The end of July brought some interesting developments in the Land of 10,000 Lakes.
First, on July 29, the Minnesota Supreme Court tossed common law on its head in a case involving Hospitals and Independent Contractor (IC) Physicians. Traditionally, the law in Minnesota would not hold hospitals liable for the acts of its IC physicians. In the case at hand, a patient sued a hospital for negligent services provided in its emergency room. The hospital sought to defend itself by holding out that the specific doctor who provided the services was not an employee of the hospital. Rather, the doctor was employed by a physician group under an Independent Contractor Agreement (ICA). While this is considered standard practice, and has often been sufficient to insulate hospitals against such claims, the Supreme Court ruled that the hospital was liable for the actions of the IC physician, under the “Apparent Authority” doctrine. Under the doctrine, among other things, if it isn’t clear to the patient/service recipient that the IC is not your representative, there is cause to assert that you face liability for their acts and omissions as if they were your employees.
This certainly has ramifications for the hospital sector in Minnesota. Under Apparent Authority, it could (and I’m sure, will) be claimed that IC nurses, radiologists, etc. are a hospital’s employee. In that case, hospitals may face direct liability for the negligence of non-employee staff. While the smart actions are to be sure that any agreement a hospital has with its suppliers includes hearty indemnification should such a claim arise, remember that indemnification is only as strong as the ability of the indemnifying party to pay.
The take-home: You may not be in the hospital industry, but this case holding underscores a basic precept for qualifying ICs under any test: ICs should never walk like, talk like, or feel like a representative of your business. Rather, they should be clear non-employees in title, direction, control and appearance. If they aren’t, you may be face penalties for misclassification.
In other news from the Twin Cities, on July 31, the Minneapolis City Council passed an ordinance requiring businesses that engage ICs to use written agreements with freelancers and to pay in accordance with those agreements. Penalties for failure to adhere to the ordinance include civil penalties and liquidated damages. This ordinance becomes effective early next year.
Like NYC’s “Freelance Isn’t Free Act” (see our related blog), this ordinance requires businesses to keep up not only with state law, but city regulations as well. It also continues 2020’s trend of heavy activity in the IC space as local and state authorities look to find ways to recoup lost revenue during this time.
These days, you blink once and something has changed with 1099 legislation and worker classification. Don’t be blind-sided or surprised! TalentWave’s compliance expertise can help you safely navigate these new laws and safely leverage great IC talent.