Lexology (01/12/12) Maciel, Kara

The U.S. Department of Labor and the U.S. Internal Revenue Service have intensified their enforcement efforts regarding worker misclassification, and audits have increased substantially, particularly within the home health industry. In September 2011, the DOL and IRS announced an effort to coordinate with each other and with several states by permitting the sharing of information to combat misclassification.

In the home health industry specifically, the vast majority of courts have concluded that under the Fair Labor Standards Act, private duty nurses should be classified as employees. A recent example is Lemaster v. Alternative Healthcare Solutions Inc., in which home health licensed practical nurses sued a staffing company that recruits nurses (as independent contractors) and refers them to home health agencies and nursing homes. The evidence disclosed that the company interviewed, hired, and set the nurses’ wages, as well as assigned the nurses their work, collected time sheets, and maintained personnel files. Based on these facts, the court concluded that the nurses were employees under the FLSA, and the staffing company and its owners were liable to the LPNs for damages.

With regulatory agencies and courts more closely monitoring independent contractor relationships, firms with large numbers of independent contractors should conduct an internal legal review to ensure proper compliance with federal and state laws before the federal or state government conducts an audit or a group of employees files a class action lawsuit.