Webinar Recap: What Long-Term Care Organizations Need to Know About Misclassification Lawsuits

Historically, temporary nursing staff brought in to support long-term care facilities were classified as W2 employees. Today, fueled in part by the momentum driving workers to the gig economy, long-term care providers are increasingly turning to tech-enabled platforms to fill shifts. Many of these platforms allow for their nurses and aides to be classified as 1099 independent contractors. Given the increase in this classification type, the Department of Labor has increased its enforcement of worker misclassification in healthcare.  

McKnight’s recent webinar, “What Long-Term Care Organizations Need to Know About Misclassification Lawsuits,” discussed this issue from a legal perspective, as well as from the perspectives of an auditor with over 20 years of experience visiting long-term care facilities and a former owner and operator of a long-term care facility. The discussion centered around the risks and liabilities long-term care facilities face when working with 1099 independent contractors, how those relationships have the potential to negatively impact the auditing experience, and what can be done to avoid those headaches. 

You can access the 60-minute presentation here: 

Access the Webinar: Worker Misclassification in the Temporary Healthcare Staffing Industry

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Don’t have time to watch the full webinar? Read on for a detailed recap of the most important topics covered during the discussion. 

Why is 1099 Labor in Healthcare Problematic? 

Classification rules, especially in the post-acute space, can be a very complicated issue. Healthcare is a highly regulated field that inherently requires heightened oversight and control. In this way, 1099 independent contractors in healthcare vary greatly from 1099 independent contractors who work for companies like Uber or Lyft, for example. It is difficult, if not impossible, to argue that this working relationship is truly independent in nature. Based on recent litigation, it is clear that the Department of Labor agrees. 

What Does Increased Worker Classification Enforcement Mean for Long-Term Care Providers? 

Facilities can be found at fault for using 1099 labor to fill their staffing gaps during an audit for a variety of reasons, and therefore face a number of risks, including: 

  • Patient sub-standard care malpractice claims 
  • Increased co-employment risk related to overtime pay owed 
  • Tax and claim exposure related to unpaid payroll taxes 
  • And more. 

The DOL has conducted over 1,200 investigations looking at worker misclassification in long-term care since 2021. These investigations have resulted in millions of dollars in back wages paid to 1099 independent contractors and fines paid to the federal government. For example, a long-term care provider in Pennsylvania was ordered to pay over $19 million in unpaid overtime expenses. This represents only a fraction of the enforcement activity that is happening. 

Individual states are making an effort to put protections in place as well. California, Illinois, and Massachusetts are among the most active states making changes to how healthcare workers are classified. More may follow suit as the DOL continues to regulate and enforce the classification of healthcare labor. 

How Does Employee Misclassification Come into Play During an Audit? 

Auditors are tasked with the responsibility of proving and/or reviewing specific compliance at long-term care facilities. If you are a facility owner or operator, you know that audits routinely happen on an annual basis, with some advance notice to prepare from the regulatory body. They also happen when an alert has been identified or reported to a regulatory body. 

Auditors represent the interests of the Department of Public Health, the DOL, and professional boards. They spend a lot of time looking at facility policies, procedures, and organizational structures and interviewing facility administrators and employees. A critical part of their job consists of reviewing a facility’s responsibility to their employees. They are specifically tasked with examining any contracts between the employer and its contractors. 

If there are independent contractors working at a facility, auditors are especially diligent. They are required to review contractor training and onboarding practices, they interview facility leadership and the contractors themselves about specific clinical competencies, and they must be able to provide proof of various documentation and any specific scope of practices outlined in their agreements. 

Facilities are responsible for the management of their internal staff, whom they hire as W2 employees. They are obligated to provide support, guidance, and training. There is a shared responsibility for these same elements with independent contractors, but facilities are responsible for providing auditors with documentation provided by the independent contractors proving licensure, training, liability insurance, and more.  

This becomes very difficult in a situation where a facility is working with numerous independent contractors from a variety of staffing platforms because, if audited, they must be able to provide documentation about every independent contractor who has worked in their building, whether they worked one shift or 100 shifts. They may also need to track down individual care providers for interviews with the auditors, or to provide missing documentation that is needed. 

The technology platforms that provide independent contractors to long-term care facilities are not obligated to provide access or oversight regarding documentation that is needed in an audit. Facilities are on their own when it comes to supporting an auditor if and when questions arise about the care given by independent contractors providing services within their building. 

Making a Stressful Experience Even More Intense 

When a facility is audited, the impacts of that experience are felt by everyone at the facility, including the residents. Though the auditors’ intent isn’t to cause disruption at the facility, heightened awareness permeates the building and causes stress. 

It is the facility’s job to be able to provide the information that an auditor is asking for within the actual visit window, which can be two to three days. This involves significant time and effort, often rifling through filing cabinets to identify one or two pieces of critical information. If the documentation needed can’t be found – such as missing information from an independent contractor – the auditor is alerted to a potential breakdown in operational structure and performance. In that instance, an audit quickly accelerates to a more intense experience. 

Most of a facility owner’s job is focused on managing cost-per-resident tasks because operating a long-term care facility happens on a paper-thin margin. If time is spent hunting for paperwork that doesn’t exist, a tremendous amount of pressure is put on the owner. It becomes difficult to make sure that costs are managed, and patient care doesn’t suffer. 

What Can Make the Auditing Process Smoother? 

It is no secret that long-term care facilities are struggling to maintain proper staffing levels. At this point in time, external staffing is a necessity to ensure that facilities can continue to function as optimally as possible. However, that external staff does not have to consist of independent contractors.  

There are a handful of tech-enabled staffing platforms that chose to operate as W2 businesses from their inception. Long-term care facilities should seriously consider partnering exclusively with W2 staffing partners because these organizations are set up to help manage all the information a facility needs when an auditor comes knocking on their door. They also are set up specifically to assist with the training and onboarding processes that 1099 staffing agencies lack, and that auditors need to confirm when they come into a facility. 

Ready to Make the Switch to a W2 Talent Partner?  

IntelyCare has been a W2 employer from the start. You can count on us to be a partner to you, to treat our nurses and aides well, and to help you provide outstanding patient care. Talk to us today to learn how we can help you safely supplement your workforce


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