From HR.BLR.com, Angelo D. Catalano of Coughlin & Gerhart LLP reports on a recent appellate decision in New York that found that a psychiatrist who provided on-site services was an employee of the counseling center where he provided services. He writes:
“In addition to the NYSDOL[New York Department of Labor], many agencies, including the U.S. Department of Labor (DOL), the IRS, the New York State Department of Taxation and Finance, and the New York State Workers’ Compensation Board (WCB), use some kind of test for independent contractor status. Although administrative agencies may use slightly different tests with varying numbers of factors, most rely on a variation of the traditional common- law “master and servant” test.
That test looks at the amount of supervision, direction, and control the principal (the “master”) exercises over the purported independent contractor or employee (the “servant”). If the test reveals that the principal has the right to exercise control over the “means and methods” of performing the work or has assumed actual control over the individual, he may be deemed an employee, subjecting the principal to payroll tax liability and liability for statutory unemployment insurance contributions and workers’ compensation benefits.
On-site psychiatrist—contractor or employee?
New York Psychotherapy and Counseling Center (NYPCC) is a counseling center based in New York City. According to the organization’s website, its goal is to assist individuals with mental and emotional challenges. Dr. Samuel Lustgarten, who provided on-site psychiatric services to NYPCC patients for more than 10 years, applied for unemployment benefits after he left the center. Not surprisingly, NYPCC maintained that he was an independent contractor.
NYPCC referred patients to Lustgarten and scheduled their initial appointments. The center billed the patients and paid Lustgarten an “hourly wage” for the time he spent treating them, regardless of whether it obtained payment from patients. NYPCC also provided him with an office at the center for which it charged him a nominal fee (less than $10 per week). Finally, Lustgarten generated a treatment record that could be accessed by NYPCC’s doctors and staff.
After a hearing, the NYSDOL administrative law judge determined that Lustgarten was an employee of NYPCC. The Unemployment Insurance Appeal Board later affirmed that decision. In response to NYPCC’s appeal, the 3rd Department affirmed the NYSDOL’s determination based on the facts.
Medical doctors, like attorneys and accountants, often have a wide degree of latitude in determining the means and methods by which they provide professional services. In that regard, a code of conduct or license may affirmatively require that such a professional remain independent and use his best judgment when providing the professional services. Indeed, NYPCC had no control over how Lustgarten diagnosed or treated its patients, and there was no evidence that it ever sought to control any medical decision he made.
However, it was apparent that NYPCC structured the service arrangement with Lustgarten in a manner that called into question his status as an outside vendor. By paying him an “hourly wage” for his time regardless of whether it received reimbursement, NYPCC essentially hired him.
In addition, the center referred patients to him, created his work schedule, and provided him with an office at a nominal rent. Under the relevant tests used by the NYSDOL, those factors showed that NYPCC controlled a large part of how Lustgarten practiced medicine at its facility. In re Lustgarten, 2014 NY Slip Op 08538 (3d Dep’t, 2014)….”
Angelo also provides the key takeaways from this case. Read the full story at New York physicians: Independent contractors or employees?.