Something “Always Done That Way” May Change (and cost you money!)

Like many adults, I’ve been driving for a long time and I don’t really think about driving when I’m driving. I’m almost on autopilot. And if you’re like me and have teens learning how to drive, going through driver’s education, you might have your teen point out when your driving isn’t up to the standards the way they are being taught. You might think, what are you talking about? I’ve always done it this way. Everybody else does it this way.

The same is true when it comes to worker misclassification.

We’ve talked with prospective clients in the medical coding industry. They have been confident that treating a coder as an independent contractor is “the way the industry does it” and of no concern of risk to them. Well, knowing that federal and state agencies are looking for lost tax dollars, we knew it was only a matter of time when this industry would be affected.

Recently, a class of approximately 1,200 current and former medical coders received $1,525,000 to settle their claims that the coders were misclassified as independent contractors (Desseaux v. Aviacode, Inc., No. 17-cv-01065 (D. Utah July 1, 2019)).

  • The coders alleged Aviacode failed to pay them all wages due (including overtime) and failed to reimburse their business expenses, in violation of Utah state law and the federal Fair Labor Standards Act (FLSA).
  • The plaintiffs used Aviacode’s compensation records, which captured biweekly payment information, to estimate the number of hours worked by each class member. Time was then added on a percentage basis to account for unpaid work. Insight

“Misclassification of employees as independent contractors can be a costly mistake for employers, particularly when it affects a large group of workers over a long period of time. Additionally, the analysis can be complicated because there is no single rule or test for determining whether someone is an independent contractor or an employee for purposes of the FLSA.

According to the U.S. Department of Labor (DOL), the U.S. Supreme Court looks at many factors when determining proper worker classification, including:

  • “The extent to which the services rendered are an integral part of the principal’s business.
  • The permanency of the relationship.
  • The amount of the alleged contractor’s investment in facilities and equipment.
  • The nature and degree of control by the principal.
  • The alleged contractor’s opportunities for profit and loss.
  • The amount of initiative, judgment, or foresight in open market competition with others, required for the success of the claimed independent contractor.
  • The degree of independent business organization and operation.”

Additionally, some factors are considered irrelevant to the determination, including the place where the work is performed, the absence of a formal employment agreement, the time or mode of pay, and whether the worker is licensed by state or local government.

In general, the more control an employer asserts — or retains the right to assert — over how and when a job is performed, the more likely it is that an employer-employee relationship will be found to exist.

Finally, it’s important to remember that some states have their own rules and tests for independent contractor classification. California recently passed a law that assumes all workers are employees unless the employer can establish all components of a stringent three-part test.”1

Are you engaging independent contractors in an industry that has “always done it that way”? You might want to do some research to see if any agency is now classifying the workers as employees. Let us know if we can help.

Independent contractors can remain a viable operating option when properly classified. If your organization needs some help ensuring your ICs are classified appropriately, ClearPath Workforce Management has an IC evaluation process and risk mitigation services that bridge the gaps to enable compliant engagement of this highly skilled talent and to expand your talent supply chain. ClearIC™ can automate and simplify the Independent Contractor evaluation process while mitigating your risk via our full-service IC vetting process. Contact ClearPath for a complimentary 1:1 review of your current worker status.