A question often asked by licensees, interns and trainees is, "Can an intern or trainee work and gain hours of experience as an independent contractor?"
The answer is clearly NO. The licensing law never permitted trainees and interns to be independent contractors. Any references in the law to a working relationship has always referred to "employment." Many people, of course, have been either unaware of the law or have chosen to ignore the law. Many felt that the change from independent contractor to employee status came as a result of the licensing law revision effective January l, l987. Such is not the case. Others believe that the change came about when regulation clarified this issue on January 1, 1990. There are specific reasons for the "employee" status which will be discussed later in this article.
First of all, lets look at the differences between an independent contractor and an employee:
are not licensed professionals even though licensed professionals may
be employed. Licensed professionals, e.g., psychologists, CPAs, attorneys,
architects, engineers, etc. may operate as independent contractors. Non-licensed
persons in these professions may never work as independent contractors.
This is also true with licensed marriage, family and child counselors.
Some mistakenly believe the intern registration is a license and may even
call it an "intern license." There is no intent, and there has
never been any intent by the BBSE to grant interns a license. The "intern
registration" merely means what the name indicates; the intern is
registered with the BBSE as someone who does not yet meet all of the qualifications
of licensure. The main purpose for registering is to continue to accrue
hours of experience post-degree to eventually qualify for licensure.
Unless you are quite certain that a work relationship will be considered that of an independent contractor, be very careful about hiring in this manner. The consequences of poor judgment can be very severe. Besides being in violation of the licensing law if the employee is an intern or trainee, you may be liable for the employer payroll taxes you failed to pay and either a portion of or all of the employee taxes you failed to withhold. In effect, you could end up paying the taxes which are owed by your employee. Whats more, if your intern is hurt on the job and you have not provided workers compensation insurance coverage, you could be liable for extensive legal and medical expenses as well as lost wages. And, on a final note, if you have a qualified retirement plan and you have not contributed to the plan on behalf of the employee, the retirement plan could be disqualified. The consequences of poor judgment for the intern or trainee are loss of hours and possible disciplinary action by the Board of Behavioral Science Examiners. The consequences to the supervisor, in addition to the above, is subjecting oneself to disciplinary action by the licensing board for "aiding and abetting unlicensed practice."
When one becomes an employer, he/she assumes all federal and state employer obligations. These include federal and state income tax withholding, FICA, state disability, federal unemployment tax and workers compensation. Obviously, arrangements where interns and trainees are responsible for their own withholding taxes and social security are improper since they would be acting as independent contractors. It is usually the added costs for the variety of payroll deductions and taxes combined with the added burden of such calculations and their respective reporting forms to which most potential employers object. Indeed, it is a hassle to complete those forms, withhold taxes and pay taxes. But, getting caught on the wrong side of this issue can be much worse.
Many who employ interns and trainees are reluctant to realize that hiring an employee causes them to assume the responsibilities required of every other employer in this country. However, there are ways, for a nominal fee, to lessen this burden. There are many small accounting and bookkeeping firms which specialize in handling payroll accounting. There are also other firms and banks which provide payroll accounting for a nominal fee. Wells Fargo Bank offers what is known as a "small business package" which provides payroll accounting for a fee. ADP (Automated Data Processing) and Paychex are two businesses which specialize in payroll accounting and can easily be found in most telephone directories. Fees generally are approximately $50 per month. For this service charge, they calculate all of the withholdings, issue the payroll, and complete both quarterly and annual reports. All you supply are the funds to pay the checks, the hours worked by each employee and the amount to be paid per hour. This option, while it does not remove the burden, does make it much more acceptable.
Meanwhile, do not be wrongly persuaded by friends, colleagues, business associates and some accountants into the independent contractor game. They will tell you how easy it is to avoid all of those taxes and reporting forms. Listen to their advice only after you are confident that the person you plan to employ indeed qualifies for independent contractor status. And, if you are uncertain, get well-qualified, competent advice; or submit an SS-8 form for an IRS opinion. Keep in mind that even though the hiring of an intern or trainee is clear in the licensing law, not every other situation can be so clearly defined. Two different CPAs may even give differing opinions; and in such a situation it is probably better to err on the side of caution.
Employees or Independent
This article appeared in the January/February 1989 issue of The California Therapist, the publication of the California Association of Marriage and Family Therapists, headquartered in San Diego, California. This article is intended to provide guidelines for addressing difficult legal dilemmas. It is not intended to address every situation that could potentially arise, nor is it intended to be a substitute for independent legal advice or consultation. When using such information as a guide, be aware that laws, regulations and technical standards change over time, and thus one should verify and update any references or information contained herein.