Internal Revenue Service
Revenue Ruling
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smRev. Rul. 57-21
1957-1 C.B. 317
IRS Headnote
A licensed physician who does not have a private practice is `in residency' at a hospital. His services are made available to an organization, on a part-time basis and as a part of his clinical training, through special arrangements with the hospital. The services are performed during certain hours on two days of each week, and he is paid a stated amount each month. His services may be terminated at any time. Held , the physician is an employee of the organization for Federal employment tax purposes.
Full Text
Rev. Rul. 57-21
Advice has been requested relative to the status for Federal employment tax purposes of a licensed physician who performs services for an organization on a part-time basis.
The physician is `in residency' at a hospital and his services are made available to the organization, as a part of his clinical training, under special arrangements with the hospital. The physician does not have a private practice. He works for the organization from eight o'clock to ten o'clock in the morning on Monday and Thursday of each week. As staff physician of the organization, he prescribes medication and recommends treatment for the organization's handicapped workers. He directs the nurse in her duties and suggests phases of development of the organization's medical program. He is paid 1 x dollars a month for his services and such services may be terminated at any time.
In defining the term `employee' under the usual common law rules, section 31.3121(d)-1(c) of the Employment Tax Regulations provides that, generally, the legal relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer.
Physicians and other individuals engaged in the pursuit of an independent trade, business, or profession, in which they offer their services to the public, are independent contractors and not employees. However, if the requisite relationship exists between a physician and another, he is an employee rather than an independent contractor with respect to any services performed under such circumstances. As pointed out above, one of the major factors to be considered in determining the existence of an employment relationship is the right of direction and control. In determining what constitutes the requisite degree of direction and control, it must be borne in mind that the methods by which professional men work are prescribed by the techniques and standards of their professions, and the high degree of skill required by a professional sometimes makes it difficult or impossible for the employer to supervise his services. Therefore, the control of an employer over the manner in which professional employees shall conduct the duties of their positions must necessarily be more general than the control over nonprofessional employees. See Wendell E. and Evelyn C. James v. Commissioner , 25 T.C. 1296.
In Revenue Ruling 84, C.B. 1953-1, 404, it is held that physicians engaged in the private practice of medicine who, in connection therewith, examine and treat employees of a company as a part-time service for the company, are not its employees within the meaning of section 1426(d) and 1607(i) of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (subchapters A and C, respectively, chapter 9, of the Internal Revenue Code of 1939). Sections 1426(d) and 1607(i) now constitute sections 3121(d) and 3306(i) of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (chapters 21 and 23, subtitle C, Internal Revenue code of 1954), without substantial change. The facts in Revenue Ruling 84, supra , indicate that direct control and supervision by the company of the physicians' services were not contemplated and that the physicians were free to leave the premises of the company if emergencies should arise in connection with their private practice.
The facts in the instant case are distinguishable from the facts in Revenue Ruling 84 in that the physician in the instant case does not make his services available to the organization in connection with a private practice as a physician. Instead he is engaged for definite periods each week, apart from his regular employment at the hospital, in performing services for the organization in the furtherance of its rehabilitation program, for which he is remunerated at a regular rate each week. Under such circumstances, it is concluded that the organization retains the right to direct and control him in his activities. Accordingly, it is held that the physician is an employee of the organization for purposes of the taxes imposed by the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954).
This conclusion is also applicable for purposes of the Federal Unemployment Tax Act and the Collection of Income Tax at Source on Wages (chapters 23 and 24, respectively, subtitle C of the 1954 Code).