By Sonia Page
In 2014 alone, the Wage and Hour Division of the Department of Labor found that more than $79 million in back wages was owed to more than 109,000 workers across varying industries. In many cases, they trace issues back to misclassification of employees.
As reported by the United States Department of Labor, misclassifying dental employees as independent contractors (ICs) is a common problem — one that affects dental practice owners, employees, and the economy.
If you own a dental practice, it is imperative that you understand the difference between employees and independent contractors. Classifying workers correctly will help you protect your practice for years to come.
The most common scenario associated with dental professionals being classified as independent contractors is when these individuals work as a temporary employee. They may either fill in for those on leave or help a dental office when they have a lot of patients to see.
Some practice owners mistakenly believe that a temporary worker is an Independent Contractor, but it is extremely rare for dental hygienists to qualify as such.
A common misconception in the dental industry is that temporary employees can be hired as independent contractors so that they don't need to be paid as employees. However, misclassifying your employees is illegal, and if the IRS catches you, your practice could be in serious trouble.
By classifying an associate dentist or dental hygienist as an independent contractor, the tax burden of that previously classified employee now shifts to the worker. This reduces costs for the employer. For example, employers do not need to pay into the Federal Insurance Contribution Act (FICA) for Independent Contractors.
However, if an employer begins to classify an employee as an Independent Contractor and there is no wage increase, that worker will take a significant pay cut. They will also no longer be eligible for benefits such as unemployment insurance or overtime pay.
Overall, a dental practice may choose to take this route because it requires less paperwork, results in fewer taxes, and has fewer rules (e.g., rules surrounding rest breaks, employment protection, overtime, etc.). Although this may seem like an ideal route in the short term, the long-term consequences could be immense.
If you're someone who struggles to stay on top of overtime pay, payroll, compliant timekeeping, and overall team management, software such as HR for Health could not only help you save time and boost productivity but also help you avoid potential legal issues.
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When you hire dental hygienists and associate dentists, you will have control over the work they do and how they carry out that work. Since you own the practice and they work for you, they will perform dental work on your patients. This is how you know these workers should be classified and paid as employees.
Several factors come into play in terms of independent contractor determinations. Both the IRS and the Department of Labor (DOL) have their own set of requirements. If an Independent Contractor meets the requirements of one set of rules but not the other, it's safest to classify that individual as an employee.
IRS rules encompass three categories:
On January 6, 2021, the DOL finalized its independent contractor rule. After considering more than 1,800 comments, the final rule is based on what the DOL originally proposed. However, they did make a few clarifications. Until now, the DOL and most court systems looked at seven economic reality factors to analyze a work relationship. Two core factors have now replaced these seven factors:
There are various reasons both hygienists and associate dentists are considered employees.
First, as an employer, you control the work they do. You lead in terms of what works needs to be done and when, as well as how they complete that work. Since they work within your practice, performing dentistry services on your patients, and use your equipment, this means you employ them.
However, the main reason is that the work they perform is the same as your practice's business. When a dentist comes to work in your dental practice, they are performing the same line of work, unlike a contractor who comes to fix your floors or a plumber who tends to a leak. These types of Independent Contractors perform tasks that are not related to your practice. Hygienists and associate dentists perform services that are.
Some dentist employers misclassify associate dentists and dental hygienists as independent contractors, and while this has been going on for decades, this misrepresentation can have significant consequences.
In addition to fines and penalties from the IRS, some states have their own employment determination guides, which are often stricter than IRS rules. For example, the California Dental Association published the factors that allow workers to be considered independent contractors.
This issue is catching the attention of states across the nation, and action is being taken by state labor boards, state attorney generals, and professional organizations, as well as task forces in states such as Massachusetts, New Jersey, North Carolina, and Virginia.
If you require support to classify your employees and independent contractors accurately, we can help. We will also ensure that everything is signed and tracked correctly in your HR for Health account so that you remain compliant.We welcome you to contact us to learn more or to seek HR consultation today!