Texas Independent Contractor Laws and Healthcare Staffing
Healthcare facilities face many challenges with nurse staffing. From fluctuating patient censuses and seasonal demand to unexpected nurse turnover, staffing needs can be unpredictable — and dire. To fill urgent needs, facilities commonly work with staffing firms that connect them with trained nursing professionals. Temporary nurses hired through agencies may function as 1099 independent contractors or as W2 employees.
Hiring independent contractors can be a short-term solution to manage workloads without the cost and time associated with permanent training. However, this comes with potential long-term risks for healthcare employers, including the risk of misclassifying a worker as a contractor when they are, in effect, acting more like an employee. This can lead to investigations by state agencies, lawsuits by the misclassified employees, and significant cost for facilities.
Learn about the Texas independent contractor laws that relate to healthcare staffing and how they could impact your facility.
Texas Independent Contractor Laws at a Glance
Maintaining compliance with Texas independent contractor laws helps avoid misclassification and legal implications that can impact your healthcare business. Here’s a breakdown of the relevant 1099 laws in Texas and how they might affect your facility.
| Texas Independent Contractor Laws | |
|---|---|
| Authorities | Texas Labor Code, Section 201.029 (covering temporary help firms)
Texas Labor Code, Section 214.008 (for employers that contract with governmental entities) |
| Key Definitions | Section 201.041: “Employment” is defined as a service performed for wages or under a contract, unless that performance is free from the control or direction of the hiring entity, as that would indicate an independent contractor relationship.
Section 401.012: An “employee” is defined as any person in the service of another under a contract of hire and includes those employed in the usual course and scope of the employer’s business. Section 406.121: An individual is considered an “independent contractor” (IC) if they perform work for the benefit of another and are:
Section 201.011(20): Defining a “temporary employee” as one employed by a temporary help firm to be assigned to work for clients of the firm. Section 201.011(21): Defining “temporary help firm” as one that employs individuals for the purpose of assigning them to support or supplement a client’s workforce during absences, shortages, seasonal workloads, special assignments or similar situations. |
| Test | Under Section 201.029, a temporary help firm is considered to be the employer of any workers that they provide as staffing support to their clients, at least for purposes of unemployment compensation. However, there is the risk of a “joint employment” determination where the client of a temporary help firm could also be found to be a joint-employer if they “exercise enough of the attributes of an employer.”
In determining the attributes of employment, Texas does not use the “ABC” test like other states. Instead, Texas independent contractor laws weigh a mix of twenty different common law factors, which include:
|
| Enforcement | The Texas Workforce Commission (TWC) investigates and enforces employee misclassification and can charge fines for violations. For businesses contracting with the government, the TWC can impose a $200 penalty for each individual that was misclassified.
In addition to enforcement actions by the TWC, employers may also face lawsuits from misclassified employees claiming unpaid wages, overtime, and other costly damages. |
Independent Contractor vs. Employee: Texas State Review
Texas independent contractor laws may increase the risk of employee misclassification for employers that hire contractor nurses. As an employer, ask yourself, are the initial savings worth the risk of financial loss due to potential misclassification claims?
The U.S. Department of Labor (DOL) implements and enforces federal labor laws, providing guidance on regulations and compliance for employers. Standards for minimum wage, overtime rates, recordkeeping, and child labor laws are set in the Fair Labor Standards Act (FLSA). Individual states have the authority to expand on federal regulations. Texas is no exception.
The Texas Workforce Commission (TWC) regulates and enforces labor laws in the state, including misclassification claims for temporary workers. Independent contractor laws in Texas are nuanced and use specific terminology that differs from other states and the federal government. One example is the term “temporary help firms,” which refers to staffing firms that connect businesses with temporary workers. Under the law, these firms are required, at a minimum,to act as the employers of their staffing workforce to protect independent contractor payment rights like unemployment compensation.
Texas Independent Contractor Test and Healthcare Facilities
As a healthcare facility, you may be wondering if temporary 1099 nurses at your facility could be classified as your employees under Texas law. The state’s independent contractor test guides employers in maintaining compliance with employment taxes, regulations, and labor laws.
Texas independent contractor laws don’t include the ABC test commonly used in other states. Instead, state courts and agencies can determine employment status by looking at a mix of different common law factors, which are listed in the chart above. For the Texas Workforce Commission, independent contractor test factors may have a unique application for healthcare facilities hiring nursing professionals. After all, many of the factors that describe an “independent contractor” would not clearly apply to 1099 nurses who operate in a highly regulated and supervised profession. For example, consider the following:
- Location of work. Healthcare facilities typically hire temporary nurses for a specific department or unit with urgent staffing needs. This helps place nurses with specialized experience in areas in need. According to the IC factors, independent contractors typically have the right to choose the location of their work. If this applied to a healthcare environment, it would interfere with a nurse’s placement within a facility, or their ability to float to other locations.
- Instructions. Under the IC factors in Texas, independent contractors don’t require instructions on the work they perform. Refusing instructions could lead to patient abandonment or harm, as taking direction from colleagues — such as a physician or advanced practice provider, manager, or charge nurse — is essential to carrying out their core nursing duties. One example would be if a 1099 nurse refused a patient assignment created by a charge nurse. How would your facility handle this situation? Requiring the assignment would be more indicative of an “employee” relationship compared to that of an IC.
- Training. ICs shouldn’t require training because they possess the skills necessary for a job. However, nursing jobs require on-the-job training, no matter an individual’s level of experience. Healthcare protocols vary from one facility to another, and minimum training is necessary to ensure patient safety isn’t compromised. But the more training that’s required, the more likely you could face an employee misclassification determination.
- Hours of work. Nursing shift times are typically set by a healthcare facility. Nurses’ schedules may be set or approved by a nurse manager. These instances would interfere with the misclassification factor stating ICs are in charge of their own schedule and can choose their days and hours of work.
These are just a few examples of issues that could arise when hiring an independent contractor nurse.Under Texas’ independent contractor agreement, ICs are not supposed to be controlled like employees, but due to the nature of a nursing role, the line between the two can easily blur.
Employers also risk breaking Texas independent contractor laws with joint employment. In this scenario, the TWC or a state court could find that two or more entities share the responsibilities of an employer. Joint employment in healthcare usually involves a staffing firm and a healthcare facility. When both entities have the same level of control over a worker’s employment conditions (such as hours, location, or method of work), it can lead to shared legal responsibilities.
Joint employment can raise red flags for the TWC if a complaint is made about potential employee misclassification claims. This could prompt misclassification investigations into both healthcare facilities and the 1099 agencies that they use for staffing.
Is There a Way to Minimize the Risk of Misclassification?
Fortunately, facilities have options when it comes to staffing their shifts. If you have a need for temporary and flexible staffing, there are staffing agencies that hire their nursing professionals as W2 employees, instead of independent contractors. This means that the temporary nurses in your facility would have a clear employer of record responsible for verifying the credentials of their nursing team and providing the supervision, training, documentation, and support needed to comply with legal requirements and applicable standards of care.
Texas W2 vs. 1099 Nurse Staffing: What’s Best for Your Facility?
Misclassification of healthcare employees can result in legal and financial liabilities for your healthcare organization. Fortunately, you can minimize your risk of violating Texas independent contractor laws by staffing your shifts with W2 nursing professionals who can deliver safe, supervised care to your patients.
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.