CHAPTER 21

Employment Contracts and Compensation

Adam Winger

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CHAPTER 21

Employment Contracts and Compensation

Adam Winger

RECRUITING AND RETAINING TOP clinical talent is a crucial step in establishing a competitive presence in the urgent care marketplace. To do so, an urgent care employer must offer an appropriate package of benefits and incentives while balancing the company’s overall performance objectives. This chapter addresses issues associated with the employment relationship between an urgent care company and its medical providers.

EMPLOYEE VERSUS INDEPENDENT CONTRACTOR

A threshold question in any discussion involving employment agreements is whether the individual rendering the services is actually an employee of the urgent care company. This determination is meaningful for both legal liability and tax purposes.

Legal Liability

Inappropriately classifying an independent contractor as an employee may result in the urgent care employer unnecessarily assuming all liability for the provider’s actions. In general, employers are liable for the negligent acts of their employees but not for those of an independent contractor. Although it is common for independent contractors to be added as insured parties to an urgent care company’s malpractice policies, there is no requirement that the company do so. Whether a provider is an employee or independent contractor for legal liability purposes is a matter of state law. Most states, however, analyze the issue by considering factors similar to those used by the Internal Revenue Service (IRS), which are discussed in the following section.

Tax Consequences

If a provider is classified as an employee for tax purposes, the urgent care employer must withhold income and payroll taxes (Social Security tax and Medicare tax from the provider’s compensation), and pay Federal Unemployment Tax on it. The taxes must be remitted to the IRS, and substantial penalties exist for the employer’s failure to do so. As is the case under state law, a worker who is not appropriately classified as an employee is deemed to be an independent contractor for tax purposes. If the employer incorrectly classifies an employee as an independent contractor or the employer fails to withhold and remit payments, the IRS holds the employer liable for the entire amount that should have been withheld and imposes penalties and interest.

Although applicable treasury regulations plainly state that physicians who “offer their services to the public are independent contractors and not employees,”1 in making its classification determination, the IRS continues to focus on whether “the person for whom services are performed has the right to control and direct the individual who performs the services.”2 For over 25 years, the IRS has employed a 20-factor test to analyze whether the extent of a service recipient’s control rises to the level of an employer.3 Although a full discussion of each of the 20 factors is beyond the scope of this chapter, here are a few of the pertinent factors to consider in making worker classification decisions in the urgent care context:

    The degree of instructions given to the worker by the urgent care company

    Whether the urgent care company pays for continuing medical education and other training for the worker

    Whether the urgent care company is entitled to dictate the time, date, and location that the services are rendered

    The extent to which the worker is entitled to share in the profit or loss in the business

    Whether the company furnishes supplies, equipment, or other materials to be used in the worker’s performance of their duties

    Whether the worker makes their services available to more than one company while working for the urgent care company