When DC’s are looking for chiropractic jobs or to hire a chiropractor to work in their office, one of the first questions that is typically asked is in regards to whether the doc should be an employee or an independent contractor?”
While this sounds like a straightforward question, the best decision and the danger is in the details of the chiropractic job description. Unfortunately, this is where many chiropractors make mistakes which can not only lead to a failed associateship or independent contractor role, but to painful financial consequences as well.
The good news is that, with a little clarity on the details and an understanding of relevant “rules,” you can avoid a lot of headaches and make the best move for this stage of your chiropractic career. Here’s how and why:
Avoiding the Three Dangers
The above goals that each chiropractor bring to the table have great potential to lead the inexperienced doc (which could be either the owner, as hiring DC, or the associate / independent contractor) down a bad road.
In this, there are three obstacles that chiropractors typically face and must overcome with respect to chiropractic jobs:
Improper IRS Classification
This mistake may also be called “The Independent Contractor That Isn’t.” Here’s how it happens. The hiring doc looks to bring on the new DC and save some taxes in the process by making them an independent contractor rather than an employee. The owner feels justified because their goal is to have the associate build their own practice independently of their own. Thus the two practices combined increase the income of the clinic as a whole.
Sometimes this situation sounds attractive to the associate because they may get a percentage of their collections, the tax write-offs of being in business for themselves and the promise of more freedom because they are “independent.”
On the surface the Independent Contractor route appears reasonable until you realize that many, if not most, of these chiropractic jobs would fail the IRS definition of an Independent Contractor. And if and when this happens, the IRS will declare that you have an Employee relationship and payroll taxes are owed. Here’s why:
According to the IRS document “Understanding Employee vs Independent Contractor Designation”, there are three major “tests” you must pass in order to have this worker properly classified. And unfortunately, if you dictate their hours and work conditions, give them your staff, phone number, etc — then it’s highly likely the IRS would state that these workers are NOT independent contractors. Then the IRS can re-classify their work as Employee, then force you to pay back employment taxes and/or fines.
Does this mean there can be no legitimate Independent Contractor setups within chiropractic jobs? No. But my observations are that most are set up wrong and really should be employees – so be sure to read the IRS Designation Requirements and be careful to avoid this lurking danger.
Even if you pass the tax hurdle of proper designation or worker classification, the Independent Contractor route can create legal challenges in the area of a non-compete clause. Most owners do not want to hire an associate who will go out and open up a practice across town and/or take patients with them.
Yet, in many states, non-competes that are attempted with an Independent Contractor will typically be thrown out in court. Even a signed agreement may be considered unenforceable because of the nature of an independent contractor designation. In other words, if the IC is truly able to establish their own work arrangements, is free of the owner’s behavioral control and responsible for building their own business, then placing a non-compete on their work may be viewed as a restriction of trade. From another perspective, if the IC is free to dictate their own hours, treat patients how they want and essentially has the freedom to create their own income – the court may decide this includes the freedom to work for other chiropractors and/or relocate their business to wherever they deem beneficial.
Some chiropractors confuse this issue to believe that chiropractic non-competes are not enforceable in general. This is simply not true! With a couple notable exceptions dictated by state-law, a well-constructed non-compete agreement IS enforceable IF it is written according to solid guidelines and for the right worker designation. Much of the time, the problem lies with chiropractors who attempt to get their non-compete enforced on a non-employee (ex: an Independent Contractor) by “borrowing” their buddy’s non-compete agreement that was written for an employee! For a more detailed analysis, see our previous post: “Is your chiropractic non-compete enforceable?”
If you are the owner, you may wonder if a non-compete is worth all the trouble. But without a non-compete, you are risking a future sale, as the doc can essentially take all your patients across the street and you have nothing left to sell and/or no way to stop him or her.
Perhaps the greatest danger in the Employee vs Independent Contractor debate stems from impractical expectations that are put on the working relationship for these chiropractic jobs. In this, both parties must acknowledge that the logistics of how each side reaches their end goal may be opposed to each other.
Associates want great paying chiropractic jobs, as much freedom as possible as little responsibility as possible and no non-compete so they can be free to get another job or start their own practice whenever or wherever they want.
On the other hand, owners who hire associates would love to pay them as little as possible, earn as much as possible, be as hands off as possible, yet have the associate follow their instructions as much as possible. And of course, they want a non-compete so that the associate doesn’t take their systems, patients or “secret sauce” across the street to become their competitor.
Yes, these are generalizations, but there is more truth to them than either party usually wants to admit.
From the starting point, an outsider can easily see that all of these goals cannot be achieved. This is why it is often best to begin with the end in mind and solidify your expectations from the start. In this respect, the successful associate or independent contractor relationship then begins by acknowledging the need for a compromise – which requires the doctors to go one level deeper to avoid disaster.
STRATEGIES FOR SUCCESS
Despite the challenges mentioned above, successful associateships are definitely possible. To make them more probable, here are a few final tips:
- Get Competent Counsel: I believe Proverbs 15:22 says it best: “Plans fail for lack of counsel, but with many advisors they succeed.” Unfortunately, we’ve observed and heard from many chiropractors over the years who have set up their own associateship, independent contractor, written their own agreements and created their own non-compete – without a shred of advice from an experienced advisor – only to have those plans fail. Don’t be one of these docs. We’ve got a number of articles on this site related to chiropractic jobs, associateships, educate yourself BEFORE you hire one! And, if you are looking to become an associate, starting a practice from scratch or even if you are considering purchasing a practice, I strongly suggest you check out our Buy, Build or Break Up webinar to get more informed on the process and get strategies for success!
- Time Your Planning: When a chiropractor suddenly needs an associate because of a health issue or because their current DC quit, the chances of making a mistake increase exponentially. Lack of planning (or even not allowing enough time for a legitimate plan to hatch) is especially hazardous if your associate is to be part of your future chiropractic practice sale, retirement or exit strategy because you will have little (if any) time to recover from those mistakes. If you’re looking to hire an associate, consider our Sell, Switch or Slow Down webinar to help you get there safely.
- Let us help with your search – for FREE! Finally, if you are looking for chiropractic jobs or chiropractic practice for sales, we’ve got owners who are looking for you! Join our FREE Practice Match service and let us get you in touch with chiropractic practice sales, chiropractic jobs and associate opportunities that match your interests and in the locations you are looking for! It’s a 2 minute form to fill out and it’s free but it can save you a ton of time and money in the process!