Worker classification has become a contentious issue impacting a growing number of companies in the emerging gig economy. To date, the headlines have been dominated by sectors that provide conveniences for us in the form of transportation, food delivery, or other services. Surprisingly, the topic of healthcare worker misclassification has garnered little attention, even though healthcare access is a near-universal concern for all of us, particularly policymakers. 

Today, with the rise of tech-enabled staffing platforms, many nurses are improperly working as “independent contractors,” or 1099 workers. This is particularly true in assisted living, nursing homes and other long-term care settings that are dependent on temporary staff to fill staffing gaps. These 1099 nurses don’t enjoy basic employee rights, such as healthcare benefits, overtime and minimum wage protections. 

They are also often underinsured and lack the required level of professional liability insurance and/or workers’ compensation coverage. And given the inherent constraints of the independent contractor model, also lack the required level of training and support, which poses a high level of risk to themselves and the patients they serve. 

The recent shift toward tech-enabled staffing platforms has been driven largely by our healthcare workforce crisis. Already this year, the Senate Health Education, Labor and Pensions Committee, which has jurisdiction over workforce issues, held a hearing to examine where we are today as we emerge from the COVID-19 pandemic and not surprisingly, they found little improvement.

On the contrary, unprecedented patient demand during the pandemic only exacerbated our workforce needs. Between March and April 2020 alone, we lost 1.5 million healthcare workers. And, despite steady growth in registered nurses over the years, the supply of registered nurses decreased by over 100,000 in 2021 – the largest decline we’ve seen over the past four decades. 

These trends are compounded by a shortage of healthcare educators to train nurses, barriers to entry for foreign clinicians, clinicians leaving due to growing safety concerns in healthcare settings, burnout, and retirement as the average age of nurses continues to rise. 

Tech-enabled staffing platforms have emerged to help healthcare providers find the nursing staff they need. Essentially these companies perform a matchmaking function, using technology to connect healthcare providers with nurses and nurse aides who want to control their own work schedules. But while many platform companies hire nurses and nurse aides as employees, others treat the nurses and nurse aides as independent contractors, reducing worker-related costs. 

Prior to the pandemic, most temporary nurses and nurse aides were traditional W-2 employees. Today, an estimated 25% of nurses and nurse aides are placed in post-acute facilities as 1099 independent contractors. Further, an estimated 50% of these workers are classified as both, with the worker classification determined only by the staffing platform they used to accept their shift assignment.

Without question, platform-based staffing is playing a critical role, enabling healthcare providers to find and deploy needed nursing staff. And, without question, the booming gig economy has forever transformed the American worker – offering more flexibility and autonomy than ever before. However, the stakes in healthcare and for patients are far higher. Simply put, the nature of the temporary nursing industry fundamentally warrants a level of oversight that is not required throughout much of the gig economy.

Fortunately, the Department of Labor is shining a light on this issue with the issuance of its Employee or Independent Contractor Classification Under the Fair Labor Standards Act Proposed Rule. As proposed, the regulation provides additional clarity to ensure that employers appropriately classify their workers as either employees or independent contractors, focusing on the totality of the employer-employee relationship.  

Evaluating the totality of the circumstances is particularly important for certain industries, as the agency notes in the proposed rule. For a regulated industry, such as healthcare, the level of control and oversight necessary for temporary nursing staff in nursing homes is indicative of a traditional employee-employer relationship and not a 1099 worker.  

To that end, the Department of Labor’s enforcement of the classification rules is of equal importance. An updated Memorandum of Understanding between the Department of Labor and the Internal Revenue Service will enable both agencies to work closely together to promote and enforce compliance with the classification regulations. But enforcement must move beyond the modest penalties that can be treated by 1099 companies as simply the cost of doing business; policies and remedies should also serve as a deterrent against the deliberate misclassification of workers.

Illinois, Oregon, Louisiana, Pennsylvania and Connecticut have already enacted laws that require healthcare staffing organizations to apply for a license to operate, laying the groundwork for a system that allows for meaningful penalties beyond fines and lawsuits. These laws illustrate that the push to protect nursing professionals can and should occur at both the state and federal levels, transcending geographical and political boundaries. 

We have a duty to ensure that our attempts to solve our workforce crisis do not have the unintended consequence of creating more harm than good. As the Department of Labor finalizes its proposed rule and moves to prioritize enforcement, the administration has an opportunity to maintain its commitment to the rights and protections of nursing professionals who are so desperately needed to sustain our healthcare system and ensure access to high-quality healthcare for all Americans. 

Tom Daschle (D-SD) is a former Senate Majority Leader and is the founder and CEO of The Daschle Group.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.