Another 1099 Nurse Lawsuit Heightens the Risk for Facilities

Here is another post in our ongoing series on the news, lawsuits and updates around 1099 staffing in healthcare. Please check back with us to see the latest as we follow the stories and bring the latest to you.

Rolling the dice with a 1099 nurse staffing agency continues to get riskier for healthcare facilities. The warning signs that federal agencies have been training their attention on employee misclassification can’t be ignored, especially in the healthcare world.

As the gig economy in healthcare continues to grow, facilities that rely on staffing agencies to fill their shifts must reevaluate the risks that come with using agencies that provide 1099 nurses (hired as independent contractors by a staffing agency). There has been a sea change in enforcement at the federal level which is now becoming a tidal wave as states — and now private litigants — step up their enforcement efforts.

Here’s a rundown of the federal sea change and how one nurse lawsuit in California continues to demonstrate that 1099 nurse staffing is the riskier option for facilities.

What is Employee Misclassification?

An employee misclassification lawsuit involves claims that a business is hiring workers as independent contractors (usually for ease and for the cost savings), but then treating those workers as employees.

When a business wants to cut costs and avoid the responsibilities that come with being an employer by hiring a 1099 contractor, one big tradeoff is that it must sacrifice its control over the worker. As soon as the business starts to direct and control their 1099 contractor in the work that they perform, the façade of “contractor” begins to chip away.

Big Federal Moves

In December 2021, two of the big players charged with enforcing federal labor law entered into a Memorandum of Understanding (MOU). With the MOU, the U.S. Department of Labor, Wage and Hour Division and the National Labor Relations Board sought to strengthen their “collaborative relationship” in an effort to “maximize the enforcement” of federal labor laws. One of the areas for increased information sharing and collaboration specifically mentioned in the MOU was employee misclassification.

With the MOU in place, the Department of Labor has been busy investigating employers, including healthcare staffing agencies and facilities. Between 2020 and 2022 it launched over 1,200 home care and nursing care investigations, finding violations in almost 89% of cases. As a result of these investigations, the state recovered over $16 million in back wages and liquidated damages, and over $150,000 in civil penalties.

The wave of federal enforcement of healthcare worker misclassification is growing as states and private litigants follow suit. Here’s a look at one recent nurse lawsuit which was filed under the California Private Attorney General Act (PAGA), which allows individual workers to privately enforce labor laws through litigation.

1099 Lawsuit Spotlight: California

California Healthcare Staffing Agency Agrees to $1 Million Settlement for Nurse Suit Alleging Employee Misclassification

Workers for a California-based mobile app healthcare staffing company filed this case alleging that they were improperly classified as independent contractors. Specifically, their complaint alleged that the staffing agency engaged in a pattern of willful misclassification and had, among other things:

  • Failed to provide adequate break times and uninterrupted meal periods and failed to compensate workers for these missed periods
  • Failed to provide sick leave and notice of their accrued paid sick leave on their wage statements
  • Improperly withheld amounts from workers’ wages to cover occupational accident insurance
  • Failed to reimburse workers for necessary business expenses incurred as a result of their employment

While this California PAGA case is still pending, the court entered an order in October 2022, approving a proposed settlement for $1 million. This nurse lawsuit is a good reminder that states that allow PAGA-type actions add an extra incentive to workers to file employee misclassification actions.

As facilities look to healthcare staffing partners, the costs of doing business with a 1099 nurse staffing agency continue to rise. With employees incentivized to help with private enforcement of labor laws, the chances of a facility client getting caught in the legal crossfire are rising.

Fill Your Shifts With a W2 Nurse Staffing Partner You Can Trust

Nurse staffing and nurse lawsuits don’t have to go hand-in-hand. At IntelyCare, we don’t dance around the fact that we are the employer of our W2 nurses; we invest in their training and we directly manage and supervise them at every point. Reach out to us today so you can safely staff your facility with quality professionals — without the added risk.

Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current as laws regularly change through updates in legislation, regulation, and caselaw at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.


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