Per Diem Nurses and Worker Classification: What Healthcare Employers Need to Know

Hospitals, clinics, and long-term care facilities nationwide are struggling to keep shifts covered. Many have turned to per diem, PRN, and other flexible staffing models to fill the gap when full-time hires aren’t available fast enough.

That shift raises a legal question employers can’t afford to ignore. Does calling a nurse “per diem” or “flexible” change how she must be classified under wage and hour law? It doesn’t, and treating the label as if it does can expose a facility to significant financial and legal risk.

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The Scope of the Nursing Shortage Driving Flexible Staffing

The numbers behind this trend are stark. The Health Resources and Services Administration projects a shortfall of more than 500,000 registered nurses nationally by 2030, according to workforce data summarized by Nightingale College.

Some projections put the national shortage rate at over 8% by 2026. LPN shortfalls are running as high as 20% in certain regions.

Turnover compounds the problem. The 2025 NSI National Health Care Retention & RN Staffing Report found RN turnover at roughly 16% in 2024, with more than 287,000 staff RNs leaving their positions.

Hospitals hired approximately 385,000 RNs just to backfill losses and grow their teams. That’s on top of a U.S. Bureau of Labor Statistics projection of 6% growth in registered nurse employment from 2025 to 2035, with about 180,800 average annual job openings.

Facilities are adapting in real time. Picture an HR director at a mid-size hospital trying to cover weekend ICU shifts.

Instead of waiting months to fill a full-time req, she posts the open shifts on a flexible staffing platform and connects with nurses browsing nursing job opportunities that fit their own schedules. It’s a practical fix for a real staffing gap.

But every one of those arrangements still has to be classified correctly under federal and state labor law, and that’s where things get complicated.

Employee or Independent Contractor? The Legal Tests That Apply

The Fair Labor Standards Act doesn’t care what a staffing arrangement is called. It cares about the actual working relationship. The Department of Labor’s 2024 final rule applies a six-factor “economic realities” test, weighing things like the worker’s opportunity for profit or loss, the permanence of the relationship, and the degree of control the employer exercises over the work.

That regulatory picture has been in motion. The Wage and Hour Division paused enforcement of the 2024 rule in May 2025 and reverted to the pre-2024 economic reality standard for investigations, with a rescission proposal announced in February 2026.

Employers should track this closely rather than assume the rules are settled.

Here’s the part that trips up a lot of staffing decisions: being scheduled per diem doesn’t automatically make someone a contractor. What matters is who controls the schedule, who supplies the equipment and training, and who directs the day-to-day work.

A nurse who works exclusively through one facility, uses the facility’s equipment, and follows its supervisors’ instructions looks a lot like an employee, regardless of the shift label attached to her role. Employers weighing this question should start by reviewing the guidance on classifying a worker as an independent contractor, which walks through each factor in detail.

Facilities operating across state lines face an added wrinkle. States like California apply a stricter “ABC test” that presumes a worker is an employee unless the employer proves otherwise on all three prongs. A classification that survives federal scrutiny won’t necessarily hold up under a stricter state standard.

Why Misclassification Is a Costly Risk in Healthcare Staffing

 

The financial stakes are real, not theoretical. In July 2025, the U.S. Court of Appeals for the Fourth Circuit upheld a $9.3 million judgment against Medical Staffing of America for misclassifying roughly 1,100 nurses and nursing assistants as independent contractors. The court rejected the company’s good faith defense, a reminder that intent doesn’t shield an employer from liability once a misclassification is established.

Joint-employer liability adds another layer of exposure. Both the staffing agency and the host facility can be held responsible for unpaid overtime and wage violations, even when the facility believed the agency handled classification correctly. Understanding federal overtime requirements under the FLSA is a useful starting point for any facility auditing its exposure.

The consequences of getting it wrong stack up quickly:

• Back pay for unpaid overtime, sometimes going back years
• Liquidated damages equal to the unpaid wages, effectively doubling the bill
• DOL investigations that can expand to cover an employer’s entire workforce
• State-level penalties and interest, which vary widely by jurisdiction

Practical Steps for Healthcare Employers

Facilities relying on per-diem or flexible staffing don’t have to choose between flexibility and compliance. A few practical habits go a long way:

• Document who actually controls scheduling, supervision, and equipment for each staffing arrangement
• Review staffing agency contracts to clarify who bears responsibility for classification decisions
• Apply the strictest applicable test (federal or state) when operating in multiple jurisdictions
• Audit payroll practices for per-diem, PRN, and travel staff on a recurring schedule, not just once

As facilities continue tracking broader hiring trends across the healthcare industry, classification review should be part of that ongoing planning, not an afterthought addressed only after a complaint or audit triggers it.

Conclusion

Flexible staffing is a reasonable, often necessary response to a nursing shortage that isn’t going away soon. But “per diem” describes a scheduling arrangement, not a legal classification. Employers who confuse the two are the ones most likely to end up on the wrong side of a DOL investigation or a multi-million-dollar judgment. Getting the classification analysis right up front costs far less than fixing it after the fact, and it protects both the facility and the nurses who depend on it.