Paul Edwards
Which sounds like a better deal: Hiring someone you’ve only briefly met during an interview, or hiring someone you’ve observed performing in the prospective position?
As an employer, you know job applicants do their best to say exactly what you want to hear during the interview. It is expensive and disappointing to realize too late that your new hire’s skills do not align with your expectations. Wouldn’t it be nice if you could “try” a candidate before you “buy”?
Many dentists have a sudden flash of inspiration that the latter option, commonly called a “working interview,” might be a clever way to do just that. There’s just one huge, expensive problem: your interview could be considered tax fraud by both the IRS and the Department of Labor (DOL).
Working interviews work best at endangering employers
Even if you’re not trying to evade tax obligations when using a working interview, the IRS and DOL may see it differently.
Simply put: If a candidate (let’s call her Shirley) is under your control and works in your office using your equipment on your patients, even if it is only for an hour, as far as the IRS and DOL are concerned, you are her employer. And as an employer, you have immediate legal and tax obligations that pertain to all of your employees, including Shirley, no matter how short a period of time she works for you. The IRS and DOL may see your “working interview” scheme as an attempt to avoid those obligations.
Worse, you now have other liability issues. If Shirley gets hurt on the job, files a complaint after not being hired by you, handles a patient incorrectly, or causes a HIPAA violation, your practice is completely unprotected. In court, you would be at a huge disadvantage from the start, and would probably need to pay out an expensive settlement.
It gets even worse. Your employee handbook—your most vital tool to set expectations, resolve employee complaints, and prevent lawsuits—won’t apply to an employee who never received it.
1099 status won’t help you out of this bind—it’ll make things worse
OK, but what if you made Shirley an independent contractor? Then you could pay her a set amount for her time, and she would be required to withhold her own taxes, Social Security, Medicare, etc.
Unfortunately, that won’t work, either. Here’s why: During the working interview, Shirley was under your control. She was doing the primary work of your practice. She was there at a time you indicated and for the length of time you required, and she used your equipment. I could go on, but the point is that she doesn’t meet any of the official criteria for classification as an independent contractor.i
The IRS and DOL would consider Shirley your employee, and misclassification as an independent contractor only creates a new legal problem for your business.
Don’t get caught in temp agency traps
What if you hire Shirley through a temp agency instead, and then conduct your working interview? Beware the temp agency trap. If done properly, the temp agency itself will actually employ the candidate. But in many temp agency arrangements, the candidate is actually your employee, adding yet another wrinkle and source of liability.
Working interviews are no workaround for proper hiring
Once someone starts working for you, even if only for an hour, you should do all of the following to stay legal and compliant:
- Pay no less than minimum wage.
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