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Pennsylvania court ruling finds home health nurses were misclassified as independent contractors

2/23/26

By: Sunshine Fellows

A recent decision from a Pennsylvania federal court underscores the continued legal risk associated with classifying healthcare workers, particularly home health nurses, as independent contractors. In granting summary judgment on liability, the court in Lori Chavez-Deremer, Sec’y of Lab., United States Dep’t of Lab. v. Amazing Care Home Healthcare Services, LLC, et al., No. CV 24-190, 2026 WL 413312, at *1 (E.D. Pa. Feb. 13, 2026) concluded that a home healthcare provider misclassified its nurses and that, under federal wage-and-hour law, they should have been treated as employees. The ruling serves as another reminder that labels and tax forms alone will not control classification outcomes, especially in industries where operational control is difficult to avoid.

Factual Background

The case arose from a lawsuit brought by the U.S. Department of Labor against a home healthcare company operating in Pennsylvania. The company engaged licensed nurses to provide in-home patient care and treated many of those workers as independent contractors, issuing IRS Form 1099s rather than W-2s.

According to the record, the company recruited the nurses, set their pay rates, assigned patient visits, and retained authority over scheduling and job expectations. The nurses performed core services central to the company’s business model and worked under policies and procedures established by the company. The Department of Labor alleged that, despite the independent-contractor designation, the nurses functioned as employees and were unlawfully denied overtime compensation under the Fair Labor Standards Act (“FLSA”).

What the Court Found and Why

The court agreed with the Department of Labor and ruled that the nurses were employees as a matter of law. Applying the FLSA’s “economic realities” test, the court focused on the substance of the working relationship rather than the contractual labels used by the company.

Key factors supporting employee status included the company’s control over the nurses’ work, the integral nature of the nurses’ services to the business, the lack of meaningful opportunity for entrepreneurial profit or loss, and the relative permanence of the working relationships. The court also found that the nurses did not operate independent businesses of their own in any meaningful sense, despite being classified as contractors on paper.

While the court resolved the misclassification issue on summary judgment, questions concerning damages, including the amount of unpaid overtime and whether the violations were willful, were left for further proceedings.

Employer Takeaways

This decision offers several important lessons for employers, particularly in healthcare and other service-based industries:

• Control remains decisive: When a company controls scheduling, pay rates, assignments and work expectations, independent-contractor status becomes difficult to sustain.
• Core services matter: Workers who perform the central function of a business are more likely to be viewed as employees, regardless of how they are labeled.
• 1099s are not determinative: Tax treatment and contractual language will not override the economic realities of the relationship.
• Healthcare faces heightened scrutiny: Home health, staffing and caregiving models continue to draw enforcement attention due to recurring misclassification concerns.
• Proactive audits are critical: Employers should periodically review contractor relationships with counsel to assess risk before litigation or agency enforcement arises.

As federal and state agencies continue to focus on worker classification, this ruling reinforces the need for employers to evaluate not just how workers are classified on paper, but how they actually operate day to day.

For more information, please contact Sunshine Fellows at sunshine.fellows@fmglaw.com or your local FMG attorney.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.