On July 13, 2018, the Wage and Hour Division of the Department of Labor (WHD) issued guidance on the subject of whether nurse or caregiver registries were the “employer” of the nurses or caregivers on those registries. This guidance is notable for a several reasons. It recognizes the changing nature of employment. These registries are often online services where a person or group needing caregivers (e.g., home health, babysitter, nanny, etc.) might go to locate a caregiver in the area, conduct research, schedule an interview, do a background check, and possibly even run payroll services. Determining whether or when such a registry moves from a referral or “matchmaking” service to an “employer” matters a great deal. Once an entity becomes an “employer,” it has an extraordinary amount of responsibility and potential legal liability. Even if the caregiv er works for a particular client, that client might simply be the co-employer with the registry such that the client and the registry could both be liable to the caregiver under various employment laws.

While the guidance addresses caregiver registries specifically, the concepts apply to other referral type services you might find.

General Test for Employment Relationship

The WHD relies upon the “economic reality” test to determine whether an employment relationship exists. In other words, there is no single fact which is determinative, but the WHD (or the courts) will look to several factors to determine if an employment relationship exists. Factors generally reviewed include: whether the potential employer determines the rate and method of payment, whether the potential employer has the power to hire and fire, and whether the potential employer controls the worker’s schedule or conditions of employment.

Guidance as to Caregiver Registries

The WHD reviewed several common purposes of Caregiver Registries. At the outset it noted that the mere referring of a caregiver to a client – the “matchmaking” – would not make the Registry an employer.

Conducting Background and Reference Checks. The WHD opined that the act of running routine checks and reporting that information did not make the Registry an employee. However, the Registry making subjective comments or interpreting the results could be interpreted as the Registry acting in the role of an employer who was “selecting” a candidate. If a Registry wants to ensure it is not an employer, it must not invade the province of an employer by suggesting the best candidate or ranking the candidates.

Hiring and Firing. Again, the WHD noted that a Registry which merely carried out the decision of the client was not an employer. But, as a Registry became more involved in the decision-making, that Registry moved along the sliding scale toward establishing an employment relationship with the caregiver (and, thus, a co-employer relationship with the client).

Scheduling and Assigning Work; Setting the Pay Rate. A Registry which requires that the caregiver and client determine these issues is not an employer. Even if the Registry provides information about “going rates,” that will not change the analysis provided those rates are not required. If the Registry requires a caregiver be available for a certain number of hours, be available during a certain window, or work for a certain rate of pay, those are the types of things that will cause the WHD to look at the relationship as an employment relationship.

Note: The administrative function of performing the payroll function on behalf of the client will not transform the Registry into an employer.

Controlling the Caregiver’s Work. This can be complicated. A “matchmaker” type service simply provides information. However, if the Registry provides training or standards by which the work must be performed, or if the Registry notes that caregivers who do not abide by certain rules will be disciplined, this moves the needle toward the employment mark. Exercising control over the work performed is a significant factor reviewed by the WHD.

Form 1099s. As a reminder, simply calling a caregiver an independent contractor does not make it so, even if the caregiver wants to be an independent contractor. No court or administrative agency will look to the Form 1099 (or the Independent Contractor Agreement you drafted) and stop asking questions. The “economic reality” test requires a review of the totality of circumstances.

Lessons Learned and Possible Consequences

Whether you are a Caregiver Registry or any business, understanding the WHD’s position on what makes a person your employee matters. The guidance for Caregiver Registries is somewhat portable to other businesses. If a business is controlling the work of a person then, regardless of the Form 1099 or the Independent Contractor Agreement, that person may truly be your employee.

If that person is your employee, the WHD will be asking whether you properly paid him minimum wage for all hours worked; whether you properly paid him overtime for all time worked over 40 hours in each work week; and whether you have records proving the hours worked. If you misclassified that person believing he was not your employee, you may be in a tough spot with the WHD. (This does not even address questions which may be asked of you by others, such as governmental taxing agencies).

It is worthwhile for all employers to assess their workforce to be sure persons are properly classified. First question to ask, is this person an employee? Second question, is this person being properly paid under the law? Third question, do I have the records to prove it? These questions are complicated, but necessary. It is far better to ask the questions of yourself than to have them asked of you by the Department of Labor or an ex-employee’s attorney.

By Kristen L. Brightmire, kbrightmire@dsda.com