Issue link: https://viewer.e-digitaledition.com/i/298497
M ORE AND MORE physicians are shifting to a business model which decreases dependence on employees and increases the use of independent contractors. There are many benefits and potential cost savings available when independent contractors are properly utilized. For example, the correct use of independent contractors can reduce tax burdens, reduce insurance obligations, limit legal liability because of the numerous laws which protect employees but not independent contractors, and reduce costs spent on employee benefits. Sounds great, right? However, both federal and state gov- ernment agencies are increasing their enforcement efforts on the issue of independent contractor misclassification. This focus has led to significant payments by employers to wrongfully classified individuals. As a result, it is a good idea for every physician who uses independent contractors to take a close look at these individuals to determine if potential liability exists. Correcting misclas- sification now can greatly reduce legal liability and costs down the line. Physicians should know that simply giving a 1099 to an individual instead of a W-2 is not enough. Rather, physicians should conduct an audit of their independent contractors to review the factors government agencies examine, including: + Whether an independent contractor agreement exists; + The degree of control of a physician over or independence of an individual; + Who directs and controls how the individual performs the work; + The types of instructions given to the individual by the physician; + Who controls the economic aspects of the individual's job; + The nature of the relationship [such as benefits, agreements, length of relationship] between the physician and the individual; and + The location of the work. Please note that the foregoing factors do not cover every aspect that a government agency might look at because numerous tests are used to assess an individual's classification. Both federal and state agencies are closely examining the misclassification issue. Indeed, not only is the Department of Labor partnering with state agencies to identify misclassification, but a bill is pending before the United States Senate which would create liability for employers under the Fair Labor Standards Act. Under the proposed law, employers would be required to provide information to individuals about misclassification and their right to file a complaint with the Department of Labor. Aside from payment of back wages and taxes, potential fines for misclassification would start at $1,100 per offense. In addition to the Department of Labor's increased enforcement efforts, physicians should be aware that the Internal Revenue Service is also increasing its focus on misclassification. As a result, it is strongly recommended that all physicians conduct an independent contractor audit in the near future. Neil Bhagat is an attorney with Buckingham, Doolittle & Burroughs, LLC. He practices in Buckingham's Employment and Litigation Practice Groups. He may be contacted at 216-615-7321 or nbhagat@bdblaw.com. For more information about the law firm, visit www.bdblaw.com. n Is Your Practice at Risk? Independent Contractor Misclassification: By Neil Bhagat ++++++++++++++++++++++++ + +++ + +++ ++++++++++++++++++++++++ BUSINESS SECTION 3 0 | Cleveland/Akron/Canton MD NEWS n M D N E W S . CO M n M AY/J U N E 2 0 1 4