Guidances Aims to Prevent Misclassification of Healthcare Workers

The American Staffing Association is implementing guidance to prevent the misclassification of healthcare workers. Employees of a company are usually exempt or nonexempt. This classification depends on whether they meet the Fair Labor Standards Act criteria for entitlement to overtime wages.

Healthcare Workers and the Independent Contractor

Sometimes, though, a worker is not considered an employee at all. In these cases, they are called independent contractors.

Independent contractors have become a big thing in healthcare, but many do not have proper classification. Guidelines published by the American Staffing Association aim to mitigate this issue. How can misclassification be prevented, and why is it such a big problem? Why do healthcare workers have such a tough time getting proper classification? Learn about how healthcare companies can minimize misclassification-related liabilities.

Exclusion From Benefit Entitlement

A worker is appropriately classified as an independent contractor if they complete work on a self-employed, contractual basis. Misclassified employees are typically excluded from benefits that they would receive as employees. It may include healthcare coverage, pension plans, and retirement benefits. If a company wrongfully excludes a would-be employee from these benefits, the employee may have grounds for litigation. In addition to compensation for the excluded benefits, the company may face additional fines for the misclassification.

Unpaid Payroll Taxes

Another significant difference between employees and independent contractors is the tax liability associated with each type of worker. Law requires that companies withhold certain taxes from employees’ wages, including federal income, Social Security, and Medicare taxes. Conversely, companies are not required to withhold taxes from an independent contractor’s wages. If an employee is incorrectly classified, the company and the worker could be on the hook for unpaid taxes.

Violation of Wage Laws

Yet another potential consequence of misclassification is the violation of state and federal wage laws. It may occur if the misclassification results in a violation of FLSA. FLSA establishes that regular nonexempt employees enjoy entitlement to overtime pay and minimum wage, for example. However, independent contractors do not get these benefits. Suppose a healthcare worker is incorrectly classified as an independent contractor and denied the rights outlined by FLSA. In that case, a company could be subject to criminal penalties from the U.S. Department of Labor.

Insufficient Insurance Coverage

How should employers protect against misclassification and ensure coverage of liabilities? Some employers that misclassify employees do so in an attempt to cut costs. In addition to the unethical nature of denying workers the wages they should receive, employers must pay attention to the significant liability resulting from underinsurance. Prevention thus starts with a shift in priorities and investment in sufficient insurance. Employers typically do not carry unemployment or staffing professional liability insurance for independent contractors, but this will prove to be a significant vulnerability in the event of misclassification.

About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.