Are you classifying your RBTs and BCBAs as employees or independent contractors? Following a discussion in an ABA social media group, I noticed how many misconceptions there still were regarding this topic.
While it is becoming increasingly understood that RBTs cannot be classified as 1099 contractors, there is still confusion on whether it is acceptable to classify a BCBA as a contractor.
Misclassifying workers can be a costly error that should be avoided. This article will explore the differences between employees and contractors, the 6-factor economic reality test, and the ramifications of misclassification to help you make an informed decision on classifying your ABA staff.
Please note: This is informational only to guide you in your decision. The content contained in this article was obtained directly from the Department of Labor (DOL). However, I encourage you to consult legal and tax professionals before choosing how to classify your ABA team.
What is an Independent Contractor?
A good first question to explore is what exactly is an independent contractor and how is it different from an employee? An independent contractor is an individual who is in business for themselves and contracts with companies, providing their services. Conversely, an employee is an individual who works for an employer under specific employment conditions (DOL, 2024). Employers should use the economic reality test to identify whether an individual and the role they are working meets the qualifications of an independent contractor.
What is the 6 Factor Economic Reality Test?
The economic reality test involves a list of considerations that help employers discern whether an individual meets the legal requirements to be classified as a contractor. In the next two sections, we'll explore whether RBT and BCBA positions meet the conditions that would determine whether an employer-employee relationship exists.
The Department of Labor clarifies that all six factors should be considered and not one single factor can indicate a worker's status. The totality of all of the factors will determine whether to classify your ABA staff as contractors or employees.
The Economic Reality Test includes these six factors:
Opportunity for profit or loss depending on managerial skill,
Investments by the worker and the employer,
Permanence of the work relationship,
Nature and degree of control,
Whether the work performed is integral to the employer’s business, and
Skill and initiative.
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Can an RBT be an Independent Contractor?
No, RBTs cannot be independent contractors. This is relatively simple, though we'll still explore each factor in more depth. By definition, an independent contractor is, well, independent. RBTs can never work independently, as they require BCBA supervision, per the BACB. Even if the RBT has a supervisor, they still cannot be classified as a 1099 contractor.
Reflecting back on the economic reality test, other considerations would exclude RBTs from being independent contractors as well. Let's dive in a bit further.
Opportunity for profit or loss depending on managerial skill RBTs generally do not have opportunities for profit or loss. Simply choosing to pick up more hours at a fixed pay rate (i.e., covering a therapy session for a colleague) would not constitute an opportunity for profit or less.
Investments by the worker and the employer This factor looks at investments the individual would make that support business growth by increasing clients, reducing costs, extending reach, or increasing sales. RBTs do not typically make investments that are capital or entrepreneurial in nature.
Degree of permanence of the work relationship
RBTs are typically hired as permanent employees. Working in a position that is continuous without a fixed ending date and/or one that is the RBT's only working relationship indicates an employee status.
Nature and degree of control
This is a big one. An employer has control over the work an employee performs. Because RBTs do not have the ability to exercise control over how they perform their work and they require supervision, they cannot qualify as a 1099 contractor under this factor.
Extent to which work performed is an integral part of the employer's business
The work RBTs do for ABA organizations is almost always critical, necessary, or central to the operations, indicating an employee relationship.
Skill and initiative
RBTs do not use specialized skills with business planning and effort to perform their responsibilities and grow their business. Since they rely on their employer to provide training and oversight, they would be classified as an employee.
Can a BCBA be an Independent Contractor?
While RBTs cannot be independent contractors, it is a bit more complex of a consideration for BCBAs. There are circumstances when BCBAs can be properly classified as an independent contractor. However, it is not true that BCBAs can always be contractors simply because they don't require supervision.
Let's explore the six factors of the economic reality test to help you consider whether BCBAs working for your ABA organization could be classified as contractors.
Opportunity for profit or loss depending on managerial skills Does the BCBA have opportunities for profit or loss? Ask yourself the following questions to evaluate this factor.
Do your BCBAs negotiate their pay or do you set fixed pay rates?
Do they have the ability to accept or decline work or do you assign cases?
Can they hire their own workers to support their working responsibilities?
Can they decide which materials and equipment to purchase to do their job?
Can they engage in other efforts to expand their business or secure more work, such as marketing or advertising?
Choosing to pick up hours at a fixed hourly rate is not considered exercising managerial skills as an independent contractor.
Investments by the worker and the employer
Do your BCBAs make investments that are capital or entrepreneurial in nature? The DOL clarifies that the costs of tools for specific jobs and costs the employer imposes on the staff don't qualify as capital or entrepreneurial investments. The focus of this factor is on whether or not the BCBA makes investments that are similar to the employer and allow them to work independently in the ABA field.
Degree of permanence of the work relationship
Evaluate the nature and length of your working relationship with the BCBA. Independent contractor relationships are often project-based with either a fixed ending date or regularly occurring fixed periods of work, rather than ongoing and reliable work. If the BCBA works only for your organization and does not have the opportunity to make a business decision to take on multiple jobs, this indicates an employee-employer relationship.
Nature and degree of control
According to this factor, an employee status is indicated when an employer maintains control over the BCBA's performance. Consider aspects such as whether you:
Control hiring and firing
Dictate the BCBA's schedule
Dictate the BCBA's pay rates
Supervise the BCBA's work
Have the right to supervise or discipline the BCBA
Take actions to limit the BCBA's ability to work for other organizations
An important element to clarify is control that is based on compliance with federal, state, or local regulations rather than the employer's internal policies, would not be taken into consideration for determining an employment relationship.
Extent to which work performed is an integral part of the employer's business
Is the work your BCBAs perform critical, necessary, or central to your business operations? When the work is not an integral part of the business, it lends credence to independent contractor status.
This one is hard to conceptualize with a typical BCBA position in an ABA company. For a related example, consider the work a freelance writer does. I, myself, am a freelance writer for ABA providers. The work I do—writing blogs, guides, and other marketing and content materials—is important, but not central to their operations. Rather, providing ABA therapy is their primary business operation.
Skill and initiative
Do your BCBAs use their own specialized skills to perform their work or do they rely on you to provide training? Employees and contractors can both be skilled, but the focus is more on whether the BCBA uses their skills in conjunction with business initiative.
Do you classify your BCBAs as contractors or employees? (OR, are YOU as a BCBA classified as a contractor or employee?
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Common Classification Myths in the ABA Field
If an RBT or BCBA has an LLC, they must be classified as an independent contractor.
It is untrue that having an Employer Identification Number (EIN) or LLC automatically makes you an independent contractor. If the conditions of the BCBA's work fall under the legal definition of employment, they must be classified as an employee. Learn more about this here (See myth #7).
It doesn't matter how ABA staff are classified, as long as both the employer and staff agree. There is no harm in misclassification. The decision of how to classify does not fall on the worker. The BCBA agreeing to be classified in this way does not mean that they are legally an independent contractor.
There are potential harms to misclassifying, even if the BCBA agrees to be (incorrectly) classified as a 1099 contractor. When a BCBA is classified as a contractor, yet treated as an employee, they lose certain benefits that employees are obligated to receive, such as:
The right to unpaid, job-protected family and medical leave
Certain anti-discrimination and anti-retaliation protections
The availability of workers’ compensation if injured on the job
The availability of unemployment insurance (UI)
Employer payment of half of the Social Security and Medicare Taxes
Further, misclassification harms ABA providers who are operating within the legal parameters by creating an uneven playing field. For example, wrongly classifying BCBAs and RBTs as independent contractors saves organizations a significant amount of money (at least temporarily until the legal ramifications of misclassification come to light). Because of this, these providers offer a higher hourly wage, which can be difficult for ethical, law-abiding organizations to compete with. This is especially true with companies who misclassify RBTs as contractors. RBTs may be drawn in by the significantly higher hourly rate and may not understand what constitutes an independent contractor.
If the employer issues a 1099, that means the RBT or BCBA IS an independent contractor Issuing a 1099 form does not automatically mean the RBT or BCBA is in fact an independent contractor. See myth #3 on this DOL article for more on this.
Explore more common myths about ABA employment and supervision practices.
What are the Penalties for Misclassification of ABA Staff?
Misclassifying ABA staff puts ABA organizations at great risk. There are many potential consequences, including:
Backpay for wages that were wrongfully withheld (e.g., overtime pay, pay for hours worked that the employer deemed not payable such as admin/non-billable hours).
Backpay on Medicare and Social Security taxes.
Federal and state agency fines.
Civil lawsuits.
Damage to reputation.
Costly and time-consuming IRS audits.
Criminal charges, in severe cases.
The temporary financial savings by misclassifying RBTs and BCBAs as independent contractors is not worth the risk. I urge you to comprehensively consider whether your BCBA positions pass the 6-factor test before classifying them as contractors.
What Should I Do if I Believe I'm Misclassified?
If you are classified as a contractor but believe you are actually working in an employee capacity, I recommend first discussing the discrepancy with your employer. Request to be re-classified. Employers can reclassify employees with partial relief from federal employment taxes through the Voluntary Classification Settlement Program (VCSP).
Misclassified employees can file form 8919 with the IRS to report uncollected Social Security and Medicare taxes due to misclassification.
For additional assistance, reach out to your local labor board.
References
Department of Labor. (2024). Fact Sheet 13: Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA). Retrieved from https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship#:~:text=The%20Department%20has%20issued%20regulations,employee%20or%20an%20independent%20contractor.
Department of Labor. (n.d.). Myths about misclassification. Retrieved from https://www.dol.gov/agencies/whd/flsa/misclassification/myths/detail#1.
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