Understanding the Risk Associated with Using 1099 Agency Staff
Using 1099 agency staff can pose significant risks for operators, particularly in the skilled nursing facility (SNF) industry. Worker misclassification is one of the greatest legal risks associated with employing 1099 workers. This occurs when employees are wrongly classified as independent contractors, which can lead to lawsuits and audits by government agencies, such as the Department of Labor (DOL).
For example, Comprehensive Healthcare Management Services (CHMS), a Pennsylvania-based SNF operator, was sued by the DOL in March for allegedly owing $19 million in unpaid overtime. The lawsuit claimed that many of these workers worked more than 70 hours per week but did not receive any overtime pay. It’s important to note that the DOL has not yet sued the staffing agency, indicating that both the agency and the facility can be held responsible for misclassified workers.
Another case in Sarasota, Florida, involved a local agency. The DOL recovered $260,221 in back wages for 61 caregivers in this case. The Department of Labor has been conducting audits to crack down on worker misclassification and collect unpaid overtime. See the latest DOL complaint. U.S. Department of Labor files suit seeking $181K for 70 nurses, assistants denied overtime after Michigan company misclassified them as contractors. | U.S. Department of Labor (dol.gov)
Operators that choose to only partner with agencies that hire W-2 employees can mitigate exposure related to misclassification, co-employment, and unpaid overtime issues. It is advisable for operators to carefully review their agency contracts and weigh the risks associated with using staff hired as independent contractors. The perceived advantages of using 1099 workers may not outweigh the potential legal and financial risks involved.
The W-2 model continues to be the more stable approach to building a flexible labor pool. These nurses not only participate in federal overtime and wage protections, but they are also protected by workers compensation coverage and benefits.
We provide our clients with exceptional staff, and we stand by them in all matters of compliance, mitigating risk by only providing W-2 staff that is fully insured and bonded.
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