Can doctors, and other medical professionals, be misclassified as independent contractors? Yes.
Dr. David is a dentist who works out of multiple dental offices in California. These dental offices are all part of the same “network” of offices; they all work with an outside company that supplies marketing, HR, and facilities, among other things. When he first started working, Dr. David signed several “independent contractor” agreements with each of the dental offices he works at. These independent contractor agreements require Dr. David to supply his own assistants and tools, carry his own insurance, and indemnify the dental offices. Naturally as an independent contractor Dr. David must also pay both his share and the employer’s share of Social Security/Medicare, etc. Recently, Dr. David has become concerned that he might be misclassified as an independent contractor because he is actively supervised by both the dental offices and the outside company. For example, he is told to emphasize certain procedures over others, and his schedule is highly regulated by the dental offices. Dr. David only has limited input on the patients he can see and when.
Is Dr. David an independent contractor or an employee under California law?
Medical professionals like Dr. David have encountered these issues for many years, but the law has largely assumed that they are contractors. But a recent California Supreme Court case, Dynamex v. Superior Court threatens to upend the status quo for medical professionals.
In Dynamex, the California Supreme Court adopted the “ABC test” for determining whether a worker is an independent contractor or an employee. Under the ABC test, the alleged employer (in this case the dental offices/outside company) must prove all 3 parts of the test for a worker to be properly classified as an independent contractor.
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
The consequences of Dynamex for medical professionals are potentially enormous. Let’s apply the test to Dr. David’s hypothetical situation one step at a time.
(A) the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact.
This first step is all about how much control the alleged employer has over the worker. Here, Dr. David says that his schedule and work are highly controlled by his alleged employers, and that he has very little control over his day to day business. Dr. David will have to produce evidence to back up his claims because the dental office will argue that as a medical professional Dr. David has a lot of autonomy. The employer will have a hard time prevailing on this step if Dr. David can show a high level of control over the finer details of his work such as how his schedule is managed and if the alleged employer is very nitpicky or controlling about details such as which procedures he needs to perform or prioritize. This step will require Dr. David and his counsel to thoroughly marshal and present evidence of his day to day work schedule.
(B) the worker performs work that is outside the usual course of the hiring entity’s business.
This second step requires us to compare Dr. David’s work to the work of the business, in this case the dental office. A dental office’s business is to perform dentistry and Dr. David is a dentist who practices in that field. Thus, the work is not outside the usual course of the dental office’s business. It would be different if Dr. David was, for example, a roving, private dentist who occasionally visits a tech office to clean the CEO’s teeth on demand. The employer will have a difficult time meeting its burden of proof under these facts.
(C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
This third step is similar to step two. Here the question is whether Dr. David ‘s work as a dentist is an “independently established trade, occupation or business of the same nature” as the dental office. Admittedly, this is a somewhat vague step, but the key words are “independently established”. If the evidence shows that the employer exercises a high degree of control over Dr. David then he is not an independent actor. It might be different if Dr. David had his own outside specialty practice and was called in to help on the occasional high-risk procedure because he knows the managing dentist.
To establish that Dr. Davis is an independent contractor, the alleged employer would have to prove all three elements of the Dynamex test, i.e. that the person is (A) “free from control and direction”, (B) working “outside the usual course of the hiring entity’s business”, and (C) engaging in an “independently established trade, occupation, or business”. If the employer is unable to establish any one of these factors, Dr. Davis would be an employee. Under these facts, we feel that Dr. David is actually an employee, and the dental offices owe him wages, penalties, and attorneys’ fees among other remedies.
Dynamex is a watershed moment in California employment law. If you are in Dr. David’s position, please call us for a free consultation 925-937-3900