The home health care industry has been targeted in the past for independent contractor misclassification by the U.S. Department of Labor and state workforce agencies, particularly with respect to home health aides.  Earlier today, July 13, 2018, the U.S. Department of Labor issued guidance that, on its face, seems to provide home care, nurse, and caregiver registries with a road map as to how they can structure their IC relationships with home health aides and nurses to heighten their compliance with federal law.  But, as noted in the Analysis and Takeaways below, home care registries that are based on an IC business model would be wise to take additional steps to maximize the likelihood that they will survive scrutiny if subjected to a legal challenge by a plaintiffs’ class action law firm or an administrative agency.

The guidance issued today was in the form of a Field Assistance Bulletin from the Acting Administrator of the Wage and Hour Division of the U.S. Department of Labor to its top enforcement administrators and directors across the country.  Entitled “Determining Whether Nurse or Caregiver Registries are Employers of the Caregiver,” the Bulletin provides guidance in determining if and when caregiver and nurse registries are deemed to be employers under the federal Fair Labor Standards Act.

What Does the Field Assistance Bulletin Say?

The types of registries covered by the Bulletin are those that facilitate matches or referrals between clients and caregivers.  The Bulletin tells federal Wage and Hour Division personnel that such registries may engage in the following actions that they should not regard as indicative of an employment relationship:

  • conducting background screening;
  • verifying credentials of potential workers;
  • matching a client’s threshold preferences with a potential caregiver;
  • introducing the caregiver to the client;
  • informing the client and caregiver about typical rates in the local area to serve as a benchmark for negotiations;
  • relaying communications, offers, or counteroffers between the client and prospective caregiver;
  • collecting time sheets from caregivers or offering caregivers the use of the registry’s electronic time verification system;
  • handling payroll services;
  • affording caregivers the opportunity to purchase discounted equipment or supplies from the registry or a third party;
  • requiring an Employer Identification Number (EIN) issued by the IRS, or insurance, or a bond required by law; and
  • compliance with mandatory requirements of the law.

The Bulletin, however, makes it clear that certain types of activities engaged in by caregiver registries will result in a finding of employer status.  For example, interviewing a prospective caregiver to determine if he or she is “likeable” or will “work well with a particular client” will be regarded as an indicator of employment in contrast to merely “performing basic quality control and verification checks.”  Determining whether one caregiver is likely to “do a better job” than another caregiver is cited as yet another indicator of employment status.

Other indicators of employment status mentioned in the Bulletin include setting policies that require a caregiver to provide services in a particular way; requiring a caregiver to accept a job with a particular client; visiting the home to monitor a caregiver’s behavior; conducting performance evaluations of the caregiver; setting policies for a caregiver’s time off from work; requiring the caregiver to use only the registry; disciplining a caregiver for his or her performance; limiting the number of clients to whom a caregiver may provide services; restricting a caregiver’s hours; prohibiting a caregiver from registering with other referral services; or prohibiting a caregiver from working with his or her own clients outside of the registry.

The Bulletin concludes with a statement that the Wage and Hour Division will “consider the totality of the circumstances” to evaluate whether an employment relationship exists between a registry and a caregiver.  A Labor Department spokesperson reportedly stated that the Bulletin is not meant to apply to other industries and is tailored solely to homecare registry operators.

Analysis and Takeaways

This new Bulletin demonstrates that the U.S. Department of Labor is prepared to provide useful guidance to an industry that has been subject to uncertainty over whether an independent contractor model for home care and nursing registries is permissible under the federal wage and hour law. The Bulletin takes great pains not to favor businesses or employees but rather attempts to provide a fair and balanced assessment of which factors are indicative of employment and which favor independent contractor status.

The Labor Department’s assessment, though, misses the mark in at least one key respect. The Bulletin states that a registry’s decision to terminate a caregiver “for failing to comply with the requirements and standards established by the industry, the client, or the law” indicates that the registry is an employer of the caregiver. This view is contrary to many court decisions under the FLSA involving a variety of industries. Certainly, if a registry has reason to believe that a caregiver has engaged in theft of a client’s possessions, has mentally or physically abused a client, permits obvious tripping hazards to remain in the home of an elderly client who has ambulatory issues, or repeatedly refuses to comply with a reasonable request of a client such as not to overheat meals, virtually every homecare registry would terminate its relationship with the caregiver.  Such responsible action on the part of a registry should hardly be regarded as indicative of control indicating an employment relationship. Hopefully, the Labor Department will correct this part of the Bulletin.

While the new Bulletin provides considerable guidance to home care and nursing registries using an IC model, it does not address the legal significance or importance of a registry’s documentation in determining the validity of an IC model. As noted in our White Paper, proper documentation of an IC relationship is instrumental in an effort to maximize compliance, and is an integral part of any process used by a business in seeking to minimize IC misclassification liability.

For example, for those businesses using a process such as IC Diagnostics,™ documentation is one part of a three-pronged approach to enhancing compliance with IC laws:  structuring, documenting, and implementing the IC relationship elevates a company’s level of compliance.  Documentation, in the case of registries, would include the registry’s agreement not only with caregivers but also with its clients.

As stated in prior blog posts and our White Paper, documentation ideally should embody the entire relationship between the independent contractors in question and the business. Many independent contractors work without an agreement or, worse, work under agreements that do not reflect the true relationship between the contractor and the company. A contract that misstates the true relationship between the parties is generally of little or no benefit.

The use of form or model independent contractor agreements (sometimes called templates) and other “one size fits all” solutions are likely to be ill fitting. While some registries may operate in a similar manner to others, few businesses in any industry are operated in the same manner.  Thus, savvy companies that use ICs have opted for customized documentation with state-of-the-art clauses that maximize the likelihood that the IC relationship will be validated.

Written by Richard Reibstein

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