The United States Department of Labor (DOL) implemented a project earlier this year to reduce the improper classification of workers in many fields as independent contractors. The project includes educational initiatives, clarified criteria for determining worker status and collaboration agreements with state departments of labor. In September, Vermont became the 26th state to sign an agreement with the DOL providing for shared law enforcement and information between the two entities.
Why is worker misclassification a big deal? To quote the DOL, “When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. Misclassification also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers.”
It turns out that home care is one of the fields where worker misclassification is a big problem. There are a number of so-called “registries” or “1099-companies” that call their workers independent contractors rather than bona fide W-2 employees. By thereby escaping many of the costs and obligations of true employers, they are able to offer their services at below prevailing rates. Unsuspecting consumers, attracted by the savings, may not realize they are dealing with an entity that in all likelihood is breaking the law.
But why should consumers care? Well, for one thing, consumers may find themselves responsible for occupational injuries sustained by their workers. Second, independent contractor agencies escape the state licensure regulations designed to protect consumers. They are also under no obligation to send an immediate replacement in the case of worker absenteeism. Finally, it is worth mentioning that consumers actually begin to care in a personal way about the well-being of the workers who are caring for a loved one. When a dedicated home care aide is being cheated out of important worker protections, that may not sit well with the families for whom they provide services.
And let’s be clear: worker misclassification is illegal. In fiscal 2014 the DOL’s investigations resulted in employers being required to pay $79 million in back wages to 109,000 workers in various service fields. Violations can trigger significant liabilities including damages double the amount of compensation that would be due as an employee plus attorney’s fees and costs. Home care companies have been taken to court over the issue. In July, 2015, a Florida court found that a home care registry improperly classified a Certified Nursing Assistant (CNA) worker as an independent contractor, ordering that back overtime wages be paid.
Whether a worker is an employee or independent contractor is a legal question determined by the economic realities of the relationship between the worker and employer. It is independent of job title or any agreement between the parties. The actual legal criteria are rather technical and include such considerations as whether the work is an integral part of the employer’s business and the nature and degree of the employer’s control.
Despite the legal complexities of making a clear determination of worker status, calling home care workers independent contractors is a big stretch at best, and likely illegal in most or all cases. One of the industry’s trade associations, the Home Care Association of America, won’t even offer membership to companies that don’t assume all legal obligations of employment. Their position paper on the subject warns consumers of the risks of independent contractor agencies.
The National Association for Home Care and Hospice (NAHCH) also has alerted its member agencies to the risks of worker misclassification. According to NAHCH, “Home care companies utilizing independent contractors are advised to rely on competent legal counsel when determining proper worker classifications. It is readily apparent that the federal and state labor departments are taking a special interest in home care… These government entities…are joined by private attorneys that specialize in these types of cases and often prosecute them on behalf of a large class of workers against a single employer. Those private attorneys also have home care on their radar.”
How can a consumer determine if a home care agency uses independent contractors? The most direct way is to simply ask. But if the answer seems evasive, there is another surefire indicator: a company offering hourly rates less than around $19.00 in Northern Virginia is almost always an independent contractor agency. The savings may be tempting, but the risks are good reason to steer clear.