HR Legal Update: DOL Gives Guidance on Caregiver Registries As Independent Contractors
ARE CAREGIVERS INDEPENDENT CONTRACTORS
On July 13, 2018, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued a Field Assistance Bulletin to create consistent enforcement as to whether home care, nurse, or caregiver registries (entities that match caregivers with those needing caregiver services) are employers under the Fair Labor Standards Act (FLSA). The longstanding position of the WHD is that caregiver registries are not employers under the FLSA if they only match the client with the caregiver or provide services, such as payroll. However, a registry that goes beyond that and controls the terms and conditions of the caregiver’s employment activities establishes an employer/employee relationship.
The Bulletin states that the “economic reality” test should be utilized to determine whether an employment relationship exists under the FLSA. The “economic reality” test does not look at one single fact about the relationship between a registry and a caregiver; rather, a number of relevant factors are considered on a case-by-case basis. Below are common registry business practices that WHD analyzes to determine whether an employment relationship exists:
Conducting Background and Reference Checks – basic quality control and verification checks into a caregiver’s background does not equate to the registry being an employer. However, conducting background interviews for pre-selection of caregivers for a specific client leans more toward an employer/employee relationship.
Hiring & Firing – a registry is not considered an employer if it lacks the right to hire or fire a caregiver.
Scheduling & Assigning Work – a registry often facilitates the initial conversation between a caregiver and the client without establishing an employer/employee relationship. However, determining work schedules and assignments indicates that the registry is an employer of the caregiver.
Controlling the Caregiver’s Work – a registry that chooses not to monitor or manage the caregiver’s methods or work habits is not considered an employer. A registry would be considered an employee if they, for example, maintained control over the caregiver’s performance evaluations, policies for time off from work, disciplining, etc.
Setting the Pay Rate – a registry that negotiates and sets the caregiver’s rate of pay with the client is usually considered an employer, while a registry that may provide market information regarding pay or relays communications between the client and caregiver regarding pay is not considered an employer.
Receiving Continuous Payments for Caregiver Services – a registry that charges a one-time fee for matching the caregiver with a client or charges a fee for an administrative or ministerial function (like processing payroll or producing tax documents) is not necessarily an employer. On-going payments to the registry based on the number of hours worked by the caregiver suggest the registry is invested in the relationship between the client and caregiver and could be an employer.
Paying Wages – if a registry provides direct payment of its own funds to a caregiver then it is considered an employer. Otherwise, if a registry performs payroll-related functions, with funds directly from clients, it is not considered an employer.
Tracking Caregiver Hours – a registry that collects time sheets, offers an electronic time verification system or requires correct submission of time sheets for payroll processing is not considered an employer. If a registry creates and verifies time records of a caregiver it may be considered an employer.
Purchasing Equipment and Supplies – a registry investing money for a caregiver to perform his or her services, such as payment for equipment, training, licensure, insurance or medical supplies, is likely an employer. Investing in office space, payroll software, and timekeeping systems, along with providing caregivers an option to purchase discounted equipment or supplies, does not suggest the registry is an employer.
Receiving EINs or 1099s – whether a caregiver is an employee of a registry does not hinge on the caregiver acquiring an Employer Identification Number or the issuance of an IRS 1099 form.
DOL TO HR: EVALUATE EMPLOYEE AND INDEPENDENT CONTRACTOR RELATIONSHIPS
As you can see from the long but non-exhaustive list above, the WHD will consider each case on its own merits and take into account the totality of the circumstances to determine if an employment relationship exists between a registry and a caregiver. While the exact relationship this Bulletin was analyzing may not be directly applicable to each employer, it still provides a roadmap for employers to use as they consider the relationship they have with their independent contractors and whether it actually establishes an employee/employer relationship. The implications for an employer treating an independent contractor as an employee or vice versa can be extremely detrimental, so taking the time for a thorough review of these relationships is important.
If you have questions or would like a review of your independent contractor relationships, please contact your Thompson Coe attorney at (651) 389-5000 or at myHRgenius@thompsoncoe.com. You can also find helpful information and resources at https://thehrgenius.com/.
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