Should Nurses Be Classified as Independent Contactors?

The misclassification of nurses and nurse practitioners as “1099 employees” is drawing intense scrutiny in Virginia and across the country. For medical practices, staffing agencies, and facilities, classifying RNs, LPNs, or NPs who function like employees in day‑to‑day operations as contractors is exceedingly risky under both federal and Virginia law.

In Chavez‑DeRemer v. Medical Staffing of America, LLC d/b/a Steadfast Medical Staffing, the U.S. Court of Appeals for the Fourth Circuit recently affirmed a judgment against a Virginia‑based staffing company that had treated more than 1,000 nurses and nursing assistants as independent contractors. The Department of Labor’s investigation showed that the staffing company required the workers to complete an “employment” application, controlled their schedules and rates of pay, placed non‑compete restrictions on them, and provided liability and workers’ compensation coverage, all while paying them on a day‑rate basis without overtime.

Applying the familiar “economic realities” test, the Fourth Circuit agreed that the nurses were economically dependent on the staffing company.  The business exerted extensive control over their work; the nurses had minimal opportunity for profit or loss beyond working more hours; the nurses own capital investment was negligible; the relationship was ongoing rather than project‑based; and the nursing services were integral to the company’s business. The mere label of an “independent contractor agreement” did not defeat entitlement to overtime under the Fair Labor Standards Act.

Virginia has layered an additional level of protection on top of these federal standards under Va. Code § 40.1‑28.7:7, its worker‑misclassification statute. Virginia law creates a presumption that anyone paid to perform services is an employee of the payor unless the putative employer can prove independent‑contractor status under IRS guidelines, effectively shifting the burden of proof onto the practice or staffing agency that wants to classify a clinician as 1099. A misclassified worker can sue for lost wages, salary, benefits, plus reasonable attorney’s fees and costs.  Employers also may face additional exposure for unpaid taxes, workers’ compensation, and unemployment contributions.

For nurses and nurse practitioners working in Virginia, where the actual working relationship reflects employee‑like control and dependence, the law presumptively treats the clinician as an employee regardless of the employer’s efforts to shift “employee” expenses using a 1099 contract structure. To support legitimate independent‑contractor status, the clinician ideally would operate a real business with multiple clients, exercise meaningful control over when and how work is performed, bear some entrepreneurial risk, and avoid restraints that tether them to a single entity.

dsgordonlaw.com

Richmond Employment Lawyer

Court Strikes Down NLRB Joint Employer Rule

On March 8, 2024, the U.S. District Court for the Eastern District of Texas vacated the National Labor Relations Board’s (NLRB) 2023 joint employer rule. The new rule, which was set to take effect on March 11, 2024, expanded the criteria for determining joint employer status, potentially increasing the number of businesses classified as joint employers. The vacated rule would have placed more employers at risk of being deemed joint employers, affecting their liabilities and responsibilities towards employees. Under the proposed 2023 rule, an entity could be deemed a joint employer under common-law agency principles if it had authority to control essential terms and conditions of one’s employment, even if the the control was indirect. The Court found that the new rule failed to provide a clear standard for employers to follow.

The ruling has significant implications for businesses, particularly those who work with contractors or franchisees. The current ruling leaves the 2020 joint employer rule in place, which requires direct and immediate control over employees to establish a joint employer relationship. However, other U.S. District Courts are certain to consider the issue in their jurisdictions, likely resulting in a final review by the U.S. Supreme Court.