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Hello everyone. My name is Michael Miscoe with Miscoe Health Law and this week’s edition of the ChiroSecure Growth of Out Risk Podcast is gonna focus on some things unrelated to billing, but nonetheless some recent changes in federal law that, that certainly impact your practice. We’re gonna talk about the Corporate Transparency Act and the Fair Labor Standards Act.
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The Corporate Transparency Act, some of you may have heard about it. It came into effect on January 1st, 2024, and it mandates that incorporated businesses operating in the United States report information about their beneficial owners and what they call company applicants to the Department of Treasury Financial Crimes Enforcement Network.
And this is all part of a effort by the federal government to shut down money laundering and. I’m sure there’s with terrorists or whatever. But that’s what it attempts to do combat illicit activities, tax fraud, money laundering and financing for T terrorism. Corporate entities. So if you have an LLC a, I think even doing business as any of those entities are required to report information about the ownership. Or people who have substantial control over business or are holding 25% or more of the equity, those individuals have to report or file a report with a.
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Department of Treasury, financial Crimes Enforcement folks and the filing deadline is dependent on, the type of entity you are or what you’re, whether you’re onshore, offshore, whatnot. But for most of you, I think the deadline’s gonna be the end of this year. There are rather serious penalties for non-reporting.
In what you want to do is you want to go up to the financial FinCEN beneficial ownership information reporting page, which is on the internet. And you can find it very easily. Just do Corporate Transparency Act reporting and it’ll find you a link. Go right to it. I have done it for both of my companies.
And I will tell you the online report is much easier. Some of the things that you’ll need is a copy of your driver’s license, front and back or a copy of your US passport. You can, have somebody fill it out for you. However, they’re gonna have to identify themselves as the applicant. And they’re still gonna need both their and your identifying information.
But have that stuff ready in PDF format so that you can upload and it takes about, eh, 15 minutes or so. But it’s something you definitely wanna do sooner rather than later, so you don’t forget either that or set yourself up a a reminder to get that done before the end of the year.
The and once you’ve reported, what I don’t understand or don’t know yet is whether you have to continue to report each year. That hasn’t been I haven’t seen any instructions along those lines yet. And basically the impetus for this is that all of this information is maintained by the individual state, secretary’s state, but for some reason, sharing of that information from the 50 states to the the federal government. Apparently they haven’t figured out how to consolidate and standardize the format for that information. And rather than spend gazillions of dollars. Trying to figure that out, which that would be, it’d be a pretty simple project, I’m sure if it wasn’t government funded, but nonetheless, they decided to require business owners to report not something you need to be concerned about.
I think if you’re a legitimate business owner, you Secretary of State already knows who you are, this is now passing that information onto the federal government so that they can track. Financial crimes. The other thing that I wanted to pass on is the Fair Labor Standards Act. And what that does is that establishes, the basic federal law standards for minimum wage overtime, pay record keeping standards for covered employers and employees.
And under the Fair Labor Standards Act, a worker that performs services for an entity is an independent contractor, is not an employee, and therefore not covered by the Fair Labor Standards Act. What changed recently is that. The Department of Labor published a final rule that’s entitled Employee or Independent Contractor Classification under the Fair Labor Standards Act.
And what it, its purpose is to guide business owners in understanding who is and who isn’t technically. An independent contractor and they lay out a number of factors. It’s a multi-factor analysis to determine whether the people that you think are independent contractors are in fact classifiable as independent contractors, and therefore escape fair labor standards, with respect to minimum wage over time, pay, so forth and so on.
Now, the reason I bring this up is because it’s common in chiropractic practices for docs to have massage therapists as independent contractors where they’re providing massage services and or associate chiropractors that they wanna classify as independent contractors. And there’s two classification standards that you need to be concerned about the fair labor standards.
Act as well as the IRS. The IRS has a 13 point analytical process for determining whether someone’s an independent contractor or not. If they are unfortunately there’s some overlap between the two rules, but if they are, then you don’t have to do withholdings pay security act and all that other stuff.
Workers’ compensation, yada, yada, yada. If they’re not, and you haven’t been paying that, then you could be subject on the IRS side to substantial tax penalties and on the Fair Labor Standards Act side penalties for misclassification and not providing benefits. I would also point out that some states also address the issue of independent contractors.
Take for example, California. I can assure you that no associate DC or no massage therapist, if you’re in the state of California is gonna qualify as an independent contractor. And there are what are called plague lawsuits that can be brought by employees against employers or was involved in one recently as an expert.
And it didn’t turn out. Super well for the doctor because essentially under that standard if that person is providing a service that’s integral to your business and then it was massage therapist involved, then they couldn’t be classified as an independent contractor. Plus there’s issues of whether you control their work or not.
And certainly where your billing services of these individuals under your name and NPI, and that applies mostly to massage therapist then. That billing is indicative of that you’re exercising direction and control consistent with the provisions of the what’s called the incident two rule.
That aside the analysis under the Fair Labor Standards Act looks at the totality of the circumstances to assess whether a worker’s an employee or an independent contractor. And what they look at is things like economic reality factors which is, the opportunity for profit or loss.
Based on managerial skill, meaning are you making money off of what they’re doing? Investments made by the worker and the potential employer, so if you’re paying for them to get education, things like that. The degree of permanence in the work relationship. And most importantly, the nature and degree of control over their work.
So to the extent that any of these. Auxiliary persons in the context of the incident. Two role, like an associate DC therapist, cas whatever. Are working pursuant to your instructions, chances are they are not going to qualify as an independent contractor. One of the other factors that I think makes it difficult to classify your workers as independent contractors in a chiropractic practice is the factor, the extent to which workers performed is an integral part of the of your business.
It’s one thing if you have somebody as an independent contractor running a snow cone stand outta your chiropractic practice, they could be an independent contractor or more likely a lessee meaning they’re just leasing space from you. But when you bring a doctor in and they’re an independent contractor, essentially they’re, they have to be running their own practice.
Doing their own billing checks, go to them. They don’t assign their payments to you. And they set their own hours and preferably they’re, they have a practice location somewhere else. So you’re not assigning patients to them, they’re doing their own thing. You may be leasing some of your staff to them, like front desk to schedule appointments and whatnot.
They’re essentially running their own practice. If they’re seeing your part, your practice and their are assigned. They are not gonna be classified as a 10 99 employee, in which case the fair Labor standards apply to you. And fortunately many providers don’t get jammed up with this because the employee doesn’t understand their rights under the Fair Labor Standards Act.
So given that this new regulation has come down. I expect two things. One, people are gonna probably become a little more aware and two, there’s gonna be a whole litany of lawyers marketing for people who have been improperly classified as independent contractors, 10 99 employees when they are subject and they should to fair labor standards and should be W2 employees.
And there’s gonna be, lawsuits, at the end of the day, the whole point of this according to the federal government, is to ensure that workers who are in fact employees receive minimum wage overtime, pay appropriate rest breaks, lunch hours, all that stuff that federal employment standards require.
That if you have an independent contractor. They are not entitled to those things. Usually the minimum wage thing doesn’t arise, when you’re talking about massage therapists and associate chiropractors. But the time off for lunches and things of that nature, which believe it or not in a lawsuit there’s gonna be some, actuarial accountant that’s gonna monetize that.
And then there’s penalties and whatnot on top. Just be cautious that if you have what you believe are independent contractors, that you actually analyze or have someone analyze that relationship to make sure that you’re meeting the test on both the IRS side as well as the Fair Labor Standards Act.
And if you’re not. You either make changes so that you do or you roll ’em in as W2 employees and, pay the workers’ comp, pay the unemployment compensation, do the withholding on the tax side, and then and then make sure that they get their fair labor standards benefits as required by the Labor Standards Practice Act.
Also look to state. To make sure that there are not additional issues that you need to worry about with respect to independent contractors like in California. Because in California they’ve pretty much eradicated the idea that, someone is gonna be an independent contractor especially when they’re doing the same type of work that you’re doing in your practice.
It’s impossible. There’s a three factor test, but that, that is gonna eliminate you under that factor. And to the extent somebody wises up and finds an appropriate attorney that does these cases, then you may be staring at. Some pretty substantial liability. That’s all we have time for today.
Hope that was helpful and we’ll see you next time.
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