Dental practices often classify dental associates and hygienists as independent contractors as a means of controlling costs: payroll taxes, workers’ compensation insurance, unemployment insurance withholdings. In addition, independent contractors are not entitled to the wage and hour protections under the federal Fair Labor Standards Act (FLSA), which basically means they are not required to be paid overtime.
Because state and federal agencies have stepped up regulatory enforcement of employee misclassification across multiple industries, including the medical profession, it is crucial for dental practices to properly classify associates, hygienists and other employees. Moreover, a number of state laws allow plaintiffs to recover attorney’s fees in employment-related lawsuits, which can expose a dental practice significant legal liabilities.
The Challenge of Properly Classifying Dental Employees
While balancing patient care with practice management, dental practices must be mindful of applicable tax and labor laws governing the classification of employees: the Internal Revenue Service (IRS), the U.S. Department of Labor, and state and federal courts rely on slightly different tests to determine independent contractor status.
Generally, independent contractors control their own workload and are free from supervision or direction of the services they provide. An associate or hygienist may be considered an independent contractor when they:
- Pay their own expenses
- Set their own schedules
- Negotiate or set their own pay rates
- Carry insurance
- Assume risk for profit or loss
By contrast, if a dental practice has a significant level of control over how associates or hygienists provide their services, they are likely considered employees. Some of the factors involved in making this determination include:
- Behavioral control — If the dental practice controls how work is performed (e.g. supervision, training, instruction) the individual is likely an employee. If the practice only controls the result of the work and not the method of accomplishing it, however, the worker is most likely an independent contractor.
- Financial control — If the dental practice has directed the financial and business aspects of an associate’s or hygienists performance (e.g. by providing tools and equipment), he or she is likely an employee.
- Type of relationship — If dental practice provides benefits (e.g. health insurance, vacation pay, retirement plans), or the service provided is a key aspect of the practice, an associate or hygienist may be classified as an employee.
Consequences of Misclassifying Employees
Although classifying certain dental employees as independent contractors is permissible, misclassifying employees can have consequences, including:
- Administrative enforcement actions
- Civil penalties and fines
- Assessment of back taxes and penalties
In the end, it is critically important for dental practices to properly classify their employees. The best way to do so is to consult a lawyer who provides comprehensive legal services to dental professionals. This article is not legal advice.