Why a statutory definition of what it means to be a contractor is key to preserving the locum tenens industry
By Matt Baade, Executive Vice President, Consilium Staffing
Even before the term gig economy described the modern labor market, locum tenens was a highly sought-after profession. The flexible, mobile nature of locum tenens means professionals stay on an assignment for a short length of time, then move on to another one, perhaps in a different area, city, or state. This freedom to pick and choose when and where to work is a core benefit of locum tenens, and it’s the main reason why locum providers are classified as independent contractors.
As the gig economy continues to gain momentum, a growing number of employers are struggling to define the difference between full-time employees and independent contractors. This worker classification matters because it impacts overtime, pay, taxation, and more.
In response to the changing labor market, the U.S. Department of Labor (DOL) submitted a new proposal on September 22, 2020, to the Fair Labor Standards Act with the purpose of streamlining the criteria used to classify workers. While locum tenens providers have always been considered independent contractors, the proposed rule would invite greater interpretation on exactly what classifies an independent contractor and an employee – and it could have a potentially negative effect on locum tenens. This is precisely why entities such as the National Association of Locum Tenens Organizations (NALTO) are working diligently to protect the classification by pushing for legislation that statutorily defines locum tenens as independent contractors.
Right now, locum providers have the unique opportunity to participate in the process, namely by advocating for their independent contractor status – and making their voices heard.
As an industry, locum tenens has an enormous impact on patient care. Locum professionals provide an estimated 1 million days of coverage and more than 20 million patient visits annually. The industry also plays a key role in alleviating the nation’s doctor shortage, which is expected to reach 90,000 by 2025. In addition,
over the next 10 years, the Association of American Medical Colleges estimates that up to 250,000 physicians will retire. Many of these physicians would like to continue working on a part-time or temporary basis, and the locum tenens industry empowers them to remain active.
These stats are important to consider because today, 90% of facilities utilize locum providers to solve staffing shortages, realize operational efficiencies, and meet seasonal or temporary patient demand. Providers, in turn, choose locum assignments because of the freedom and autonomy.
And then there are the financial benefits.
Since locum tenens providers are considered independent contractors, the IRS defines them as self-employed business owners who report taxes through Form 1099. Because independent contractors don’t have state, federal, Social Security, or Medicare taxes automatically withheld from paychecks, they settle up with the IRS with estimated quarterly taxes. (By contrast, full-time employees file taxes through Form W-2 and have taxes taken out of every paycheck.)
As a self-employed business owner, the tax structure empowers independent contractors to write off travel, lodging, meals, and other job-related expenses. Independent contractors can also maximize their retirement savings by contributing the full amount allowed to a self-employed 401k account while also lowering their taxable income.
Independent contractors also enjoy the freedom and autonomy that comes from being in control of their work schedule and income potential. Locum providers can decide where they want to work, when they want to work, and what assignments to take to fulfill their career goals. They can accept an assignment because they’re interested in a particular specialty, or turn one down if they don’t want to work in a certain setting.
From a work-life balance perspective, locum providers determine how much they want or need to work and construct their schedules around holidays, vacations, family obligations, and personal commitments. Providers can travel, take time off, or work extended contracts. In essence, the career of a locum provider is customized to his or her ambitions.
What’s Happening Now: Proposed Rule
The proposed rule from the DOL or is designed to help employers distinguish between full-time employees and independent contractors. The rule includes an “economic reality” test to help classify the worker’s status by determining if he or she is self-employed (and thus an independent contractor) or economically dependent on the employer (which would make him or her fall into the “employee” classification).
The rule also lists five factors to help employees classify workers, including the nature of the work, worker skill level, and level of worker’s economic dependence on the employer’s business. While the criteria is specific, the interpretation of the criteria is much more subjective.
How To Participate
The outcome of the proposed rule, which may come at the end of the year, will have a direct impact on the locum tenens profession, and now is the time for providers to speak out. One way to participate is by contacting lawmakers and leaders and ask them to support legislation to statutorily define locum tenens as independent contractors. (You can find contact information for your congressman/congresswoman at www.house.gov.)
A second way to participate is by making a public comment that states your support for statutorily defining locum tenens professionals as independent contractors. DOL’s proposal was published in the Federal Registeron September 26, 2020. Providers can click the green button and submit a public comment on or before October 26, 2020.