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Independent Contractor Vs Employee

Greetings All,

I would love some feedback on a situation that has presented itself to me. I am currently an employee of a chiropractic clinic located in a rural community as a massage therapist. I am the sole therapist on staff at this time. I feel I am well paid for the work that I do. During down times (no massages) I do marketing work for the clinic, setting up seminars, taking care of brochures, clinic maintainance (hanging shelves, brochure racks, cleaning, pretty much everything that needs attention).

Recently the owner of the clinic approached me with the opportunity of converting to an Independent Contractor. I'm interested in the idea for it will free me up from a non-compete agreement I have as an employee. The owner says it will save her money in terms of not having to pay taxes on me (ssi, workman's comp, etc). It will also save her on not having to pay me hourly wages. It would be a cut in my earnings yet offer me more opportunities in my own personal business.

I am curious to find out what you think is a fair percentage for compensation working as an IC, particularly in regards to work that is billed to insurance. The owner wants to compensate me based on what is collected, not what is billed. I am aware that those are 2 different figures, insurance does deny payment on claims for various reasons.

I am considering proposing a set minimum compensation for work that is not collected on if we go that direction. Another option I plan on proposing is a set percentage for all work that is billed, another percentage for all work that is paid up front. Is there anyone who has experience working as an independent contractor for a chiropractor or PT? I would welcome your advice. Thanks.

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Permalink Reply by Laura Allen on January 3, 2010 at 2:02pm

Yes, it does. You can actually fill it out and submit it and the IRS will decide for you. The burden is on the employer to have you classified correctly.

Allison Boehm said:

So, if I am in fact an employee, then I am getting screwed because I am not having taxes, workers comp, etc taken out of my pay check. Does the S88 help clarify the grey line or what? Either way, my coworkers and I cannot be held "prisoner" for the rest of our lives. We are going to defy to rules this time and begin to make something for ourselves. (well, not all of us...but a few of us). I just plan to be a spokesperson against these types of relationships. In most of us, it has ruined our energy and excitement for the job we do.

Erica Olson said:
It depends upon the state you live in. I'd google "non-compete [state] agreement" and go from there. In Colorado, non-competes really don't hold water. As long as client info is publicly available, the spa/etc has no standing. Even if you sign to one, it doesn't matter. Of course, your mileage may vary and you should check with an attorney, etc. Having a good labor relations attorney on retainer is invaluable, IMO.

FYI, the be-all, end-all authority of IC-versus-employee status is the IRS; most state labor boards won't even touch the question. To determine between the two, the IRS has a form (the SS-8, if I remember correctly) that either you or your employer can fill out. Beware that in our profession, most IC contracts do not hold up under scrutiny; basically, the default is employee and one has to work especially hard to prove IC status.

Non-competes do not an IC make. Basically, if the owner feels that s/he has the right to determine how you work (whether or not s/he actually does), then you are determined to be an employee. Gut instinct tells me that in all reality, contract or not, you are probably an employee.

Allison Boehm said:
Hey everyone! You are all discussing a very important topic to me. At this time I am working for a business and when I said on my contract claimed me as an employee/contract labor worker. At the same time, we were all required to sign a non-compete. When a former therapist raised questions over the legitimacy of our standing contract my owner changed our title to strictly contract labor. The question that all of my co-workers are not sure about is will the non-compete still stand if we are now considered strictly contract labor? And to make everyone feel better, we get paid about 25%....definately not a therapist friendly situation. Please respond with any knowledge you have of this

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Permalink Reply by Gerry Bunnell on January 4, 2010 at 6:10am

Personal Injury cases can take years to clear and sometimes result in no money at all. I totally agree on the differences between what is charged to insurance and what is paid. My D.C. and I have agreed to base my commission on charges at a lower percentage rate instead of basing it on receipts. This will result in timely payment and will result in about the same commissions in my pocket..

I had not considered a cap on her percentage of business. Maybe that will encourage her to send more business my way? This new year is proving to be one full of adventure. All the rules have changed in my work. At least it won't be dull!

Laura Allen said:

There is good advice here, and as one who has more than a dozen ICs working for me, I will add to it. First, as has been said, be SURE that you will be an IC by the IRS rules. My staff members are in complete control of their own schedules. They come and go at will. I have no say-so over it whatsoever---this has worked for me for six years and I am blessed to have my clinic staffed with great people. They do not do chores or anything else other than massage, and they certainly don't have to sit around when business is not here.

Second advice, re the billing: I have a chiro who works for me, we are members of a chiropractic network, and what is billed and what the insurance companies pay are two very different things. I just totaled for the year, and the network discounted the services by over 18,000 for this year alone (the billings were over 50,000). When you belong to a network, you are not allowed to bill the client for the difference. The catch is that if you DON'T belong to a network, they do not send people your way, and they pay you at even lower out-of-network rates.

I do not make my staff wait on pay. They bill me every week for what they have done, and I pay them for it. I am the one sitting here waiting for the insurance company to pay.

I do not accept personal injury cases any more based on the fact that I have some on the books that are years old that still haven't been settled. I also do not accept WC. The state will not tell you how much they are going to allow, and in years gone by, I have billed WC for 1000 and gotten 300 bucks out of it, and again, you aren't allowed to bill the client for the rest, you just take what they give you, so I quit playing with them a long time ago.

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Permalink Reply by Erica Olson on January 4, 2010 at 5:17pm

My biggest question is whether or not the IRS contacts the non-filing party for their side of things before making a judgment. Anyone have any practical answers/experience with this?

Laura Allen said:

Yes, it does. You can actually fill it out and submit it and the IRS will decide for you. The burden is on the employer to have you classified correctly.

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