Hiring an Associate: Employee or Independent Contractor?
When considering whether to hire an associate as an employee or as an independent contractor, there are many variables to consider. For example, will the associate: Be full-time or part-time? Bring in his or her own patients? Be responsible for his or her own billing? Hire his or her own assistant? It is the facts and circumstances of each case that determine whether you can properly classify your associate as an independent contractor.
The idea of an independent contractor can be very appealing, as it is usually less costly to a practice. By hiring an associate as an independent contractor, the practice does not have to pay unemployment or Medicare, it does not have to offer the associate benefits, and it provides more flexibility. However, before deciding on this course of action, you should consider several factors.
The classification of an associate as independent contractor or an employee depends upon the facts and circumstances of each case and, in addition, each governmental agency has its own list of factors that it will look at to determine whether it believes your associate is really an employee and not an independent contractor. However, with all the various factors, the most common, and the one you want to focus your attention on when evaluating your situation, is “control”. If your practice exerts control over what is being done by an associate and when, your associate is an employee.
The following are some factors that are important to consider in order to determine whether the associate is subject to the control of the dental office (and, therefore, not an independent contractor). Some factors are given more weight than others. Depending on the agency or the court making the determination, any one factor could be either dispositive or only one of many factors included in the final determination.
- The senior dentist trains and oversees the work of the associates (especially recent graduates).
- The senior dentist must approve of each diagnosis and treatment plan.
- The associate provides the same services as other employees, and appears to be very similar to other dentists in the practice that are classified as employees.
- The associate uses the dental practice’s equipment, instruments, and/or supplies. Plus, the services are performed on the premises of the dental practice.
- The associate does not provide similar services for any other dental office.
- The associate is bound to a practice handbook or other internal rules and standards. (This might even be called an “Employee Handbook”).
- The associate has certain “employment” benefits from the practice.
- The associate’s schedule is controlled by the practice.
- The associate is required to be in the office during certain hours; he or she cannot come and go.
- The associate uses the hygienist and other support staff of the practice.
- The associate can be terminated at will.
- The practice (not the associate) bills patients or third-party payers.
- A restrictive covenant prohibits the associate from working for other dentists (both during and after the engagement).
Having an agreement that states the associate is an independent contractor will not override the above factors.
Having said all this, it is still possible to hire an associate as an independent contractor. There are certain circumstances that may (but not necessarily) help, including if:
- The contractor forms an entity (e.g., a professional association), and services are provided by the entity.
- The contractor provides services to multiple practices.
- The contractor uses his/her own office, equipment, instruments and/or supplies.
- The contractor sets his or her own schedule with his or her patients.
- The contractor bills and collects fees directly from patients.
- The contractor provides services not provided by the practice (e.g., a dentist with a specialty provides services to patients of a general dentist)
It can be hard to justify to an agency that your associate is in fact an independent contractor. If the practice is questioned or audited, it can be quite challenging to withstand the scrutiny of the agency doubting the practice’s classification. As a result, now is the time to ensure that your dental practice’s workers are all correctly classified and, if in doubt, perhaps reclassify as an employee now because once that notice letter is received from the IRS or a state agency, it will be too late. You should work with your practice’s legal counsel to ensure the arrangement you have is correctly classified.