ruling in June 2017. At the time of the revocation, the rules and interpretations were not replaced with new rules or regulations.
However, the new ruling provides some guidance that left many providers in limbo. The new bulletin focuses on the economic reality test which has long been used by the DOL to determine if a staff member is an actual W-2 based employee or a 1099-MISC independent contractor.
The bulletin goes on to discuss the relationship agencies have based on control of the individual who provides patient care. The caregiver-client relationship is the defining item in determining if an individual is in fact an employee of the agency or works independently. The bulletin goes into great detail for agencies to test whether or not they have formed an employer and employee based relationship. Remember this relationship is going to come down to control and what kind of control your agency exerts over the individual.
Background Checks and Reference Checks: Performing background and reference checks alone does not constitute a relationship. But, if the agency is using a reference or background check as criteria for engaging that individual, an employee-employer relationship exists.
Hiring and Firing Individuals: As most agencies do retain the right to hire and fire an individual at any given time, a relationship exists. If the agency was strictly a staffing agency that placed individuals with clients and did not decide whom to hire or whom to fire, then this employer-employee relationship would not exist.
Scheduling and Assignment: The control over an individual’s work schedule – whom they provide care to and when – all create an employee-employer relationship. To not qualify for this status, the agency would need to only introduce an individual to a client or patient.
Controlling Staff’s Work: Agencies who control how care is provided, the type of services, and quality of care all create an employee-employer relationship. Since all agencies are required by federal and state laws to directly supervise staff, your agency automatically creates an employee-employer relationship.
Pay Rate: The agency usually sets the rate paid per hour or visit. Therefore, the individual is an employee.
Regular Pay & Wages: Agencies operate on a normal payroll schedule such as weekly, bi-weekly or bi-monthly. The agency is responsible for paying the individual and collecting funds for the services provided. The individual does not collect funds from the patient. Therefore, the individual is an employee acting as an agent of the agency.
Timesheets and Mileage Tracking: The ability alone to track and collect a timesheet does not create an employer-employee relationship. However, utilizing this information to verify the staff member visited a patient and using it to pay the individual does form a relationship.
Equipment and Supplies: If an agency provides medical equipment and medical supplies to an individual, an employee-employer relationship exists.
The criteria issued by the DOL clearly indicates that almost all home health agencies and home care agencies are going to fit the requirements of establishing an employee-employer relationship. There are exceptions to this rule’s criteria but the delineation must be clear.
A time when an individual does not constitute an employee of the agency is when that individual is the employee of another entity such as a staffing agency. The staffing agency is responsible for remitting and withholding payroll funds as necessary and insuring the individual.
Agencies that “1099” all of their staff are operating in a very promiscuous manner and could face serious consequences should a DOL audit occur. After a DOL audit occurs, usually from a complaint by a disgruntled employee, the IRS gets involved.
The IRS almost always classifies individual contractors as employees. When this happens, the agency is responsible for all of the back payroll taxes associated with the amounts paid. On top of the taxes, the agency must pay penalties and fines. If this happens, the ability for an agency to continue to operate may be hindered and the ownership of the agency held liable for repayment of the back taxes.
If you are unsure of your current operating model or need assistance, please contact us. We can work with you to determine the best course of action and refer you, if necessary, to legal counsel to assist with transitioning your agency to a complaint model in which your staff are treated as employees and not contractors.