Independent Contractors in Optometry

Most businesses have workers. Some of those workers may be employees. Others may be independent contractors. What's the difference? Can you pick and choose? Who decides? Why might one be better than the other, from the perspective of the employer and from the perspective of the employee?

These are just a few of the questions that typically come up when discussing this topic. And, surprisingly, many employers determine their associate doctor is an independent contractor, and even more surprisingly, many associate doctors choose or want to be independent contractors. 

EXPERT TIP: To be clear, there are NO benefits to the employee to be classified as a contractor. It means no benefits, no overtime, no insurance, no workers' compensation protection, no state disability, and about a 10% reduction in pay due to the additional taxes. 

The distinction is very important. It significantly affects taxes (how much the employer and the employee must pay), as well as liabilities and insurance requirements. As an example, a worker that thinks he or she is an employee but is actually an independent contractor can be independently sued and unless he/she has his/her OWN insurance policy, may have no coverage for the lawsuit. Independent contractors are not entitled to state disability or workers' compensation benefits if injured on the job. And in terms of payroll taxes, an independent contractor pays the full 15% of the FICA/Medicare tax, whereas an employee pays only half because the employer pays the other half. These are important differences. Moreover, employers that misclassify employees as an independent contractors can face substantial fines and penalties from state and federal tax agencies. 

Most jurisdictions within the United States use what is called the "ABC" test to determine if a worker is properly classified as an employee or an independent contractor.  

The ABC Test

The ABC test determines whether a worker qualifies as an independent contractor. If the worker fails any one of these three tests, he/she is an employee and not an independent contractor -- even if you have a written contract that says otherwise!  

A. Autonomy (Control)

To be an independent contractor the worker must be free from the control and direction of the hiring entity in performing the work — both under the contract and in fact. This means the business doesn’t tell the worker how, when, or where to do the job. The worker has discretion over how to complete the tasks.

B. Business of the Worker

To be an independent contractor the work performed must be outside the usual course of the hiring entity’s business. The worker’s role must be different from the core business of the company. In optometry this is the key element which typically bars claiming an associate doctor is a contractor!  

C. Customarily Engaged Business

To be an independent contractor the worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. The worker runs an independent business — has multiple clients, their own business license, or markets their services to the public.

Optometrists

Many practices hire part-time optometrists to work in their office and pay them as "1099" independent contractors. However, because of the "B" test, these are -- always -- misclassifications. An optometry practice is in the business of providing optometric services to patients of the practice. That is accomplished through the services of a licensed optometrist. Optometry is what the optometrist does! It is not only not "outside the usual course" of the practice's business, it IS the usual course of the practice's business. 

There is no evading this classification problem. Unless you hire an optometrist to exclusively do non-optometric services, such as IT or marketing, that optometrist is an employee and must be treated accordingly.  

EXPERT TIP: Any optometrist that works for you, even if it is just one day a month, should be classified and treated as an employee. To do otherwise creates substantial risk, including the risk that the worker him/herself will make a claim against you some time in the future. It is not worth the exposure. 

Nonetheless, if you still want to hire an associate optometrist as an independent contractor, a Model Independent Contractor Agreement is one of the agreements available when you purchase the Model Employee Agreements.  

Non-Optometrists

There may, however, be others in the practice that could qualify as independent contractors. A biller, for instance, that works outside your office and does your billing. Medical billing is an independent business. Arguably it is not "outside the usual course" of the business, but it can be argued that many optometry practices do not have an independent billing person and that claim submission is ancillary to the practice of optometry. 

IT, PR/marketing, and others engaged in businesses that are ancillary to the core business of optometry may also qualify as independent contractors, depending on the degree of control the hiring entity exercises over their work.