As the healthcare workforce embraces more flexible and independent roles, a growing number of professionals are choosing to work as 1099 contractors. Recognizing this trend, the Department of Labor (DOL) introduced new guidelines earlier this year. These updates aim to clarify the classification, rights, and protections of independent contractors, ensuring that 1099 workers are correctly classified and treated fairly.
What changed?
Since COVID-19, healthcare facilities have turned more and more to 1099 workers to fill staffing gaps. This shift often led to workers being misclassified. The rise of the gig economy and the surge in freelance and independent contract work have prompted the DOL to reassess its worker classification approach. Effective March 11, 2024, the new guidelines replaced the 2021 independent contractor rule, likely making it more challenging for businesses to classify workers as independent contractors.
A closer look at the 1099 misclassification rule.
Let’s take a look at some of the notable changes of the Employee or Independent Contractor Classification Under the Fair Labor Standards Act final rule:
- Worker classification: The DOL has laid out clearer guidelines for who can be considered an independent contractor. This helps employers make better decisions and ensures that workers are classified correctly.
- Flexible work setups: Understanding that 1099 work is different, the guidelines support flexible work arrangements. This includes remote work, project-based tasks, and varying schedules.
- Better protections: The new rule pushes for fair pay and certain workplace protections for 1099 workers.
- Transparent contracts: The new guidelines stress clear and transparent contracts to help prevent misunderstandings.
What this means for healthcare facilities.
If you’re managing a healthcare facility, here’s what you need to keep in mind:
- Keep excellent records: Make sure you have systems in place to track payments and details of contracts with your independent contractors.
- Meet deadlines: Stick to the new January 31st deadline for filing Form 1099-NEC to avoid any penalties.
- Review classifications: Regularly check how you classify your workers to make sure you’re following the new guidelines.
When you, as a healthcare leader, work with a company like Matchwell, you don’t have to worry about unintentional misclassification because clinical professionals are hired as W2 employees. This means you have more protection from potential risks that come with the misclassification of an employee as an independent contractor (wage and hour, tax, malpractice, worker injury, and more).
Key differences between 1099 workers and W-2 employees:
- 1099 worker: These are independent contractors or freelancers who take on specific jobs or assignments without being company employees. They typically aren’t eligible for benefits like healthcare, paid time off, or retirement plans. Furthermore, they are not entitled to overtime pay or workers’ compensation protections, and healthcare organizations face additional co-employment risks when using 1099 workers.
- W-2 employee: These workers get regular wages or salaries and are eligible for various benefits. Employers control how and what work is done, unlike 1099 workers who have more autonomy.
What this means for clinicians.
For those working as 1099 healthcare professionals, it’s good practice to regularly review your work arrangements and how they align with these guidelines to avoid potential legal and financial ramifications. Be sure to:
- Stay organized: Keep strict records of all payments and contracts.
- Plan for taxes: Keep up with regulatory updates to make sure you’re in the know and compliant, and plan for how these changes might impact your taxes. It might be worth talking to a tax professional.
- Know Your status: Make sure you’re correctly classified as an independent contractor to avoid any issues. Have conversations with your current employers about any potential changes in your classification.
Wrapping it up.
The Department of Labor’s new guidelines are a big step toward recognizing the unique needs and contributions of independent contractors in today’s workforce. With these clearer definitions and encouragement of fair treatment, these guidelines create better working environments for 1099 workers. Remember to stay informed and keep an eye on how these (or future) changes might impact you or your workplace!
Now part of the Medical Solutions healthcare talent ecosystem, Matchwell offers an innovative alternative to traditional agencies, linking clinicians with premier healthcare facilities in need of local and per diem talent. Join the conversation today!
Disclaimer: This information is provided for general purposes and should not be taken as professional legal advice. Because laws change frequently at both the federal and state levels, we recommend consulting with a qualified attorney or tax professional.