“Under the final rule, an entity may be considered a joint employer of another employer's employees if the two share or codetermine the employees' essential terms and conditions of employment.”
What This Means for Hospitals and Other Healthcare Organizations
In short, under this newly defined rule, hospitals and nursing centers nationwide could be considered joint employers for any agency healthcare staff.
Because the NLRB has recently broadened the definition of what it means to hold joint-employer status, using a 1099 company can expose healthcare organizations like hospitals, nursing centers, and continuing care retirement communities to more risk.
The Joint-Employer Standard Final Rule went into effect on December 26, 2023. For more information, view the NLRB Fact Sheet.
W2 Versus 1099 Healthcare Staffing Agencies
W2 Healthcare Staffing Firms:
- Healthcare organizations get greater peace of mind by partnering with W2 staffing firms because W2 employees are subject to labor law protections, including overtime protection, worker's compensation, professional liability insurance and unemployment benefits. Additionally, W2 employees may also be held to specific policies and procedures determined by the nursing agency, holding them to a higher standard of professionalism.
- Offer their employees benefits such as medical insurance, paid time off (PTO), retirement plans and reimbursement for licensure, all of which allow W2 employees to feel valued and more committed to their work, which is ideal for hospitals and nursing centers as it directly correlates to quality of patient care.
- Ensure that employees are fully compliant and qualified to work. W2 staffing firms will conduct criminal background checks, drug screens, and verify that all certifications are current prior to the employee's start date at the building.
- Have stronger, more developed relationships with hospitals and nursing home. When partnering with a W2 staffing firm, hospitals and nursing centers work closely with a tenured professional to identify their needs, which can lead to better care for patients and residents.
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1099 Healthcare Staffing Agencies:
- Are experiencing consequences from the Department of Labor (DOL) due to misclassifying employees. Additionally, when healthcare organizations utilize 1099 agency staff, the organizations will most likely be subject to join employer status under the new rule, which comes with increased legal and financial risk.
- Employ independent contractors -- commonly referred to as "per diem" or "PRN" staff -- that accept work on their own terms without being bound to any particular healthcare organization.
- Pay their 1099 contractors a premium, which means more money out-of-pocket for hospitals and nursing centers. Due to the ongoing staffing healthcare staffing shortages across the country, healthcare organizations can expect to pay anywhere from $5-$17/hour more for a 1099 contractor than a W2 employee.
According to a 2023 McKnight’s Long-Term Care News article, W2 is the preferred model when it comes to healthcare staffing:
“Hiring our nurses as W2 employees could help protect our clients from being legally designated as the “employer” of our nurses and aides and lessen the financial and legal liability that comes with that designation during a DOL audit.
A W2 model would also enable us to invest in our nurses. Not only could we provide employee benefits and payroll tax contributions, but we could directly manage and supervise them, provide ongoing support and training, and properly handle any clinical incidents.”
Learn more about how hiring W2 employees is key for resident safety in nursing homes.
Misclassification
Unfortunately, choosing to partner with 1099 healthcare staffing companies can result in detrimental legal trouble.
Misclassification occurs when healthcare staffing firms incorrectly classify a worker as an independent contractor (1099) rather than an employee (W2). Intentional acts of misclassification can result in staffing agencies being investigated by federal and/or state authorities for payroll fraud. This error can also result in violations of labor laws and the potential for class action lawsuits.
Because there have been recent lawsuits conducted by the Department of Labor (DOL) against 1099 healthcare staffing agencies like ShiftKey, KARE, and Clipboard Health due to misclassification, hospitals and nursing centers can mitigate their risk simply by working with W2 agencies instead.
The Bottom Line
By providing benefits, compliance requirements, and maintaining a stable employer-employee relationship, W2 nursing agencies ensure better nurse quality, lower turnover rates, and higher care standards, ultimately resulting in better outcomes for residents, patients, and staff.
Disclaimer: LeaderStat does not provide legal, accounting, or tax advice to its employees or to healthcare organizations. This content is for informational purposes only and is not intended to provide legal, accounting, or tax advice.
LeaderStat specializes in direct care staff, interim leadership, executive recruitment, travel nursing and consulting for healthcare organizations nationwide.
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