Skip to main content
Not legal advice. Classification rules are state-specific and enforcement is active. When in doubt, W-2.

​
The rule of thumb

If you control how, when, and where someone works, set their schedule, provide the equipment and the patients, they are a W-2 employee, whatever the contract says. The IRS and states look at behavioral control, financial control, and relationship, not the label. California and states with ABC tests are stricter still: 1099 clinicians inside your core business rarely survive scrutiny.

​
Why it matters

Misclassification costs back payroll taxes plus penalties and interest, retroactive benefits and overtime claims, and unemployment or workers’ comp assessments, typically surfacing when a “contractor” files for unemployment. The 1099 savings are an illusion: you save ~7.65% employer payroll tax and carry all of that risk.

​
Doing W-2 right

Payroll from the first hire (payroll setup), workers’ comp active, I-9 and state new-hire reporting, exempt/non-exempt classification for overtime, and an offer letter plus handbook basics. For associates, put comp formula, malpractice tail, and restrictive covenants in the agreement (comp models).