That 1099 theory worked for a little while back in the 1970s when computer-based compliance systems were in their infancy.
Remember when nobody had to tell IRS when a stock was bought or sold? Those days are gone. Now capital gains are scrupulously
tracked to the penny by Uncle Sam. And the same degree of attention is focused on the intricacies of the employee-employer
The upshot of the effort to ensure employer compliance is that, in each case, there must be a determination of who is and
who is not an employee.
For years, the IRS employed numerous ad hoc tests to determine whether the person receiving compensation for work or the person
providing compensation was responsible for making sure that Medicare, FICA, unemployment insurance and other withholding were
being satisfied. They looked as such things as who determines the hours, who supervises the worker, whose tools (instruments)
were being used and so on.
Lately, though, it seems that the determination of who is the employer (the clinic or the relief vet) focuses closely on a
single issue: Who provides the worker compensation coverage? If the relief vet carries his or her own policy, he or she is
much more likely to meet the independent-contractor test and thus be responsible for his or her own tax and insurance compliance.
But if the clinic arranges for and pays the worker compensation premium, it is in a much weaker position to claim later that
it was not an employer and thereby exempt from all the other withholding and compliance issues.
Neither party can unilaterally avoid sanctions
Here is why the relief vet and the clinic owner need to chat about legal compliance before the work begins:
1. SOMEBODY HAS TO BUY THE COMP COVERAGE.
If you hire a company to fix the furnace and the technician gets hurt, your office probably doesn't have a problem. The worker
likely will be considered a non-employee, and someone other than you will be responsible for his medical bills.
The same cannot be said for a relief vet who works several days at your business. You have an obligation to make sure that
person is insured, either by covering the doctor or demanding a current certificate of worker compensation coverage.
In many states, a clinic's comp carrier automatically assesses the clinic account for premiums covering a relief veterinarian
if he or she does not provide proof of coverage.
So be sure to get that certificate during your early summit. This will avoid inadvertent payment of premiums by both parties
or, worse, a complete failure of coverage followed by lawsuits and uncovered medical bills.
2. IF YOU PAY THE COMP, YOU MAY HAVE TO WITHHOLD, TOO.
Many relief vets have no idea about insurance but insist they are independent contractors and therefore want gross pay with
no tax withheld. The intent is that the relief vet will handle his or her own tax compliance.
The problem is, while the spirit may be willing, sometimes the pocketbook is weak.
If the relief vet runs short of Christmas money, he or she may not pay the estimated tax, FICA and Medicare amounts due, or
not on time.
Guess who the IRS will be looking to for money and explanations (read: penalties)? They probably will talk to Dr. Relief for
about 5 minutes, and then they will come to you. It would be really nice to have a document to show them, signed by the relief
vet, accepting all liability for those payments.
3. EVEN IF DR. RELIEF CARRIES INSURANCE, SHE STILL MIGHT BE YOUR EMPLOYEE.
In your initial discussion of tax and insurance details with a potential relief vet, (which may be the first time he or she
has ever even heard of these issues), you need to find out a few things.
The government's eventual determination that the relief vet was an independent contractor (presumably freeing the practice
from withholding and other obligations) may hinge on some other facts and circumstances, such as these:
» Does the relief vet operate within a business entity such as an LLC?
» Does the relief vet advertise?
» Does the relief vet have some clients who do withholding for him and others who do not?
» Does the relief vet submit invoices to her client hospitals?
» Does the relief vet have at least a rudimentary contract for client hospitals to sign?
While no single one of these tests is definitive, let's just say that the more "incidents of independency" that the relief
veterinarian can demonstrate, the more unlikely that the practice later will have to explain a failure to comply with traditional
legal obligations of an employer.
Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit