The modern healthcare world facilities increasingly rely on a per diem workforce so that the gaps left by shortages, unexpected surges, or even the absence of personnel are filled. This adaptable model appears to be the perfect solution initially because it provides immediate access to nurses and other healthcare professionals without any long-term involvement. However, the risks of per diem staffing are much greater than mere scheduling issues. Misclassification of workers is one of the biggest hidden risks, where per diem employees who operate as employees are classified as independent contractors in most cases. This error puts the healthcare providers at risk of paying hefty fines, back wages, lawsuits, and reputational damage. This is where Capline Healthcare Staffing can help you out. We put special focus on correct classification to ensure that the facilities do not fall into these traps and yet have quality coverage in place.
Misclassification of workers occurs when a medical institution or staffing agency considers a per diem employee as an independent contractor rather than an employee. The DOL (Department of Labor) applies the economic realities test in order to classify under the FLSA (Fair Labor Standards Act). This test analyzes such factors as
In the healthcare sector, per diem nurses are frequently supervised in the same manner, abide by the healthcare facility policies, and utilize work equipment provided by employers, just like regular workers. Misclassifying per diem nurses as 1099 contractors can be risky for your practice. The per diem nurse staffing risks are magnified in such cases since facilities can think that the flexibility is the same as being a contractor, but the truth is otherwise.
The risks of per diem staffing spread into various problematic aspects when misclassification takes place.
To begin with, monetary fines are disastrous. Employers can be liable for repayment of back wages, overtime (time-and-a-half on hours above 40), and liquidated damages in the sum of the unpaid wages. It includes state fines, IRS penalties for unpaid taxes, and legal expenses that can add up to a really high amount. This happened in a recent case in California, where there was a judgment of 10 million dollars against a healthcare company over the misclassification of in-home care workers and several million dollars in settlements for overtime actions.
Second, there is an increased legal and regulatory exposure. The state agencies and the Department of Labor (DOL) have increased enforcement. Misclassified employees have often filed suit in class actions, costing companies millions of dollars to settle. In a single case of 2025, a staffing company was liable to compensate up to 9 million dollars, following the investigation of the DOL.
Last but not least, there arise operational disadvantages. Misclassified employees lack the benefits such as health insurance, workers' compensation, and eligibility for unemployment, which may result in increased turnover and dissatisfaction. The excessive control of facilities also exposes them to co-employment claims.
Without misclassification, there are still drawbacks to per diem healthcare workers, which create continuous difficulties.
The most important factor is the unstable continuity of care. Per diem staff are not always familiar with their patients, protocols, or workplace dynamics, and this could cause errors. Research indicates that the more the agency staffing, the worse the quality outcomes. This includes the risk of more care being left unfinished or the risk of developing hospital-acquired conditions.
Other challenges of per diem scheduling are poor predictability and cancellations at the last minute. This overworks core staff during shortages, which also contributes to burnout. Recent reports indicate that the vacancy rate among RNs is approximately 9.6%, with the strains in staffing adding to the problem.
This is a brief comparison of the popular per diem models:
W-2 models are suggested by many experts to avoid all risks of per diem staffing.
Healthcare providers should reduce exposure by:
Cases in the recent past demonstrate that regulatory scrutiny is on the increase. According to the Department of Labor (DOL) investigation, the per diem staff should have been considered as employees; this is why millions of dollars were awarded to them in back overtime and liquidated damages. These results point to the ease with which per diem schemes cross the line.
The disadvantages of per diem healthcare employees and the difficulties with the per diem scheduling complicate and worsen the situation even more. Thus, you can collaborate with reliable business partners like Capline Healthcare Staffing, which ensures compliance and reliable per diem solutions without any tricks.
Risks lurking in the background should not put your facility at risk. Collaborate with an agency that is compliant, experienced, and focuses on the correct classification and quality care. Call Capline Healthcare Staffing (888-444-6041) today for risk-free staffing solutions to ensure that you stay patient-focused!
The main risk is to be in debt over time due to taxes and penalties, and to be charged with lawsuits, which will cost millions of dollars, as observed in the recent DOL cases.
It uses an economic realities test, considering such factors as control, being part of the business, and permanency of the relationship.
Yes, the W-2 models are already compliant with overtime and benefits, which mitigate the risk of misclassification and enhance the satisfaction level of workers.
Yes, however, in certain instances, good-faith efforts and appropriate documentation can be used to defend against liquidated damages.
The high turnover of staff stops continuity, which, in turn, increases errors and negative patient outcomes.
