WA Veterinarian Magazine
Is the veterinarian you recently hired a relief veterinarian or a part-time employee? For utmost clarity, the words “relief veterinarian” should be reserved for the self-employed contractor.
It is important to realize that the question of a veterinarian’s employment status depends on whether a state or federal agency is asking the question. The state’s definition of an independent contractor (IC) differs from, and is more restrictive than, the IRS guidelines.
For federal taxes purposes
For federal taxes purposes, the IRS determines independent contractor status by considering three aspects of control: behavioral control, financial control, and the business relationship. An IC relief veterinarian who meets the IRS requirements pays his or her own federal taxes and is eligible for specific tax deductions. The part-time employee (one who does not fit the IRS guidelines) must have taxes withheld from wages. Relief veterinarians should consult their accountant and attorney to find out if they fulfill the IRS requirements for independent contractor status. The remainder of this article deals with the state’s position.
Washington State has its own definition of independent contractors, which differs from and is more restrictive than the federal guidelines. The state is concerned that unemployment insurance and worker’s compensation coverage is obtained for veterinarians who are part-time employees. This coverage is not necessary for independent contractors when they meet six requirements to be considered independent contractors by the state.
In 2002, Dr. Carin Smith (author of The Relief Veterinarian’s Manual) and Greg Hanon (WSVMA’s legislative advocate) met with representatives from the Employment Security Department and the Department of Labor and Industries. As a result, it was found that it is possible for relief veterinarians to be considered independent contractors by the state. To do so, they must fulfill all six requirements. Both departments will work together in the future to consistently apply their decisions regarding relief veterinarians. A review of this document in 2012 upheld the main points and reiterated that such decisions will be decided on a case by case basis.
The state departments are not willing to make a “blanket ruling” for all relief veterinarians, nor will they give a one-time “stamp of approval” for an individual relief veterinarian, because of the potential for changes in working conditions. Since relievers vary in the way they conduct business, each relief veterinarian’s situation will be judged on a case-by-case basis. The work situation will only be examined in the event of an audit or a claim for unemployment or worker’s compensation benefits.
Relief veterinarians will be considered independent contractors by the state if they fulfill the requirements discussed here. Examples are given to illustrate the means by which a relief veterinarian may fulfill the requirements. The words “relief veterinarian” or “reliever” in this article refer only to the independent contractor relief veterinarian. The words “part-time employee” refer to the veterinarian who does not fulfill these six requirements.
1 The individual is free from direction and control of the business. Relief veterinarians examine, diagnose, and treat patients using knowledge gathered through schooling, continuing education, and practice experience. Relievers are legally responsible for the outcome of every case they treat, and they carry their own liability (malpractice) insurance since they are not covered under the hiring veterinarian’s liability insurance. Because of this liability, the ultimate control of how procedures are performed, what diagnoses are made, and how patients are treated always rests with the relief veterinarian.
Relief veterinarians are generally hired for a block of time ranging from one day to several weeks. Even though the hospital may have certain hours of operation, the reliever has the right to modify those hours in order to treat or monitor patients under his or her care. The reliever also controls the daily schedule. For example, the reliever may choose to conduct treatments prior to performing scheduled surgery, to spend as much or as little time performing an examination as necessary, or to examine an unscheduled patient at any time. The reliever’s actions and decisions are based on his or her professional judgment and are under his or her control at all times.
2 The service is outside the usual course of business, OR outside all the places of business of the employer OR the individual is responsible, both under the contract and in fact, for the costs of the principal place of business from which the service is performed. Relief veterinarians are unlikely to fulfill the first two criteria, therefore must meet the third description. The relief veterinarian’s principal place of business is their home office. This home office is eligible for a business deduction for federal income tax purposes. Relievers are responsible for expenses related to keeping a home office, including office supplies, office equipment, professional journal subscriptions, book purchases, and specific veterinary equipment that is carried to each job. Other expenses incurred by relievers include insurance, continuing education, and automobile maintenance.
Relievers bill the hiring veterinarian rather than collecting payment from customers of the clinic. For example, after a relief veterinarian examines a dog, its owner pays the veterinary clinic (not the relief vet). In a separate act, the reliever charges the hiring veterinarian a daily and/or hourly fee.
In addition, relievers have the right to modify the clinic’s basic fee schedule. Because of the complexity of certain medical and surgical procedures, it is not possible for veterinary hospitals to make a price list that covers every eventuality. Whereas a simple vaccination is customarily billed at the same fee for each customer, a lengthy exam might be billed out at a higher rate, based on the reliever’s judgment. The reliever may also modify the charge billed for a complex surgery, based on his or her determination of the difficulty and time involved.
3 The individual is engaged in an independently established trade of the same nature as the contract, OR the individual has a principle place of business eligible for business deductions. Relief veterinarians have independent service businesses. They temporarily work for each veterinary clinic to fulfill a short-term need. Relievers keep their own records, pay their own taxes, and have their own state veterinary and business licenses.
Relief veterinarians must be differentiated from part-time employee veterinarians, such as those who work one day a week for one (or more) practice(s).
The relief veterinarian:
- Offers services to all veterinarians (with or without geographical limitations);
- Will work at many (perhaps ten to thirty) different hospitals throughout the year;
- May return to work at a particular hospital more than once during a year;
- Does not maintain a regular, consistent schedule of working at any hospital.
Also, relief veterinarians:
- Have their own business license with a Unified Business ID number from the state;
- Have a business that exists both before and after each job they perform for a particular clinic, and they do not depend on any one clinic for their work;
- Set their own schedule, fees and policies, and may accept or decline work that is requested;
- Diagnose and treat animals under their care using methods they choose;
- May use some of their own equipment, supplies, or medications in addition to those at the place of work;
- May hire others to assist them. (Although most relievers do not do so because of financial constraints, they have the right to hire their own assistants).
- Present a bill when the job is finished, are paid, and the relationship ends.
4 The individual is responsible for filing a schedule of expenses with the Internal Revenue Service. Relief veterinarians are responsible for filing their own state and federal tax forms, including a schedule of expenses with the IRS. (These expenses may include but are not limited to those discussed in 2, above). Relievers keep all necessary records to accomplish those requirements. They do not have taxes deducted from a paycheck, but instead make quarterly payments to the IRS as necessary. (Hiring veterinarians must file a 1099 form for any relief veterinarian who receives more than $600 in any one year).
5 The individual has established an account with the department of revenue and other appropriate state taxing agencies. Relief veterinarians obtain a state license from the state department of revenue, receive a unified business identifier, and pay applicable state taxes such as the B & O tax. As independent contractors they do not expect to receive unemployment benefits at any time. Relief veterinarians generally carry their own health, liability, and disability insurance to cover any eventuality.
6 The individual maintains a separate set of records for the business. Relief veterinarians maintain a separate set of books for their own business. Their records reflect all items of income and expenses of their business. They set their own fees and policies, supply the hiring veterinarian with a contract or letter of agreement for each job, bill for their work, and record expenses incurred in the course of their business.
It is a basic understanding of veterinary medicine that the veterinarian who is responsible for the outcome of a case always has the ultimate control in determining how it is managed. Relief veterinarians have customarily worked under the guidelines listed above. Yet when we are working with non-veterinarian professionals such as accountants, attorneys, auditors, and the like, we cannot assume an equal understanding. Thus we must clearly define what relief veterinarians do and how they perform their work.
Relief veterinarians (who are bona fide independent contractors) have no interest in or right to any claims against the state agencies (unless they carry their own worker’s compensation), and need not be covered by the hiring veterinarian’s policies.
Part-time employee veterinarians should not be referred to as “relief veterinarians,” and they should receive the worker’s compensation and unemployment insurance benefits they rightly deserve.
To be considered an independent contractor, the relief veterinarian must meet the above requirements in fact and intent. Both the relief veterinarian and the hiring veterinarian are responsible for ensuring that they understand their work arrangement. The relief veterinarian should show proof of a business license. (To obtain a business license, relief veterinarians should contact the Washington Department of Licensing at (360) 664-1400 and ask for a Master Business Application).
Using a clear contract to define the work relationship will help support one’s IC status, but it is important to realize that it is not possible to design one contract that all relief vets could use to be able to “become” an independent contractor. Instead, relief veterinarians should validate their IC status by obtaining their own business license, keeping appropriate records, advertising their services, and maintaining control over their work.
Questions about the state requirements may be directed to:
WA Department of Labor & Industries
For further information, consult your attorney, accountant, and the references listed below.
Carin A. Smith
Independent Contractor Exemption Further Defined
RCW 51.08.180 stipulates that an independent contractor is a covered worker if the essence of their contract is personal labor.
An additional RCW gives an employer an alternative 6-part test to determine if an independent contractor is exempt from mandatory coverage. This rule was adopted for both Labor and Industry and Employment Security, giving an employer an advantage in that both L & I and Employment Security will use the same 6-part test to determine exemptions for independent contractors.
This alternative 6-part test states that a person is exempt if:
- They are free from control and direction over the performance of the service, AND
- The service is outside the usual course of business OR outside all the places of business OR the individual is responsible for the costs of the principal place of business from which the service is performed, AND
- The individual is engaged in an independently established trade of the same nature as the contract, OR the individual has a principle place of business eligible for business deductions, AND
- The individual is responsible for filing a schedule of expense and income with the IRS for the business, AND
- On the effective date of contract or within a reasonable period, has established required accounts with state agencies, AND
- Individual maintains separate set of books and records that reflect items of income and expense for the business.
Copyright 1992 / 2002 / 2015 WSVMA and Carin A. Smith, DVM
Other than for the individual WSVMA veterinarian’s personal use, this article may not be reprinted or copied, in print or electronically, without written permission.
Originally printed in the WSVMA Newsletter, March 1992 and 2002
* This material is for information only. Laws continually change, so please consult your attorney and tax advisor for current information.