The Supreme Court Identifies Medical Residents as Employees

Posted by marykeating on January 12, 2011 under Wage and hour issues | Be the First to Comment

They might have thought they were slaves, but according to a unanimous Supreme Court, they are working full time in a capacity similar to doctors, and must be paid and taxed as employees.  This issue was resolved by the Court in the context of whether the hospitals using the residents services must pay social security and medicare taxes (FICA).  Although residents are paid, they did not pay FICA taxes, nor have them paid by their hospital employers.

Hospitals have treated residents as students for decades.  Resident training is a prerequisite to obtaining board certification allowing a doctor to specialize in a particular field.   Although medical residents are still supposed to attend lectures and keep up with some studies, they also work grueling hours in hospitals.  An exemption in the federal law governing wages and FICA taxes had allowed them to be classified as students if they work in the university, and regularly attend classes.   Instead of a salary, the Mayo Clinic pays them a “stipend,” along with health insurance, malpractice insurance coverage, and vacation time.

The Treasury Department altered its interpretation of the law with respect to medical residents in 2004, leading to the case decided yesterday,  Mayo Foundation, et al., v. U.S. (09-837).  The new regulation removed the exemption for “students” working more than 40 hours per week for the university, even though the services have an instructional or training component.  The Treasury Department “reasonably sought a way to distinguish between workers who study and students who work.”