5 Signs Your Dental "Contractor" Is Actually a W-2 Employee

Guest contribution by Jill Hasselmann, Chief Growth Officer at HR for Health

There's a good chance you have more employees than you realize. Misclassification is one of the most common compliance mistakes small employers make, and dental practices are especially exposed to it. Practice owners hire contractors to fill staffing gaps, get extra help, take care of one-time projects, or add specialties to the practice. Done correctly, it's a great way to support growth. Done without help from an HR pro or a staffing partner that employs the professionals directly, it's very easy to misclassify an employee as a contractor.

How Do You Define "Contractor"?

An independent contractor is exactly what it sounds like. It's an independent worker who provides services under a contract. A contractor is not your employee, so they handle all their own taxes, expenses, schedules, and most of their equipment. Most employment laws that govern your staff don't apply to them, because they're essentially running their own business.

Simple enough, but if you have a great contractor, their services might fold smoothly into your practice. They become an indispensable part of your team, and next thing you know, you're treating them just like employees. That leads to legal trouble and non-compliance with not one, but two federal agencies.

To help you avoid compliance problems, the Department of Labor (DoL) has a six-part economic reality test, and the IRS boils it down into three categories to consider:

• Behavioral. Who determines how the job gets done? Who sets the working hours?
• Financial. How does the worker get paid, and who provides the tools? Do they have the freedom to work for multiple clients, or just your practice?
• Type of relationship. Is there a contract for specific services or projects, or will the job continue indefinitely? Would your practice's doors stay open if they left?

Those test questions were not made with dental practices in mind, so they're a lot easier to answer in a commercial business setting. The way a job gets done isn't a matter of preference when it's patient-facing. No provider is going to haul their own chairs across town every day. Being a registered dental hygienist isn't exactly a "project" with a clear start and end date. Assignment length is the wrong test: a temporary dental hire isn't automatically a 1099.

There are a lot of legitimate needs for contractors in a dental practice, but there are just as many times when the lines get blurry. Here's what employee misclassification can look like in a dental setting.

Employee Misclassification Sign 1: You Control the Schedule

Naturally, whoever you hire will only work when your practice is open. Nobody expects you to give contractors a key. But who sets the daily working schedule? If it's always you, there's a good chance your contractor is actually a W-2 employee.

This one can be subtle, especially if you've been working together for a long time and have settled into a good working rhythm. Even a contractor might prefer a predictable working schedule. It's a question of who's in control.

Temp coverage is a useful illustration, because on paper it looks like the most "temporary" arrangement there is. When a practice books a professional through Kwikly, the office sets the shift, including start time, end time and breaks, and the professional works on the office's equipment. Every one of those facts points toward control by the practice, which is exactly why Kwikly employs those professionals as W-2 rather than treating them as independent contractors. The work is shift by shift, so paid vacation isn't part of the arrangement, but control is still what drives the classification.

How to Tell the Difference

• W-2 Employee: You set the schedule, you expect them to show up on your timeline, and someone has to fill in while they're gone. If they need time off, they need your approval, and they may have sick leave or vacation time available to use.
• Independent Contractor: They offer their availability and negotiate time tables with you. If their availability changes, you're the one who needs to adapt. If they're comfortable with a predictable schedule that you request, that's fine. Notice that we said "request," not "require."

Employee Misclassification Sign 2: They've Been With You Forever

You can have a reliable independent contractor who stays with you for years. You'd be lucky to have such an asset. So yes, contracts can be long-term and yes, they can be open-ended, but that trust can't imply permanence.

Imagine you brought in an independent contractor for a genuinely specialized service your practice doesn't perform in-house, something like whitening or Botox. Their schedule ebbs and flows with patient demand, they decide which cases they take and when, and the service is clearly an addition to what you offer rather than core to it. It's been like this for five years. That's a defensible contractor arrangement.

Now change one fact. Suppose that provider was on your schedule every Tuesday and Thursday, you built your production around them being there, and on a day they didn't show up your schedule fell apart because nobody else could step in. That isn't a vendor delivering an occasional service. It's a core part of your operation, and the classification should follow. Put them on the "Meet Our Team" page of your website and you've helpfully documented it for anyone who audits you.

How to Tell the Difference

• W-2 Employee: You provide the tools, the training, the schedule, and a regular paycheck because they're there on certain days, as expected. That's the deal. Their services are a core part of your practice's identity, or at least your day-to-day operations. They may earn employee benefits, too.
• Independent Contractor: They bring their own specialty tools and skills. They take on specific tasks or consult on complex cases, not everyday duties. They help out with services you don't perform regularly in-house, but maybe it's frequent enough that you keep the contract going. It's not an employment situation, it's more like a mutually beneficial working relationship.

Employee Misclassification Sign 3: You Have Them on Salary

If you're not sure whether your contractor is actually an employee, think about how you pay them. Does your worker log their hours in your time tracking system? Do they receive a salary or ever get paid overtime? Or do they do the work on their own, then bill you for it?

A contractor is selling you their services, just like any other vendor. If it helps, think of their work as an item under accounts payable, not payroll. If you're paying them the same way you pay the rest of your employees, but you're not withholding taxes like you do for everyone else, sorry to tell you this, but you're probably misclassifying.

One caveat that matters in dental staffing: getting an invoice does not by itself mean you're working with an independent contractor. If you book coverage through a W-2 staffing partner, that company invoices your practice and separately runs payroll for the professional. The invoice is between you and the company, not between you and the worker. What matters is who employs the person in your operatory.

How to Tell the Difference

• W-2 Employee: They enter their hours into your time tracker, the payroll system automatically calculates their withholdings and overtime, and they're accruing benefits. They don't have to do any payroll paperwork because you or your system handles it for them.
• Independent Contractor: They bill you for completed work. You don't pay them through your payroll system. It could be monthly, quarterly, or after every project. Either way, they've got to figure out their own insurance, retirement, sick leave, and vacation time. Their work is a service you purchase, not a role you control.

Employee Misclassification Sign 4: They Work Only for Your Practice

Independent contractors can have as few or as many contracts as they please, and they can work with whoever they want. They might advertise their services, contract for your competitor, and even prioritize other clients ahead of you. They can make more money by taking on more clients on their own time. It's literally none of your business.

If the idea of that kind of freedom ruffles your feathers, your contractor might actually be a W-2 employee.

That said, plenty of W-2 employees hold more than one job. If your dental assistant drove for DoorDash on weekends or started selling jewelry on Etsy, it wouldn't change their employment status with your practice. Neither would a second job at another office. This comes up often with temp coverage: a professional can work full time at one practice and still pick up shifts through Kwikly, and they're a W-2 employee in both places. They could even run a separate independent contracting business on the side. However they split their time, you can expect them to prioritize work at your practice during the hours they're scheduled.

On the flip side, some contractors have a lean business model, so they might only work for your practice by choice. Don't rely on client count as the only clue about classification.

How to Tell the Difference

• W-2 Employee: Their financial goals are tied to the paycheck you send them. They may be part-time or full-time, but they typically earn extra money by picking up more hours, not more places to work. Any side hustles or secondary work would be unrelated to your practice.
• Independent Contractor: They can work wherever they want, whenever they want, however they want. They advertise their services and can grow their business with or without you. They built their career themselves, and you have no say in how they handle their workload or divide their time.

Employee Misclassification Sign 5: You Give Them Performance Reviews

Everyone performs better when they get quality feedback about what's working and what isn't. But if you're delivering that feedback in an official manner, complete with "meets" or "exceeds" expectations, you're talking to an employee.

Independent contractors have their own set of skills and bring their expertise. Catching them up to speed on how your practice operates and what you expect is normal. Giving them milestones and benchmarks to meet is not. If something goes wrong, yes, of course you can and should bring it up with your contractor. But it can't be tied to a performance review like it would for an employee.

Ending a contractor relationship is usually more straightforward than terminating an employee. Follow the terms of your contract, document your reason, and make sure you aren't running into discrimination law. But don't treat it as consequence-free. If the working relationship actually looked like employment, the worker can argue the end of the contract was a termination, and thin documentation is what loses those arguments.

How to Tell the Difference

• W-2 Employee: You trained them how to do the job just the way you like it. When they fall short, or exceed your expectations, you take notes. You have the authority to make changes to their daily work or career growth plan accordingly.
• Independent Contractor: They brought their own expertise, and if the work isn't up to your expectations after a short ramp-up, you can stop working with them. If you love what they do, you can let them know, but it's not an official measurement.

Need a Hand with Hiring?

If you read those five signs and recognized someone on your team, you have two problems to solve: the classification you already have, and how you cover shifts going forward.

For coverage going forward, the cleanest answer is a staffing partner that employs the professionals itself. Every professional you book through Kwikly is a W-2 employee of Kwikly, not an independent contractor. You get the flexibility of bringing in help exactly when you need it, without carrying the classification risk, the payroll work, or the paperwork. Kwikly handles payroll, taxes, workers' comp and malpractice coverage, so there's no classification call for you to make.

For the people already on your books, HR for Health can help you sort out classification and keep it straight. Here's what they offer:

• Easy onboarding with all the paperwork automatically synced
• Employee scheduler that syncs with a precise time tracker
• People and performance management to track progress and problems
• Integrated payroll and benefits systems that talk to each other, with no patchwork
• Custom employee handbooks that automatically update when laws change
• Learning resources plus on-demand HR support when you need it

Get in touch with the HR specialists at HR for Health.

This article is provided for general information only and is not legal, tax, or HR advice. Worker classification rules vary by state and change over time. Consult a qualified professional about your specific situation.