Employment Subcontracts

How to Avoid the Independent Contractor Mistake

May 24, 2021

I came up with the idea for this post on my way into work while thinking about work.

No, not thinking about my work, but about yours. In fact, I’m thinking about your work to the extent that you’re using physicians as independent contractors.

In general, the issue of classifying a worker as an independent contractor versus an employee is determined both by federal law and by state law, for example, the Labor Code changes in California brought about a few years ago by a bill referred to as AB5.

In a general, non-state specific sense, it’s far easier to successfully engage an independent contractor physician than, let’s say, an independent contractor office worker for your back office. That’s because of the issue of direction and control. Historically, physicians have exercised independent direction and control over their work circumstances.

Here are two new elements for you to consider:

The first is that, unfortunately, I’ve seen many medical groups engaging independent contractor physicians — in other words, people who are treated economically as independent contractors — using documents that they have entitled “Employment Agreement,” or documents that they have entitled “Professional Services Agreement”, that then refer to the independent contractor physician as “the employee.”


The second, is about the imposition of control over the way physicians exercise, or don’t exercise, their professional discretion.

For example, more clinical pathways, and more control by lay entities, by hospitals and their captive medical groups, over physicians destroys many of the elements of professional discretion. Has so much discretion been removed that physicians, under whatever labor category title, are as likely to be treated as employees as those on the office staff?

What this really means is that you need to do significant planning in advance of engaging anyone, even a physician, as an independent contractor.

And, under any circumstance, don’t make the foolish mistake of referring to an independent contractor as an “employee”, whether in an independent contractor agreement or anywhere else. Only bad can come from that. Why weren’t you withholding? Why weren’t you turning over those withholdings to the federal government or to the state? What sort of penalties do you owe?

A big mess.

Apply my usual metaphor: Before engaging a physician as an independent contractor, think like in carpentry: measure twice, cut once.

Don’t do what usually happens the real world, which is measure incorrectly to begin with, and then cut away.

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