Oregon Independent Contractor Law and Healthcare Staffing
Hiring independent contractors is a common way to fill staffing vacancies across the healthcare industry. Especially with ongoing nursing shortages, many facilities rely on staffing companies — who supply either 1099 or W2 nurses — to temporarily cover open shifts. While this can be a quick solution, it’s important to understand the risks that can come with how these temporary workers are classified.
Laws at both the federal and state level prohibit the misclassification of workers, which can happen when an employer hires a worker as a 1099 contractor, but in reality directs and manages them like a W2 employee. Particularly in Oregon, independent contractor law is enforced by multiple state agencies. If any of these (in addition to federal agencies) determine a case of misclassification, facilities can be subject to legal and financial penalties.
If you’re running a facility in Oregon and commonly work with 1099 staffing companies, it’s important to stay up-to-date with state regulations to minimize liability risks. Here’s an overview of what you should know before entering an Oregon independent contractor agreement.
Oregon Independent Contractor Law at a Glance
Below is a chart summarizing key definitions, agencies, and enforcement policies that shape Oregon’s independent contractor (IC) laws.
| Oregon Independent Contractor Laws | |
|---|---|
| Statute(s) and Rules | Oregon Revised Statutes, Chapter 670, Section 670.600
Oregon Administrative Rules, Rule 471-031-0181 |
| State Agencies That Enforce | The following agencies are responsible for enforcing different aspects of employee misclassification in Oregon:
|
| Key Definitions and Tests | Depending on which state agency is taking action, one of three different tests may apply, as follows.Section 670.600 Test
Under this test, an independent contractor is a person who provides services for compensation and who is:
Under this test, there are some limited exceptions to this definition of IC. For employment law purposes, for example, Section 657.030(3)(c) could allow student nurses to be considered independent contractors, and subject to direction and control, but only when working as part of their educational training program. Economic Reality Test Under this test, several factors are weighed to determine whether a worker is an IC for economic purposes. These factors are the:
Right-to-control Test This test involves weighing the following factors to determine whether a worker is free from the alleged employer’s right to control their work:
Note: When applying the tests above, no single factor is determinative and the classification of a worker under one of the tests above doesn’t necessarily mean they would have the same classification under another test. |
Oregon Independent Contractor Law: Overview
Oregon independent contractor laws were enacted to prevent businesses from misclassifying W2 (a reference to the tax form designating employees) workers as independent contractors. This can happen either by mistake or as an effort to evade taxes, wage and hour laws, and benefit coverage that’s typically required for W2 employees.
Under these laws, an independent contractor is broadly defined as a worker who is free from the direction and control of the person or entity that they’re working for — like a plumber who fixes a leak for your facility without requiring instructions on which tools to use. This principle is enforced in Oregon using the various independent contractor tests described above. However, the way these tests are applied by agencies depends on the reason businesses are being investigated.
For example, the Department of Consumer and Business Services enforces payment into the worker’s compensation system, which employers are required to provide for employees. In a case where a temporary nurse is injured on the job, various factors under the Right-to-Control and the Section 670.600 test are used to determine whether the nurse is an employee who should be insured by the facility, or an independent contractor who should be self-insured.
Oregon Independent Contractor Test and Healthcare Workers
As nursing professionals require more regulated oversight than other types of professionals, this can make the distinction between independent contractors and employees less clear-cut. Several factors are used to determine misclassification in Oregon, and healthcare facilities that rely on 1099 nursing support could be liable for employee misclassification under one or all of the independent contractor tests. As such, it’s important to consider how these tests to determine the independence and autonomy of workers might apply to 1099 nursing professionals in the facility setting. For example:
- Scope of Practice: A nursing professional’s scope of practice often falls under the direction of other healthcare workers. The Oregon Board of Nursing requires licensed practical nurses (LPNs) to be clinically supervised by a registered nurse (RN) or licensed practitioner. This limits the LPN’s right to exercise control over their job duties, which is a key aspect of Oregon’s independent contractor tests.
- Placement Length: As one way to determine the status of an independent contractor, Oregon agencies evaluate the length of their relationship with a hiring entity. While contractors tend to have short-term assignments, 1099 nursing professionals are sometimes hired to fill long-term placements. This can become an issue if a nurse works at one facility for several weeks or months at a time on a schedule dictated by the facility.
- Facility Resources: As Oregon independent contractor law includes economic factors to determine whether a contractor is truly independent, 1099 workers are generally expected to cover the cost of their own supplies and equipment to provide services. However, nurses typically don’t pay for their own supplies and equipment in the facilities they’re assigned to work in.
- Healthcare Regulations: To meet standards of care, nurses must follow appropriate protocols established by each healthcare facility that they work in. This often requires facilities to provide specific training and initiatives to 1099 nursing professionals that, under Oregon law, may be viewed as the direction and control of an employer instead of a contracting entity.
1099 vs W2 Nurses: Key Considerations for Facilities
Contracting the services of 1099 nurses can be appealing for facilities, since it takes less time and resources to fill vacant shifts. However, it’s important to consider whether these benefits are worth the risks associated with violating Oregon independent contractor law. Even if misclassification is unintentional, facilities working with 1099 nurses could face liability due to the inherent nature of the nursing profession.
Especially in Oregon, regulatory compliance can be complex since each state agency evaluates misclassification differently to enforce their specific labor policies. Under these independent contractor laws, Oregon facilities may have to undergo investigations by multiple agencies at a time. This can lead to unnecessary stressors and cost for facility administrators, even if the outcomes of investigations are favorable.
If your facility relies on outside staffing support, there are other ways you can supplement your workforce while reducing the risk of liability for employee misclassification. One alternative is to partner with staffing companies that recruit W2 nursing professionals instead of 1099 contractors.
Working with a W2 staffing partner means that your temporary nursing staff would have a designated employer responsible for their onboarding, training, and supervision. That employer would also be responsible for providing those professionals with the benefits, coverage, and entitlements required by law.
Find Staffing Solutions That Are Right for You
Unintentional violations of Oregon independent contractor law can add unnecessary stress for facilities that are working to reduce gaps in staffing. Thankfully, you can minimize that stress — and your liability — by filling your shifts with W2 nursing professionals who can deliver quality care under appropriate supervision.
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.