Medical Practice Case Study: Employment vs Contractor
Understanding the legal nature of a working relationship between a Medical Practitioner and the Clinic they work at can be tricky. The law provides a number of indicators to assist Clinic owners with establishing whether their staff are genuinely contractors, or should legally be classified as employees. This does not only impact GP’s, it also impacts allied health providers like physiotherapists, optometrists and many more.
The correct classification of Contractors and Employees within a Medical Practice is something I’ve written about before on several occasions and continues to be one of the most “misunderstood” and, I believe, risky elements of Practice Management.
So you know the dangers and risks, and you’ve looked at the guidelines, but how does it apply to specific circumstances? Below are a couple of case studies to help you in your understanding.
Case Study #1:
Is the Medical Practitioner an employee of the clinic for the purposes of the Superannuation Guarantee?
The Medical Practitioner entered into an agreement with the practice to provide medical services within the clinic
The Practitioner was personally required to complete the work, there was no delegation clause
The Clinic provided furnished rooms, all equipment and receptionist services
Medicare fees were paid directly to the clinic and then distributed to the practitioner based on their billings and in accordance with a fee-splitting arrangement
There was no arrangement for annual or sick leave or other distributions
The Court found that there was no indication the doctors were contracted or required to act other than how they wanted to. The doctors had complete control as to how they serviced their patients.
The ATO held in this case that there was enough discretion for the Practitioner to be considered a Contractor and as such no Superannuation Guarantee was payable by the Clinic.
Case Study #2:
This is the case of Commission of State Revenue (Vic) v The Optical Superstore relating to the provision or requirement to remit Payroll Tax.
The facts of the working arrangement:
The Optometrist could work in any location
The Optometrist was paid a “Consultation Fee” which was the return of Medicare fees less an occupancy fee for the use of the rooms, plus an hourly rate that was independent of the number of patients seen
The Optometrist was to ensure that services were being provided during retail hours, at agreed times
The services must be seen to be provided by The Optical Superstore
The Optical Superstore was disputing its liability for Payroll Tax and this was dependent on the classification of its Optometrists as Contractors.
The Optical Superstore argued that the tenancy arrangements, i.e. that they were“renting space” on the premises as opposed to being provided a contract for service, as the conclusive factor in classifying the Optometrist as a Contractor.
Even though the Optometrist paid an hourly rate for the use of the rooms, there was a clause in the contract that guaranteed the Optometrist a minimum wage; regardless of the number of patients they saw.
On Appeal, it was found that The Optical Superstore was an employer, and the Optometrists were in fact, employees.
Control over branding and the minimum wage guarantee were the determining factors that meant the relationship between The Optical Superstore and the Optometrists working in their clinics were in an employment relationship.
