At Consultech, we provide independent contractor compliance services to help businesses be in a good position to handle any inquiries, claims, audits, or disputes from government or regulatory agencies. Here is an example of a company that successfully demonstrated the compliance of their independent contractor relationships when faced with an insurance premium claim.
The Company: Urgent Nurses Resources Inc.
Urgent Nurses Resources Inc. is a nursing registry that acts as a go-between for nurses and hospitals. Nurses register with Urgent, and at hospitals’ requests, Urgent offers temporary nursing services to registered nurses that have been preapproved by the requesting hospital. If the nurse accepts an assignment, he or she is given a list of duties to perform. The nurse provides his or her own uniform and other minor supplies to complete the assignment. Upon completion, the hospital pays Urgent for the services provided, and Urgent later pays the nurse for the service. Nurses in Urgent’s registry sign contracts as either employees or independent contractors. IC nurses with Urgent must provide their own liability insurance, and they receive an IRS 1099 tax form. Employee nurses are provided with workers’ compensation insurance and receive a W-2 tax form.
The Premium Claim: State Fund Sues Urgent Nurses Resources Inc.
In 2007 and 2008, a State Compensation Insurance Fund (State Fund) audited Urgent. Claiming that the nurses that had been given 1099s should have been considered employees, the State Fund claimed that Urgent was liable for workers’ compensation premiums for those nurses. Urgent refused to pay, and the State Fund sued Urgent for the premiums. Urgent had to provide substantial evidence to prove that their 1099 nurses were independent contractors or risk being responsible for the premiums. After considering the evidence, a trial court agreed that the 1099 nurses were indeed independent contractors, and Urgent was not responsible for the premiums. The State Fund appealed, but the trial court was affirmed in December 2015.
The Ruling in Urgent’s Favor: What Urgent Did Correctly
While no business ever wants to be sued over an insurance premium claim, circumstances can progress beyond your control. When this happened to Urgent, the business was well prepared to handle the difficulty. How? Urgent had the protective label of signed contracts with their independent contractors, but in a worker’s compensation dispute, the trial court must consider the reality of the relationship as a whole. Urgent correctly managed its independent contractor relationships in such a way that when the legal claim arose, the evidence turned out in their favor.
The Evidence: The Nature of the IC Relationship
- Urgent demonstrated evidence that the work performed by their ICs was controlled by the hospitals, not Urgent itself. Urgent had no input or supervision over the nurses while they executed an assignment.
- Urgent nurses could accept or reject the assignment at their own will, with no need for explanation or risk of penalty.
- Urgent offered its nurses temporary assignments with no guarantee of future work.
- Urgent supplied no nursing supplies or work locations for the nurses. The nurses and the hospitals provided all materials needed for the assignments.
- Urgent provided no nursing training for the nurses. Only qualified nurses would be offered certain tasks, and the hospitals themselves had to preapprove the nurses.
- Urgent’s main business function was to operate as a nursing registry, not to perform nursing services. The work provided by the nurses themselves was not integral to Urgent’s business.
- The nurses did not work exclusively with Urgent; many were registered with other registries or worked at other hospitals.
- Urgent and the nurses themselves were both clear in understanding that the relationship was an independent contractor relationship. Under contract, the nurses knew that they would be required to purchase their own liability insurance.
- The nurses had the freedom to choose whether to be categorized as independent contractors or employees.
Urgent maintained compliant relationships with its independent contractors and was therefore able to demonstrate substantial evidence that saved them from being responsible for costly workers’ compensation premiums. Consultech can help your business establish a compliant relationship with your independent contractors to prepare you in advance against any inquiries or claims. To learn more, contact Consultech Preferred IC Consultants today online or by calling (800) 769-2994.