The independent-contractor pendulum in home-based care could be swinging back in favor of pro-union policies. Providers should take note of potential changes coming down the pike.
For instance, there are currently proposed changes that would have an impact on the test used to determine whether someone is an independent contractor or an employee. Those changes would – in part – affect the analysis of whether a potential employer is exerting control over a caregiver.
Firstly, providers should be aware they can still be sued for improperly classifying a worker as a contractor under the Fair Labor Standards Act (FLSA), Emina Poricanin, managing attorney of the New York-based Poricanin Law, told Home Health Care News.
“Providers should stay on top of the issue, but keep in mind that – irrespective of the final regulation on independent contractors – they can still be sued under the FLSA or other state laws,” Poricanin said. “Those state laws provide, in some cases, greater worker protections in wage and hour than the federal government does.”
In October, the U.S. Department of Labor (DOL) issued that proposed rule, which would also apply to potential employers that include registries, virtual marketplaces or consumer-directed agencies.
The proposal is a significant shift from a few years ago under the Trump administration.
Under the former administration, there was a modification to the independent contractor test, which is the economic realities test under the FLSA.
The modifications made the test simpler and likely easier for non-employers to establish independent contractors were truly independent and not misclassified, Angelo Spinola — the co-chair of the home health and home care industry group at the law firm Polsinelli — told HHCN.
“We’ve known that the Biden administration would try to rake that back,” Spinola said. “In fact, they withdrew a lot of the opinion letters that utilize the updated test. Now, they’re attempting to put a new test in place that is more favorable to establish an employment relationship. That test seems to mirror, in some ways, what the National Labor Relations Board is doing with their joint employment test around indirect control.”
That element takes the test further than it did when the Obama administration was in charge because of the indirect control element, Spinola said.
That change could create some issues for providers.
“I think it’s very challenging when you [classify] control as not actually utilized, or perceived control,” Spinola said. “In other words, just the ability to manage somebody that is not exercised in any way can be considered employment. I think that takes it a step too far. The question should really be about what is actually occurring, not what is possible.”
Spinola said when you look at what is possible, that creates issues for several models – particularly franchise models.
The current test places significant weight on two core factors, Spinola explained. One is the nature and degree of control over the work. The second is the worker’s opportunity for profit or loss based on personal initiative or investment.
The new test will focus on the “economic reality” of the worker’s situation.
Essentially, the new test would ask if workers are economically dependent on the registry or entity sourcing the client for work. If so, they’re an employee.
If a worker is in business for themselves, then they are an independent contractor.
The DOL is encouraging interested parties to submit comments on the proposed rule. The deadline to submit comments is Dec. 13.
What home-based care agencies should know
While the rule will impart some changes if finalized, it shouldn’t surprise home care agencies.
The proposed rule, if anything, should bring some stability and clear guidance to home care providers who might still have questions about how to classify workers, Poricanin said.
“My impression is that the pendulum is swinging back again to what we saw under the Obama administration, and also that the proposed rule would codify what we’d expect the judiciary and state Departments of Labor to determine in any case when it comes to the question of whether a worker is an employee of the provider agency or a registry,” Poricanin said. “We have a plethora of case law already at the federal and state levels on this issue. While this pendulum keeps swinging back and forth every few years on this worker classification question, I consider the issue and questions largely settled for FLSA purposes and home care workers.”
For providers, Spinola said that compliance and due diligence on how contractor models are set up should be a top priority moving forward.
“If it’s a contractor model, I think there needs to be a real focus on compliance and making sure the model is built in such a way that they truly are independent contractors,” he said. “Which has been a major issue in home care, where you’ve got perceived or labeled independent contractor models that are really not that.”
In home care, caregivers are often obligated to follow state-required plans of care, maintain certain certificates or licenses and abide by safety protocols.
Under the proposed rule, those requirements could potentially be deemed as “control,” and therefore employment.
“It affects everybody, because typically you’re going to find some form of independent contracting across any of these industries,” Spinola said.