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 choose when and where to work is a core benefit of locum tenens, and it’s the main reason 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 US Department of Labor submitted a new proposed rule on Sept. 22 to streamline the criteria used to classify workers with regard to the Fair Labor Standards Act. 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.
Financial benefits. 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. In addition, the Association of American Medical Colleges estimates that up to 250,000 physicians will retire over the next decade. 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 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. 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.
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Autonomy benefits. 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. 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 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. 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. Contacting members of congress and organizational leaders to ask them to support legislation to statutorily define locum tenens as independent contractors.