North Carolina Independent Contractor Law and Healthcare Staffing
With ongoing nursing shortages affecting the healthcare industry, many facilities seek reinforcement from staffing companies who commonly send over 1099 nurses — classified as “independent contractors” for tax purposes — to fill vacant shifts. While this can be a quick way to find coverage, each state has its own set of laws and regulations that distinguish between nursing contractors and employees. This can have important consequences for a facility, especially one that is found to have misclassified a nursing professional as a contractor when they would actually be considered employees under the law.
In North Carolina, independent contractor law is shaped and enforced by multiple state agencies. To prevent worker misclassification, and the risk of significant legal and financial losses, it’s important for facilities to be aware of these laws and the increased legal and financial risks that come with the use of 1099 nursing professionals to fill shifts.
Here’s an overview of laws that healthcare facilities should be aware of before entering into a North Carolina independent contractor agreement.
North Carolina Independent Contractor Law at a Glance
Below is a chart summarizing North Carolina (NC) independent contractor laws that outlines and explains relevant statutes, definitions, and enforcement policies.
| North Carolina Independent Contractor Laws | |
|---|---|
| Statute(s) | North Carolina General Statutes, Chapter 143, Article 83 (the “Employee Fair Classification Act,” or EFCA) |
| Key Definitions and Tests | Under Section 143-786, the EFCA doesn’t provide a single definition of “employee,” or a single test to determine that classification. Instead, it incorporates multiple definitions and tests used by different state agencies.
Employment Security Division: This state agency manages the unemployment insurance program. Under Section 96-1(b)(10) it relies on the definition of employee used by the Internal Revenue Service (IRS). Under this approach, the IRS applies common law rules which classify a worker as an employee if the facts show the worker is told what work to perform and how to perform it. Department of Labor: This state agency enforces workplace rights and labor laws. Under Section 95-25.2(4) it takes a broad approach, defining “employee” as “any individual employed by an employer.” Industrial Commission: This state agency administers the workers’ compensation program. Under Section 97-2(2) it defines “employee” generally as “every person engaged in an employment under any appointment or contract of hire or apprenticeship,” and identifies several categories of positions that fall under that definition. It excludes “persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer,” among others. Department of Revenue: This state agency administers tax laws. Under Section 105-163.1(4) it defines “employee” as any individual “who performs services in this State for wages or an individual who is a resident of this State and performs services outside this State for wages.” |
| Enforcement | Section 143-788: Reports of employee misclassification are received, and investigated, by the Employee Classification Section within the North Carolina Industrial Commission. This agency is authorized to coordinate with all relevant state agencies, to include the state’s Departments of Labor and Commerce and the Employment Security Division.
The EFCA also ties employee misclassification into occupational licensing. Under Section 143-789, in order to issue any license, permit, or certification, every state occupational licensing board or commission must obtain an applicant’s certification that they understand what employee misclassification is, and that they disclose whether they have had any prior investigations of employee misclassification. |
North Carolina Independent Contractor Test
Under NC Independent Contractor Laws, there is no single test that determines whether a worker is an employee or an independent contractor. Misclassifications are instead determined on a case-by-case basis using criteria evaluating the actual “independence” of contractors. For healthcare facilities working with 1099 nurses, this criteria can include:
- Who dictates the length of a nursing professional’s placement or shift at a facility
- How much an individual nursing professional spends on facilities and equipment used to deliver care
- The amount of supervision or control a facility has over a nursing professional
- Who decides how the nursing professional’s work is being carried out
For facilities that work with a properly classified North Carolina independent contractor, taxes, overtime pay, and employee benefits do not have to be covered. While many cases of employee misclassification can be unintentional, some employers may purposely misclassify healthcare workers to avoid the financial obligations that come with hiring W2 employees (with “W2” referring to the federal wage and tax statement for those classified as employees).
To dissuade this behavior, NC independent contractor laws require all healthcare providers and facilities to sign off on their understanding of misclassification as a part of their operational licensing process. This means that facilities found misclassifying workers may risk their ability to renew or receive documentation allowing them to legally operate as a healthcare business.
How North Carolina Independent Contractor Law Impacts Healthcare Facilities
If a facility exercises too much direction or control over a 1099 nursing professional’s work, this could lead to a misclassification determination if the provider is acting more as an employee than an independent contractor. This means the facility could be on the hook for back pay, overtime, benefits, and anything else that an employee would be entitled to under North Carolina Independent Contractor law.
While the determination of misclassification in North Carolina is situation-specific, it’s important to consider how the role of nursing professionals may inherently require more direct oversight by facilities, making it more likely that they could be classified as employees. For example:
- Nursing professionals usually have to work a set amount of hours, and sometimes overtime, to fulfill mandated ratios and prevent patient abandonment.
- Nursing assistants must take direction and be closely supervised by nurses to stay within their scope of practice.
- Nursing professionals typically use medical equipment provided by facilities to deliver care, which may also warrant additional training for proper protocol compliance.
Given the nature of the nursing profession, this means that facilities who work with 1099 nursing professionals may face a higher risk of liability. Even if misclassification is unintentional, a healthcare worker could cite situations similar to the above examples and submit a complaint to the NC Department of Labor.
However, there are ways of finding temporary shift coverage without increasing the risks of violating NC independent contractor laws. An alternative to hiring 1099 nursing professionals is partnering with staffing companies who provide a W2-employed workforce. This allows facilities to fill available shifts with nurses who are onboarded, trained, and supervised by another employer.
How Can Facilities Better Adhere to NC Independent Contractor Laws?
If your facility relies on reinforcement from staffing companies, there are other ways to get staffing coverage without the liability risk. Find out how you can better adhere to North Carolina Independent Contractor Law by filling your shifts with W2 nursing professionals today.
Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current, as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.