On October 15, a federal court agreed with the U.S. Department of Labor and ruled that home care workers of a home health agency in Pennsylvania were employees—not independent contractors—of that home care agency.  As relevant to New York home care agencies, this decision applied the same test that a New York federal court would use to determine whether a worker is a contractor or an employee.  And in New York, where aides are still often classified as independent contractors, or nurses and other workers on “registries” are classified as independent contractors, this decision is a reminder that such classifications should be carefully evaluated.

In relevant part, the facts in Acosta v. Heart II Heart (available here) showed that the home care company classified the workers as independent contractors for wage and hour purposes.  The handbook and the policies were written to refer to the caregivers as contractors, not employees.  What was particularly upsetting to the US DOL in the case was that the workers were hired through two staffing agencies that had common ownership.  By “splitting” the workers among the two related entities, the entities were each able to pay the workers separately and avoid overtime.

The federal court disagreed with the contractor classification.  In so doing, it applied the well-known “economic realities” test and determined that: (1) the home care company maintained the right to control the workers by setting assignments and schedules with the patients and the workers’ pay rates; (2) the workers had no ability to profit from their work and lacked employee numbers and their own insurance (all factors which showed that the workers were not “in business for themselves,” but that they acted more as employees of the home care agency rather than its vendor); (3) the workers did not own or rent any of the equipment or materials required for their work; (4) the workers had no special skills or specialized training; (5) the workers were deemed permanent because the work was full-time over a period of several months; and (6) the direct care and home health services provided by the caregivers were the essence of the employer’s business (i.e. home care) and contractors are not generally used to supply labor for the integral aspects of an employer’s business.

As indicated, it is not uncommon for home care agencies to classify home care aides, companions, nurses, and LPNs as independent contractors.  Given the required oversight by a home care provider over such workers, and the integral nature of such work to the essence of the home care agency’s mission, classification of workers as independent contractors will likely be received with skepticism by government regulators (e.g., DOL, IRS) and plaintiffs’ attorneys who bring class action lawsuits.  As a reminder, companies that improperly classify workers as contractors could be liable for unpaid wages and overtime, payroll taxes, workers’ compensation, and unemployment insurance for those workers, in addition to interest, penalties, and liquidated damages.