W-2 vs 1099 Nurse Staffing: Texas Facility Guide

The short version: when a facility pays a nurse or aide directly as a 1099 contractor, the facility is the one that has to be right about whether that person is really an employee. The IRS, the Texas Workforce Commission and the U.S. Department of Labor each ask a version of the same question: who has the right to control the work? A W-2 staffing model moves the payroll, withholding and workers’ compensation questions to the agency that employs the clinician. It does not make the other questions go away, so this guide also lists what to ask any staffing source before the first shift.

Why classification lands on the facility’s desk

A skilled nursing facility, assisted living community or clinic that fills open shifts on its own often ends up with a mix of arrangements: its own W-2 staff, agency-supplied clinicians, and sometimes individual nurses or aides paid on a 1099. The third group is where classification risk sits, because the payer is the party that carries the tax and wage obligations if the worker is later found to be an employee.

The labels on the paperwork do not settle it. Texas Workforce Commission guidance says it does not matter what the worker is called, and that an agreement or a Form 1099 does not determine status; the actual terms of the relationship and the control exercised or reserved do. For a facility, that matters most for the roles it supervises closely by design. A CNA working a posted shift, following a care plan, on the facility’s charting system, under the charge nurse, is a fact pattern that can be read as direction and control.

This is a general explanation, not legal advice. Whether a particular worker is an employee depends on the facts, and your counsel or the agencies named below are the right place to get an answer for your building.

What the three agencies look at

Each agency applies its own test, and a worker can be treated differently under different laws, so a facility cannot rely on one answer for all three.

IRS (federal tax). The IRS groups the evidence into three categories: behavioral control (does the company control, or have the right to control, what the worker does and how), financial control (are the business aspects of the job controlled by the payer), and the type of relationship (written contracts, employee-type benefits, whether the relationship continues and whether the work is a key aspect of the business). For employees, the IRS says employers generally must withhold and deposit income, Social Security and Medicare taxes, pay the matching employer share, and pay unemployment tax on wages. Either the business or the worker can file Form SS-8 to ask the IRS for a determination; the IRS notes that can take at least six months.
Texas Workforce Commission (state unemployment tax). TWC applies the Texas Unemployment Compensation Act definition of employment and a 20-factor common-law guide. It states that control does not have to be exercised; what matters is whether the purchaser of the service has the right to direct or control the worker, both as to the final result and the details of when, where and how the work is done. TWC also notes that misclassification can bring additional taxes, penalties and interest.
U.S. Department of Labor (wages and hours). Under the Fair Labor Standards Act, DOL describes misclassification as treating a worker who is an employee as an independent contractor, and says misclassified workers may not receive the minimum wage and overtime pay they are entitled to. DOL also says employers are responsible for determining whether a worker is an employee under the FLSA.

Where the Department of Labor’s test stands right now

This is the area that is moving, so check dol.gov before relying on any summary, including this one. As of the sources we reviewed on October 25, 2026:

DOL’s misclassification page still describes a January 2024 final rule, effective March 11, 2024.
On May 1, 2025, DOL’s Wage and Hour Division said its investigators would rely on Fact Sheet #13 and reinstated Opinion Letter FLSA2019-6 and were directed not to apply the 2024 rule’s analysis in current enforcement matters.
DOL published a proposed replacement rule in the Federal Register on February 27, 2026 (91 Fed. Reg. 9932), with comments due April 28, 2026. Law-firm summaries describe two core factors: the nature and degree of control over the work, and the individual’s opportunity for profit or loss.
According to an October 9, 2026 employment-law update from Ogletree Deakins, the Wage and Hour Division has sent a final version of the rule to the Office of Information and Regulatory Affairs, and it had not yet been published.

The practical takeaway for a facility is that the federal standard is in transition, while the IRS and TWC control-based tests described above are unchanged by it. A clinician who looks like an employee under a control analysis is the situation to avoid under any version.

What W-2 staffing changes, and what it does not

When a staffing agency employs the clinician on a W-2 basis, the agency is the employer for payroll purposes: it runs payroll, withholds taxes, pays the employer-side taxes and handles the employment paperwork for that worker. For the facility, that removes the day-to-day work of classifying and paying individual nurses and aides, and replaces it with one vendor relationship and a contract.

It does not remove these questions:

Supervision and scope. The facility still directs clinical care on its units, and licensed staff still practice within the Texas Nursing Practice Act. A staffing contract should say who orients, who supervises and who evaluates competency.
Verification. Whether the worker is a W-2 employee or a contractor, the facility remains responsible for knowing that licenses are current and that no one on the schedule is excluded from federal health programs. See our guides on verifying a Texas nursing license and OIG and SAM exclusion screening.
Joint-employer and contract questions. How responsibility is split between a facility and a staffing agency depends on the contract and the facts. Have counsel review the agreement.

Workers’ compensation in Texas: ask, then verify

Texas is unusual here. The Texas Department of Insurance explains that employers that choose not to provide workers’ compensation coverage are known as non-subscribers. So “do you carry workers’ comp?” is a real question for a Texas staffing source, not a formality.

TDI publishes ways to check. Carrier-insured employers can be verified through the TXCOMP NCCI website, certified self-insured private employers through TDI’s self-insurer list, and registered non-subscribers through the Texas Open Data Portal non-subscriber dataset. If you cannot tell, TDI directs people to email coverage.verification@tdi.texas.gov with the employer’s name, physical address and date of injury. Ask for proof of coverage in writing, and use those tools to confirm it.

Six questions to ask any staffing source

How is each clinician engaged? W-2 employee of the agency, 1099 independent contractor, or something else? Ask for it in the contract.
Who runs payroll and withholding, and how often are clinicians paid?
Does the agency carry Texas workers’ compensation for the clinicians it places? Ask for written proof and verify it with the TDI tools above.
Who screens and credentials, and how often is exclusion status rechecked? Ask what is checked before the first shift and what is rechecked afterward. Our credentialing questions guide and vetting scorecard go deeper.
Who supervises and evaluates the clinician on your unit? Put orientation and competency expectations in writing.
What happens if a shift is missed? Ask how the agency handles call-outs and whether it states a placement target or a guarantee. Treat an unqualified guarantee with caution.

How Hearthstone & Co. handles this

Hearthstone & Co. staffs RNs, LVNs and CNAs as our core, and can also place allied and other medical staff. Our clinicians are W-2 employees of Hearthstone, paid weekly, and covered by Hearthstone’s workers’ compensation. We run background screening through Checkr and FACIS Level 3 and drug screening through Quest, manage credentialing, and check OIG and SAM exclusion lists monthly. After 90 days, W-2 clinicians become eligible for benefits that include paid time off, paid holidays, group medical, dental and vision, and a 401(k).

We aim to fill a role within 36–72 hours after a facility requests a shift. That is a placement target, not a guarantee. If you want to compare how we engage clinicians against how another source does, bring the six questions above to a call and we will answer each one. For per diem coverage specifically, see per diem nurse staffing; for the broader facility picture, see staffing for healthcare facilities, and to estimate what an uncovered shift costs you, try the open shift cost calculator.

Frequently asked questions

What is the difference between W-2 and 1099 nurse staffing?

With W-2 staffing, the clinician is an employee of the staffing agency, which handles payroll, tax withholding and employment paperwork. With 1099 staffing, the clinician is treated as an independent contractor who is paid without withholding. Which label is correct depends on the actual working relationship, particularly who has the right to control how the work is done, not on what the paperwork says.

Can a Texas facility be liable for misclassifying a nurse or aide?

It can be exposed. The Texas Workforce Commission says misclassification can lead to additional unemployment taxes, penalties and interest, the IRS describes employer tax obligations that apply to employees, and the Department of Labor says misclassified workers may miss minimum wage and overtime pay. How that applies to a given arrangement is a legal question for your counsel.

Does Texas require employers to carry workers’ compensation?

Not in the way many facilities assume. The Texas Department of Insurance describes employers that choose not to provide coverage as non-subscribers. That is why it is worth asking a staffing source for written proof of workers’ compensation coverage and checking it with TDI’s verification tools.

Are Hearthstone & Co. clinicians W-2 employees?

Yes. Hearthstone & Co. clinicians are W-2 employees, paid weekly and covered by Hearthstone’s workers’ compensation.

Sources

Reviewed against these sources on October 25, 2026. Federal and state classification rules are changing; confirm current requirements with the agencies and your counsel before acting.

Looking for W-2 RN, LVN or CNA coverage?

Send us your roles, shifts and start date. Our placement target is 36–72 hours; it is a target, not a guarantee.

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