With summer coming, you’re probably ready to kick back, to relax. Vacation rentals invite you to kick back and relax. Meditation music invites you to kick back and relax.
But remove the little space between “kick” and “back,” and that’s not something you want at all.
The federal Anti-Kickback Statute makes it a crime to “knowingly and willfully” offer, pay, solicit, or receive any remuneration to induce referrals of items or services reimbursable by Federal health care programs. 42 U.S.C. § 1320a–7b(b).
That means you cannot retain an independent contractor sales agent to refer customers to buy items or services that are reimbursable by Federal health care programs. Paying commissions or any other thing of value for these referrals is illegal. (There are some limited exceptions.)
Violations are a felony, punishable by up to ten years in prison and massive fines. Violations of the Anti-Kickback Statute are also automatic violations of the False Claims Act, 31 U.S.C. § 3729.
The risk of prosecution is real. One recent decision upheld damages and penalties of more then $100 million against a blood testing lab that had retained independent contractor sales agents to provide referrals.
But employees can provide these referrals, even when independent contractors cannot. The Anti-Kickback Statute says it is not a violation when the remuneration is paid to an employee providing services in the course of employment. 42 U.S.C. § 1320a–7b(b)(3)(B). To avoid violating the Anti-Kickback Statute, these sales agents should be classified as employees, not independent contractors.
There are other safe harbors too. Earlier this year, the Department of Health and Human Services adopted a new rule describing these safe harbors, but they are narrow and all conditions must be met. There is a Personal Services Arrangements Safe Harbor that, under some circumstances, will permit payments to an independent contractor agent. You can read more about the new rule here.
Tread very carefully. The penalties for violating the Anti-Kickback Statute are serious. But if you get it right, maybe you can kick back and relax after all.
© 2021 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.