When Is a Referral Service an Employer?


Retired prison guard Don Gorske claims to have eaten two McDonald’s Big Macs every day for the past 46 years. That’s 30,000 Big Macs.  If you are looking to hire a retired prison guard whose arteries laugh at the common man’s battle with cholesterol, Don is your man.

Referral services are business that serve as matchmakers. They could find you someone like Don if that’s what your company needs.

But when are referral services considered employers (or joint employers) of the workers they place? That is the question explored in a recent Bulletin posted by the Wage & Hour Division of the DOL.

The Bulletin looks specifically at home health care registries, but the analysis and factors should be applicable when trying to answer this question for any business whose primary service is matchmaking for workers.

Unlike home health care agencies, registries don’t provide actual home healthcare services. they just find qualified providers and match them with individuals in need, who then presumably become the caregivers’ employers.

Under federal wage and hour law (the Fair Labor Standards Act), an Economic Realities Test is used to determine whether an employer-employee relationship exists.

In the context of health care referral services, here are the factors that the WHD says are most relevant:

  1. Background Checks & References. Objective data collection does not suggest employment, but interviews that result in subjective judgments and recommendations may suggest an employment relationship.
  2. Hire and Fire. Hiring and firing are suggestive of employment. A referral service should be introducing candidates, not making hiring decisions.
  3. Scheduling and Assigning Work. Also indicative of employment. A referral service should not be involved in this.
  4. Controlling Caregiver’s Work. Control suggests employment. A matchmaker should not be involved in the actual work being performed.
  5. Setting Pay Rate. This is up to the employer (the individual) and the employee. A referral agency should not be setting pay rates.
  6. Receiving Continuous Payment for Services (Instead of Fee-Based). When the a registry receives a referral fee, that does not suggest an employment relationship. But if the agency’s pay varies by the number of hours worked by the caregiver, an argument can be made that the worker’s pay is affected by the hours worked and the cut given to the agency, which may weigh in favor of an employment relationship. This seems like a minor factor though.
  7. Paying Wages. If the registry pays the caregiver’s wages, that weighs in favor of an employment relationship.
  8. Tracking Hours. The employer, not the agency, should be responsible for tracking hours in compliance with worker pay and recordkeeping requirements.
  9. Purchasing Equipment and Supplies. The caregiver or the recipient should be doing this, not the agency.

As long as we’re talking health care, I’m going to limit my Big Mac intake to under two a day. Not that I’m judging, Don.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.