Independent Contractor vs. Employee (1099 vs. W2) in Podiatry

[SouthPod7]

Hi everybody,

A resident asked me a question and I thought I would relay it here since you all seem much smarter than me. From our perspective, what are the advantages of working as an independent contractor instead of just being a W2 employee as a Podiatry associate or for one of those other groups (Upperline, etc.)?

From my understanding, independent contractors are required to pay double FICA (both sides of Medicare and SS tax) and are required to find their own health insurance, retirement, etc. Wouldn't that mean that an independent contractor you should be getting paid WAAAAY more to furnish those benefits to yourself?

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[heybrother]

All of the above. You need to be paid way more. Read this forum enougn and you'll see people who were convinced to be 1099 associates who have the usual classic terrible associate contract and now they owe more in taxes. 1099 is for locums work, picking up a shift at rural critical access hospital outside of your own, picking up a day at a WHC. 1099 are independent contractors. They don't work for 1 podiatry office 4.5 days a week making 25-30%. Honestly even 40% would be low for a 1099. They set their own schedule.

 

[pod squad]

That's exactly right. The only benefit would be if you are making significantly more than whatever the W2 salary + benefits would be. Or if you are a 'true' 1099 and can develop multiple revenue streams, make your own schedule, be your own boss etc. Otherwise it's just a way for the PP owner to get out of paying your salary/benefits/payroll taxes.

 

[Boba Foot]

what are the advantages of working as an independent contractor instead

I have yet to hear of one. Even for those working in the "gig economy", the only benefit is working when you want to. Other than that, you're removing any employment benefit from an employer's hands and shouldering it yourself.

 

[HardRoadPaved]

So here are advantages: You create an LLC / S-corp. Place hires your company and pays "$x" for podiatric services. Then you set a salary for yourself in said LLC/S-corp; BLS avg is 133k. Pay yourself whatever dumb wage as W-2 income. Then the rest is revenue. You deduct all of your expenses from malpractice, uniform, dinners out, car/gas, home office etc. The left over amount of revenue - expenses = profit. You then are taxed on 80% of that revenue (QBI deduction up to 340k) on your personal tax return as a pass through.

 

[619]

I agree with what others have said. Just to add, another benefit of working as an independent contractor aka 1099 is that there is no non-compete. The end goal for anyone working as an independent contractor is to plan to open your own practice in the same city, county or state. Let the new gig get you credentialed with all the insurance in the state so when you open your practice, it is wayyy easy to just add location and you are ready to go. And the joy is, when you open your practice anywhere you like, you can still work as an independent contractor maybe 2-3 days a week and you build your own practice the remaining days.

If you think about it, a new pod (2-3 years practicing) working maybe 4-5 days a week is seeing about 60-70 patients a week. You don't need 4-5 days a week. You can see those same number of patients in 2 or 2.5 days (if you are efficient with good staff) and technically still make the same money. The remaining days can be used to build your practice.

To answer the OP, I will take the independent contractor gig (regardless of pay) if the end goal (within 3 years) is to open your own practice in the same place because there will not be a non-compete. Personally, the initial low pay is a good sacrifice for a bigger independent future.

Joining a PP/PP group as an associate or independent contractor is going to be low pay regardless. Big difference is the non-compete clause.

 

[heybrother]

The answers to this were sort of mixed. I don't disagree with you - its non-sensical. An independent contractor should inherently be able to work wherever as needed and desired. But the above disagrees.

I will concede I have never fought a non-compete and depending on who you ask they can always be fought/prevailed against, but any solution that relies on the courts is going to cost you.

 

[GreenHousePub]

If you are a straight 1099 and have not set up an S-corp then you are a fool.

I am an S-corp, and have multiple 1099 contracts. The overall income tax rate I paid was around 19% last year.

 

[SouthPod7]

Thank you for your responses everyone.

This particular contract DOES stipulate a non-compete and it's pretty extensive (nearly state-wide). I thought one of the major benefits of going 1099 was that another party couldn't reasonably enforce a non-compete against you but I guess you can write a contract with anything.

 

[pod squad]

Thank you for your responses everyone.

This particular contract DOES stipulate a non-compete and it's pretty extensive (nearly state-wide). I thought one of the major benefits of going 1099 was that another party couldn't reasonably enforce a non-compete against you but I guess you can write a contract with anything.

Talk to a lawyer in your state to see if it's even remotely enforceable. It probably isn't. Scummy PP owners will put almost anything in writing to intimidate you. You can 'hire' a lawyer through Rocket Lawyer for like $300 to review your contract and discuss it with you. Would probably be worth every penny for the peace of mind/clarity

 

[619]

Talk to a lawyer in your state to see if it's even remotely enforceable. It probably isn't. Scummy PP owners will put almost anything in writing to intimidate you. You can 'hire' a lawyer through Rocket Lawyer for like $300 to review your contract and discuss it with you. Would probably be worth every penny for the peace of mind/clarity

All the talk of lawyer and what not depends on if the friend of OP has another gig lined up. You can't fight (lawyer up) for a job you want if you can't afford to walk away. Do you have other options lined up? With saturation and new schools opening, employer have the upper hand (now and in the future) and can always pick another candidate.
So before folks decide to take advice on the internet and get a lawyer. Ask yourself if you can walk away from the offer? Beggars can't be choosers especially in podiatry as a new grad.

 

[pod squad]

All the talk of lawyer and what not depends on if the friend of OP has another gig lined up. You can't fight (lawyer up) for a job you want if you can't afford to walk away.

I respectfully disagree, if it were me I would at least want to understand the enforceability of the non-compete I signed, even if no other options were lined up. It dictates what other opportunities they could pursue if/when they arise. Plus, peace of mind.

 

[heybrother]

What they would tell you in the anesthesia forum is that the contract review isn't necessarily about arguing the contract (you can try, who knows what will happen) but about knowing what the contract says. Let's say the contract says "non-compete over the entire United States of America". Your lawyer is going to tell you that's non-enforceable. We can probably tell you that too. But hopefully your lawyer can also give you actionable advice about what happens when you break the non-compete - does it get reduced, tossed. How much does it cost to fight it, are their penalties etc. My original contract said 3 years and didn't in any way discuss anything about breaking the contract. I'm in a right to work state so I'd just quit but I remember reading it and thinking - this doesn't seem like other contracts I've seen. My partner did the whole - why would we put language about termination in a contract - that's dooming it to failure. Obviously that's not the case. Your lawyer can also tell you what the contract doesn't say.

 

[dtrack22]

A statewide non-compete would not be enforceable. If you want to go to court over a reasonable non-compete you’d probably still win. Generally the courts side with the interest of “public health” which means they don’t enforce things that reduce the community’s access to healthcare professionals. The former would be easy to fight and wouldn’t cost you much at all. The latter probably will. Not sure if you can recoup any of those costs if you were to win that case?

I thought one of the major benefits of going 1099 was that another party couldn't reasonably enforce a non-compete

Definitely not true. Ask any sales rep (most of whom are 1099) if they have non-competes and if they’ve heard of them being enforced. In fact sales of any kind are probably one of the more commonly utilized and enforced non-compete situations that exist and most are 1099