African American female nurse cares for young patient.

Hospitals and healthcare facilities across the country are experiencing critical staffing issues in nursing. From recruitment and retention issues to mass resignations, the supply of skilled RNs decreased by more than 100,000 from 2020 to 2021.   The shortage is pushing many healthcare facilities to ramp-up efforts to find alternatives to fill gaps in their healthcare staffing, including turning to gig workers like travel nurses or contract nurses.  

But in the wake of the fast-growing gig economy, the Department of Labor (DoL)wants to ensure that all workers are treated fairly. They are expected to implement a rule change on how to classify employees and independent contractors under the Fair Labor Standards Act. That change along with tax liability questions and other issues associated with employing 1099 contractors could expose healthcare facilities to risks.  

Why does the Department of Labor Care if You Hire a 1099 Contractor vs. W-2 Worker?

The answer to this goes back to the early 1900s, when there was no oversight on how businesses treated employees – low wages, long hours, no minimum working age, etc. To give American workers protections, Congress enacted a variety of laws including the Fair Labor Standards Act, which authorized a minimum wage, overtime payments for anyone working over 40 hours per week, and other provisions benefiting the employee.  

Over the next few decades, the law was challenged by employers who hired “independent contractors” instead of regular employees, arguing they didn’t have to follow the minimum wage and overtime requirements outlined in the Act for those employees they classified as independent contractors.  

The DoL fought these challenges and established a set of guidelines to classify whether a worker is an independent contractor or employee. Those rules have been modified several times, but most recently, the DoL is proposing a rule change to help ensure workers are classified correctly and receive the benefits they deserve.  

With this upcoming change, hospitals and healthcare facilities need to take a closer look at the independent contractors they are hiring to fill their nurse staffing gaps to ensure they are classifying them properly otherwise they risk serious penalties.  

Under the proposed change, there are six factors that would determine whether a worker is an independent contractor or employee: 

  1. The degree of the alleged employer's right to control the manner in which the work is to be performed 

  2. The worker's opportunity for profit or loss depending upon their managerial skill  

  3. The worker's investment in equipment or materials required to complete the job 

  4. Whether the service rendered requires a special skill  

  5. The degree of permanence of the working relationship  

  6. The extent to which the service rendered is an integral part of the employer's business 

Violations of the Fair Labor Standards Act could result in criminal prosecution and fines up to $10,000 per offense. The facility could also face lawsuits from the contractor.  

How to Stay Compliant with the Fair Labor Standards Act  

There are many skilled nurses who prefer to work as independent contractors or per diem nurses because of the flexibility it offers. These nurses and other hospital support staff play a critical part in healthcare staffing, filling gaps and ensuring effective patient care.  

Here are two ways hospitals and healthcare facilities can stay compliant with the Fair Labor Standards Act when using on-demand healthcare workers for their nursing and healthcare support staffing needs.  

1. Schedule Regular Labor Audits  

Hospitals and healthcare facilities should set a process of evaluating their working relationships with their independent contractors. Set a time annually – or every six months – to review each independent contractor’s working engagements to ensure they aren’t being treated as employees under the DoL guidelines.  

2. Use a Staffing Solution that Hires Healthcare Workers as W2 Employees  

Accountable healthcare staffing solutions like ShiftMed hire skilled nurses as W-2 employees, ensuring that the Fair Labor Standards Act requirements are being met. By using ShiftMed, hospitals and healthcare facilities can tap into the skilled nursing labor pool that don’t want to be in-house employees without the burden of ensuring they are meeting independent contractor labor requirements.   

Because ShiftMed hires nurses as W-2 workers, facilities don’t have to track invoices and payments to contract workers or send 1099s, reducing payroll headaches and back office costs. ShiftMed also integrates with HR tools like UKG to streamline and automate HR functions, including timecard oversight.  

Differences between ShiftMed workers and 1099 Contractors.

Through the ShiftMed nursing jobs app, a pool of skilled nurses and other hospital support staff that are W2 employees of ShiftMed are at your fingertips. You simply add your RN labor pool jobs to the app, and skilled nurses can pick up the open shifts. 

Request a demo to see how ShiftMed can reduce your oversight requirements and risk when partnering to fulfill your healthcare staffing needs.