Virginia Independent Contractor Laws and Healthcare Staffing

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Written by Katherine Zheng, PhD, BSN Content Writer, IntelyCare
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Reviewed by Aldo Zilli, Esq. Senior Manager, B2B Content, IntelyCare
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In the healthcare industry, it’s becoming increasingly common for staffing companies to supply the services of nursing professionals to short-staffed facilities. While these providers can be classified as either 1099 independent contractors or W2 employees, fully understanding this distinction (and properly classifying your workers) is important to protecting the rights and safety of workers.

Many states are cracking down on worker misclassification to ensure that businesses aren’t unlawfully treating their independent contractors like employees without the benefits and protections they’re entitled to. Particularly in Virginia, independent contractor laws are strictly enforced by several different state — and federal — agencies.

If your facility relies on the support of staffing companies, the following overview will provide information you should know before entering into a Virginia independent contractor agreement.

Virginia Independent Contractor Laws at a Glance

The following chart summarizes the key regulations, definitions, and enforcement policies that make up Virginia independent contractor laws.

                          Virginia Independent Contractor Laws
Statute(s) Code of Virginia:
Key Definitions and Tests As noted below, for purposes of labor laws, taxation, and unemployment compensation, Virginia relies on the IRS independent contractor (IC) test to determine the status of workers. Generally, this means that a worker is presumed to be an employee unless you lack any right to control or direct their work based on the 20 factors weighed by the IRS, which look into the following aspects of the workplace:

  1. Instructions: ICs are not required to comply with instructions about when, where, and how to work.
  2. Training: ICs use their own methods and don’t receive training from the purchasers of their services.
  3. Integration: An IC’s services are normally separate and do not merge into the hiring entity’s business.
  4. Personally-rendered services: ICs can assign others to do their contracted work. Services that must be rendered personally suggest an interest in controlling the methods used to perform the work which is more consistent in an employee relationship.
  5. Hiring, supervising, and paying of assistants: If ICs hire assistants for their work, the assistants are hired, supervised, and paid by the IC.
  6. Continuing relationship: ICs are usually hired to do one job and don’t have an expectation of continued work. Note that the IRS has found that work performed at recurring intervals (even if irregular) can indicate an employee relationship.
  7. Set work hours: ICs set their own schedule.
  8. Full time requirement: ICs are free to work when they choose and for whom they choose.
  9. Work performed on premises: ICs can typically perform work wherever they choose. Work performed on an employer’s premises suggests employer control.
  10. Order or sequence of work: ICs perform their work in whatever order or sequence they choose.
  11. Oral or written reports: ICs aren’t usually required to submit oral or written reports during the progress of their work.
  12. Pay schedule: ICs are normally paid by the job based on a negotiated rate or a bid. Hourly, weekly, or monthly pay indicates an employee relationship.
  13. Payment of expenses: ICs pay their own business and travel expenses.
  14. Furnishing tools and materials: ICs usually provide all of the tools, materials, and equipment needed to perform a job.
  15. Significant investment: ICs have a substantial investment in their own business (including the locations, tools, and equipment used in their business).
  16. Profits and losses: ICs can experience profits or losses based on how they manage their work. Employees are usually paid for their time and labor and aren’t liable for business expenses.
  17. Working for more than one client: ICs often perform work for multiple clients at a time.
  18. Publicly available services: ICs usually make their services available to the general public on a regular basis.
  19. Right to discharge: ICs that meet the terms of their contract cannot be fired without an employer facing a breach of contract action.
  20. Right to terminate: ICs are legally responsible for the completion of a job. Employees are generally free to quit work at any time without facing liability.

Note: Under Section 40.1-28.7:7(D) and Section 60.2-212(E), providing workers with personal protective equipment in response to a disaster caused by a public health threat is not to be considered when determining employment status. However, absent a disaster caused by a public health threat, providing PPE could be considered as a factor in determining whether a worker is an independent contractor or an employee supported by the direction, control, and supervision of an employer.

In Virginia, exemptions for employee classifications do exist for certain types of workers like those in farming or domestic services, but nursing is not an exempted profession.
Enforcement In Virginia, worker misclassification is investigated, and enforced, by the following agencies:

In addition, under Section 40.1-28.7:7, individual workers may bring a civil suit for damages if it can be shown that the employer had knowledge of the individual’s misclassification.
Penalties An employer that fails to classify a worker as an employee and fails to pay taxes, benefits, or other required contributions can face the following civil penalties:

  • First Offense: Up to $1,000 per misclassified worker
  • Second Offense: Up to $2,500 per misclassified worker
  • Third Offense: Up to $5,000 per misclassified worker

An employer that fails to properly classify a worker as an employee can also face “debarment” and become ineligible for government contracts for a period of:

  • Up to one year after a second offense
  • Up to three years after a third offense

In addition, an employer could face damages in lawsuits filed by misclassified workers, which can include:

  • Unpaid wages/salary
  • Employment benefits (including any of the worker’s expenses which would have been covered by insurance)
  • Other lost compensation
  • Attorneys’ fees and litigation costs

Overview of Virginia Independent Contractor Laws

In Virginia, the benefits of W2 employees and 1099 independent contractors differ greatly. Employees have taxes withheld from their paychecks, are protected by minimum wage and overtime laws, and receive unemployment and workers’ compensation benefits from their employers. On the other hand, for a Virginia independent contractor, taxes and other benefits aren’t typically covered by the entities they work with.

Virginia independent contractor laws were enacted to prevent companies from purposely misclassifying workers to cut down on employer-related costs. A company that misclassifies a worker would be responsible to provide any employer-related benefits and comply with any labor rights owed to their misclassified employee. This can include back pay, overtime, and insurance coverage, among other costs.

Each state agency weighs 20 factors used by the IRS to determine whether a 1099 worker is truly free from employer control. These factors fall under three broad categories:

  1. Behavioral — Any factors that showcase whether a company has the right to control what the worker does and how they do their job
  2. Financial — Any business aspects (e.g., finances, work location, and supplies) that are controlled by a company compared to the worker
  3. Type of Relationship — Any indication of written contracts, employee type benefits, or continuing relationships that are necessary for a company’s business

Virginia Independent Contractor Test and Healthcare Workers

When it comes to nursing, it’s important to consider how the nature of the job warrants more control or supervision than in many other types of professions. Because of this, facilities that work with 1099 nursing professionals could be at increased risk of liability under independent contractor laws in Virginia, even if misclassification is unintentional.

Let’s take a look at how 1099 nursing professionals might measure up under the scope of some of the specific IRS-defined factors used to determine worker classification:

  • Instructions: According to the Virginia Board of Nursing, licensed practical nurses (LPNs), must practice under the supervision of RNs or other licensed medical professionals. This legally requires them to follow instructions from other employees which is inconsistent with an independent contractor status.
  • Training: Nurses must be trained by the facilities they work in to ensure that they’re complying with protocols to deliver safe, high-quality patient care. According to the IRS, this is typically the responsibility of an employer and is inconsistent with an independent contractor status.
  • Work performed on premises: Independent contractors can generally perform their work wherever they want. However, nurses must deliver patient care at the facilities in which they’re contracted to work, which can be seen as employer control, also inconsistent with an independent contractor status.
  • Oral or written reports: Nursing documentation is dictated by several different federal, state, and facility-level policies. Charting and patient hand-offs are fundamental to the nursing scope of practice. Because of this, nurses don’t have free reign over reporting requirements like independent contractors typically do.

There are other seemingly innocuous factors to consider under Virginia independent contractor laws, such as a nurse’s use of PPE. Even the simple act of providing masks, gloves, and gowns to nurses — which are essential measures for healthcare workers — can be seen as factors to indicate an employer-employee relationship. Thus, complying with both classification laws and safety standards can increase your risk of liability when working with 1099 nursing professionals.

1099 vs. W2 Nurse Staffing: Key Considerations for Facilities

If you’re considering working with a staffing company, it’s important to weigh the pros and cons of contracting the services of 1099 nursing professionals. Utilizing independent contractors may appear time-saving and cost-efficient, but the liability associated with misclassification can lead to unwanted consequences down the line. While utilizing 1099 workers can reduce up to 40% of hiring costs, facilities would have to pay these damages in addition to the civil penalties for each misclassified worker if they’re found liable.

Furthermore, Virginia’s debarment penalty could place liable facilities at risk of losing government contracts. This means that if your facility is serving patients through government-funded programs (e.g., Medicare, Medicaid, CHIP) or receiving public funding for healthcare research and/or supplies, you could be temporarily cut off from reimbursement.

The bottom line? Misclassification may cost a facility significantly more than what they save from filling shifts with 1099 nursing professionals. Even if facilities take special measures to comply with Virginia independent contractor laws while working with 1099 staff, they would likely be compromising other safety and care standards that fall under the nursing scope of practice, increasing their legal liability in other ways.

To find shift coverage with decreased risks, facilities may want to consider partnering with staffing companies that supervise, train, and fill placements with W2 nurses. Companies that hire nursing professionals as W2 employees are the designated employer or record, which means they provide key training and oversight, keep proper records, and typically provide important benefits.

Fill Vacant Shifts Without Increasing Your Risk of Liability

If your facility is seeking staffing support in Virginia, independent contractor laws can’t be ignored. As an alternative to hiring 1099 nurses, partnering with a staffing company that supplies a W2 workforce can help you meet your needs while minimizing risks associated with misclassification.

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.

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