PROACTIVE PRACTICE MANAGEMENT
We hired a contract hygienist to work in our practice for the past year. Now that the contract is up, the hygienist is filing for unemployment benefits. What are the hygienist’s chances for collecting?
first read, the answer seems simple, “No chance in
h-e-double-hockey-sticks!” A contract is a contract, and the hygienist
was well aware that a year commitment was the deal.
Now force the point with the Internal Revenue Service.
IRS recognizes two types of workers; the independent contractor and the
employee. In the dental
field, most independent contractors are sole proprietorships.
Any working individual with a Social Security number has the
default tax status as sole proprietor.
Sole proprietors can use his/her Social Security number as the
federal tax identification number, but there are significant differences
regarding taxation between employees and sole proprietors.
As a sole proprietor, one must pay both the employer’s and
employee’s share of federal payroll taxes.
The Self Employment Tax requires that the individual pay both
since the independent contractor is both employer and employee.
In a usual worker/employer situation, the employer pays half of
the FICA tax and the employee is responsible for the other half.
Despite having to be accountable for both shares, the sole
proprietor reaps the benefit of tax advantages, such as deducting
legitimate business expenses, special retirement plans that offer
tax-deferred retirement contributions, and having more tax breaks than
regular employees are able to spend more of their wages tax-free.
are responsible to the employees for enforcing HIPAA regulations, OSHA
rules, etc. within the workplace, because the employees are under the
dentist’s control. Since
contract employees are considered sole proprietors, and therefore their
own employees, they are responsible for enforcing these stipulations
themselves. This is where
it gets tricky in a dental office; the dentist is responsible for the
care the staff provides to patients. The
dentist must be sure that all the employees are compliant in all aspects
of the dental experience. Can
a hygienist or any other dental staff member be a true independent
contract employee since the dentist oversees/is responsible for the
work/care the worker provides? This excludes, of course, another dentist working in the
practice as a sole proprietor.
control the work of the employees, not the work of the independent
contractors. The IRS manual
includes “Following the common law standard, the employment tax
regulations provide that an employer-employee relationship exists when
the business for which the services are performed has the right to
direct and control the worker who performs the services.
This control refers not only to the result to be accomplished by
the work, but also the means and details by which that result is
accomplished.” In other
words, the dental office must treat independent contractors like an
outside vendor, and avoid the appearance that the contractor is an
employee. However, if a
dentist must oversee all care within the office, and be accountable for
the outcome of care, can a contract worker truly be classified as
is where the seemingly simple year-end contract question becomes
difficult. If the hygienist
decides to file a claim for unemployment benefits, the burden of proof
to show the employment status of the contract employee to the IRS or
state governing boards, is shouldered by the employer.
This same scenario can be applied to workman’s compensation due
to an injury while on the job or if the dentist decides to employ this
person as a full or part-time employee. An IRS audit can be initiated
when an out-of-work contractor files for unemployment, files for
workman’s compensation/disability claim or decides to change his/her
employment status. Once a
claim has been filed, the State Department of Employment must determine
if the contract worker was actually an employee.
Sometimes the determining factor is if the contract worker
carried independent unemployment insurance, which because of the
expense, few contract workers do. If
the State Department of Employment determines that a contract employee
was actually an employee, the IRS will be given the heads up that back
taxes need to be collected for federal unemployment insurance, and this
will lead to an audit of federal and State withholding taxes as well.
To prove that a hygienist, dental assistant, office manager, or
any other dental employee besides a fellow dentist were contract
employees is extremely difficult since the care provided by them was
overseen by the dentist.
sum up, despite having a written or verbal agreement, the dental
hygienist can very well collect unemployment benefits, all the while the
dentist is suffering through an IRS audit.