Many nurses work for registries obtaining assignment to various hospitals and clinics. An important question arises, Is the nurse an employee of the registry or an independent contractor? Conduct of the parties and circumstances will determine the status, and on it will hinge the matters of taxes, pension, unemployment, and disability benefits and liability.

In this interesting case, the Superior Court of New Jersey reviewed in detail the working practices and arrangements of a registry with the nurses it hired, and concluded that they were independent contractors not entitled to State Plan Disability Benefits, reversing the decision of the Board of Review.

Facts : The salient facts are not in dispute. Carolyn Douglas, RN, worked for Trauma Nursing Inc. (TNI) which is in the business of supplying hospitals with nurses on a temporary basis. In essence, TNI acts as an employment broker, matching nursing professionals with hospitals and other health care institutions seeking to supplement their staffs on a temporary, short-term basis.

Due to the ongoing acute shortage of nurses in New Jersey, many hospitals utilize registries and broker services to supplement permanently employed personnel. At present, approximately 180 nurses are under contract with TNI. TNI primarily brokers the services of registered nurses, although it occasionally acts for licensed practical nurses such as Douglas.

The record reflects that TNI recruits its nurses through advertisements in professional journals and newspapers. Prior to entering into contracts with TNI, nurses are screened to insure that they are appropriately qualified. Each nurse must provide TNI with a resume, clinical references, proof of malpractice insurance, health and disability insurance coverage, a valid CPR certification and a nursing license. All requisite insurance policies must be obtained and paid for by the nurses. In addition, the applicant must complete both a skills checklist, as required by the Joint Commission for Accreditation of Hospitals, and a physical assessment test, demonstrating the nurse's qualifications to meet hospital staffing requirements. The skills checklist is later used by TNI to match the nurse's qualifications with the personnel needs of particular hospitals.

At the completion of the application process, each nurse enters into a written agreement with TNI. Under the terms of the agreement, the nurse is engaged as an "independent professional" and TNI is given no right "to exercise any control or direction" over his or her activities. The contract states that the nurse is subject to whatever policies and practices are mandated by the hospital or institution in which he or she is placed and TNI retains no right to dictate the manner in which he or she conducts his or her activities, subject to professional standards which are to be maintained by continuing education throughout the term of the agreement. TNI provides a liaison to the hospital, but it has no supervisory responsibility over the nurse. Instead, it assists the hospital in setting staffing levels, obtains additional nursing support to meet emergent needs and mediates disputes where the hospital cannot resolve the problem directly with the nurse.

The contract is for a period of one year, with optional yearly renewals. It may be terminated, however, if for some reason, the nurse fails to maintain appropriate insurance and professional certification and licenses. The record discloses that TNI has rarely terminated a contract, although nurses often elect to stop utilizing its services.

Each nurse negotiates with TNI to set an individual hourly rate, which varies depending upon his or her experience and qualifications. Nurses notify TNI on a weekly basis of the number of shifts completed. Each is paid according to the rates set forth in his or her contract, within 14 days of submission of this information. This procedure is designed to eliminate extra bookkeeping for hospitals, because they send one check to TNI representing compensation for all nurses who worked during a given time period. After subtracting its administrative and placement charges from the lump sum paid by the hospitals, TNI acts as a conduit to forward monies owed to the nurses by the hospitals.

Under the agreement the nurse alone decides whether to work, when to work, what shifts he or she wishes to work and his or her working hours. TNI retains no right to decide whether a nurse will work at all and, if he or she does, when, what shifts and what working hours. Nurses inform TNI of the hospitals and shifts that they are willing to work. TNI does not set a minimum or maximum number of shifts to be worked in a given period. That is left to the sole discretion of the nurses. TNI merely mails blank scheduling forms to the nurses each month to be completed for the following month and returned. After matching the nurses' proposed schedules with the personnel needs of the hospitals, TNI mails out a copy of the month's final schedule for each nurse and confirms each shift on the calendar. Once the schedule is confirmed, nurses are required to work each scheduled shift or to make arrangements on their own with other qualified nurse contractors for coverage of any shifts that they are unable to work, subject to TNI's approval. Should a nurse fail to complete a shift or obtain a suitable substitute, he or she is charged a penalty.

TNI placement is not necessarily the exclusive source of a nurse's work. No restriction is placed on a nurse's right to obtain placement by another broker or to obtain work independently. Frequently, nurses utilize other brokers along with TNI. For example, Douglas contracted with two other temporary nursing service agencies and worked at other hospitals through these non-TNI referrals. Douglas' schedule through TNI ranged from as little as one eight-hour shift per week to as much as five or more shifts per week.

TNI solicits business from hospitals in need of temporary nursing personnel. Hospitals contract with TNI on a non-exclusive basis. Most hospitals have ongoing relationships with several brokers in order to expand the available pool of nurses. These brokers represent a significant source of nursing personnel, because most hospitals employ a sufficient number of nurses to satisfy projected nursing needs based upon a 70% occupancy rate. If the occupancy rate increases, or staffing levels decrease due to attrition or absenteeism, brokers are contacted to provide additional nurses.

It is abundantly plain from the record that once a nurse is placed, the hospital is in complete control over his or her activities, subject of course to applicable professional standards. Nurses are subject to the policies, practices and procedures of the particular hospitals in which they are placed. The hospital retains the right to dismiss a nurse if his or her skill level is deficient or his or her professional standards do not meet the institution's requirements. The hospital provides the nurses with all necessary equipment and supplies. The actual treatment of the patient is coordinated by the physician and hospital personnel. Although TNI screens and selects qualified nursing personnel, TNI, both by its contractual undertaking and its actual conduct, exercises no control whatsoever over the conduct of the nurse's professional activities.

Court Decision: The Board of Review concluded that the nurse claimant "remained under the direction and control of the employer" because Douglas was "required ... to perform certain services in order to remain employed" and because TNI received "continuing payments from clients" and paid nurse contractors "on a week by week basis." This was the basis of the Board's decision to classify Douglas as an employee of the registry rather than an independent contractor.

The court rejected these contentions. The court noted that under the written agreement Douglas was obliged to perform services not to fulfill any contractual obligation owed to TNI, but rather in order to obtain payment from a hospital. Nurses could refuse to accept any particular shift and could decline to work at all without impairing their contractual relationship with TNI. The contractual relationship between the nurses and TNI would continue to exist even though no services were performed by the nurses.

The court found unpersuasive the circumstances that nurses were paid by TNI on a weekly basis. In reality, TNI served as a conduit for payment of the nurses by the hospital. Under its arrangement with client hospitals, a single check could be sent to TNI, representing payment for the services of all nurses placed by TNI. While it is agreed that continuing payments represent some evidence of an employment relationship, it cannot fairly be said that these circumstances disclose TNI's right to control or direct the activities of the nurses.

Instead, the court found the following circumstances to be determinative.

First, nurses chose on a monthly basis the hospitals and shifts they wished to work. They could work as little or as much as they wished.

Second, nurses were free to work elsewhere. They could utilize the services of other brokers or seek work independently. They could decline work offered by TNI and choose to work elsewhere.

Third, the nurses were not obliged to comply with any rules, practices or procedures set by TNI in performing their professional duties. Instead, they were required to comply with the rules of the particular institution in which they were placed.

Fourth, TNI did not issue any instructions or require nurses to report to its offices.

Fifth, TNI exercised no supervisory responsibility over the nurses. Nurses were supervised by their supervisors at the particular hospitals where they were placed.

Sixth, TNI offered no training to nurses. Instead, nurses were obliged to continue their education on their own and at their own expense.

Seventh, TNI did not furnish any supplies, equipment or uniforms to its nurses.

Finally, TNI did not provide nurses with any fringe benefits, such as sick pay, vacations, pensions or bonuses. In addition, nurses were responsible for their own medical, disability, and malpractice insurance coverage.

Under these circumstances, nurses employed by TNI were independent contractors.

Trauma Nurses, Inc., v. Board of Review, New Jersey Department of Labor 242 N.J. Super. 135; 576 A.2d. 285 1990 N.J. Super