Marcus came to our office with a goal shared by many healthcare entrepreneurs: he wanted to build a company that could connect hospitals, clinics, and long-term-care facilities with qualified CNAs, LVNs, and RNs.

Like many new business owners, Marcus initially used terms such as nursing staffing agency and nurses’ registry almost interchangeably. But before choosing an LLC, corporation, business name, or tax election, an important question has to be answered:

Marcus’s Goal: From CNA to Nursing Staffing Business Owner

Marcus had worked in healthcare as a certified nursing assistant and was preparing to continue his nursing career. At the same time, he saw a business opportunity created by ongoing staffing needs throughout California’s healthcare system.

His proposed company would help place healthcare personnel with facilities that needed temporary or supplemental staff. He was considering the name “Nurse Partners” and initially expected to form an LLC.

But healthcare staffing businesses do not all operate the same way. Before determining whether Marcus should use an LLC, corporation, professional corporation, or another structure, the more important first step was defining the relationship between his company, the healthcare workers, and the facilities receiving those workers.

What Type of Nursing Staffing Business Are You Starting?

“Nursing staffing agency” is commonly used as a broad business term. California law, however, recognizes different employment, referral, and healthcare business relationships. The name an entrepreneur gives the company does not by itself determine which legal framework applies.

Before filing the business entity, a nursing staffing entrepreneur should be able to answer questions such as:

• Will the company hire the nurses or healthcare workers?
• Will the company determine assignments or reassign workers between clients?
• Will the company set compensation and pay workers from its own accounts?
• Will personnel be assigned primarily to hospitals, clinics, skilled nursing facilities, or other organizations?
• Will the business instead refer private-duty nurses directly to individual patients?
• Will the business simply introduce job candidates to prospective employers?
• Will the company itself provide professional healthcare services directly to patients?

California Labor Code section 201.3, for example, describes a “temporary services employer” using factors such as supplying employees to clients, assigning or reassigning workers, determining compensation, paying workers, and retaining authority over hiring and termination.

California also has a separate statutory framework for certain nurses’ registries. That framework addresses a particular private-duty nursing and referral model and includes requirements that should not automatically be assumed to apply to every business commonly described as a “nursing staffing agency.”

Questions That Help Identify the Right Business Model

The following table is not a substitute for a legal classification of the business. It is a starting point for identifying the issues that should be reviewed before formation.

Understanding the Staffing Relationship: Agency, Worker, and Client Facility

A traditional staffing arrangement can involve three separate parties, and it is important to define the role of each one.

1. The Staffing Company

Depending on the business model, the staffing company may recruit personnel, hire them, establish compensation, administer payroll, make assignments, and contract with healthcare facilities that need temporary or supplemental staff.

2. The Healthcare Worker

The worker may be an RN, LVN, CNA, or another healthcare professional or employee whose qualifications must match the position and assignment the company is filling.

3. The Client Facility

The client may be a hospital, clinic, skilled nursing facility, long-term-care facility, or another organization where the worker performs the assignment.

California’s Labor Commissioner recognizes staffing relationships in which a staffing agency is the hiring employer even though the employee performs work for another business. Employment documents and client agreements should therefore clearly reflect how the parties’ respective responsibilities are structured.

Choosing a Business Entity for a California Nursing Staffing Agency

One of the most common questions is whether a California nursing staffing company should be an LLC, general stock corporation, professional corporation, or another type of entity.

That question should not be answered solely from the words “nurse” or “staffing” in the business name. The appropriate structure can depend on what services the company itself provides, who owns it, whether it employs licensed professionals, whether professional services are being rendered through the entity, and how the business intends to operate.

Before selecting an entity, clarify:

• Who will own the business?
• Will the company hire and pay the healthcare workers?
• Who will enter into the contract with the hospital or facility?
• Will the business itself render professional healthcare services?
• Will workers serve facilities, individual patients, or both?
• Will the business make referrals without employing the workers?
• Does the owner expect to add partners, investors, or additional shareholders?
• How does the owner expect the company to be taxed?

Choosing a Name for Your Nursing Staffing Business

Marcus originally considered the name “Nurse Partners.” Healthcare business names deserve extra review because the name should accurately represent the business being formed and should not create confusion about the services or type of entity involved.

Before investing heavily in a domain, logo, signage, or other branding, business owners should check the proposed entity name and determine whether additional fictitious business name requirements will apply if the company plans to operate under a different public-facing name.

The naming review is also a good opportunity to make sure the brand accurately reflects whether the company is functioning as a staffing business, referral business, professional practice, or another type of healthcare company.

If the Staffing Agency Employs Its Workers, Employer Obligations Become Central

If the company hires and pays the nurses or other healthcare personnel it places, the business should be planned not only as a business entity but also as a California employer.

California’s Labor Commissioner specifically recognizes staffing arrangements in which the staffing business is the hiring employer while the employee performs work for another entity. California’s Notice to Employee requirements even include a designation for a staffing agency or business and information about the other entity for whom the employee will perform work.

Depending on the workforce and business model, areas requiring attention may include:

• payroll and wage-payment procedures;
• new-hire and employee notices;
• workers’ compensation insurance;
• workplace policies and employee documentation;
• timekeeping and overtime procedures;
• sick-leave and other California employment requirements;
• workplace safety responsibilities; and
• coordination with the client facilities where employees are assigned.

California employers generally must maintain workers’ compensation coverage when they have employees. A staffing company’s responsibilities do not necessarily disappear simply because its employee performs the day-to-day assignment at a client’s facility.

Workplace Safety Still Matters When Employees Work at a Client’s Facility

Healthcare staffing companies often send personnel to worksites the staffing company does not own or control. That makes it especially important to understand how workplace responsibilities are divided between the staffing company and the host facility.

California employers are subject to workplace-safety requirements, including maintaining a written Injury and Illness Prevention Program where required. Staffing companies should also have procedures for coordinating with client facilities regarding workplace hazards, training, incidents, and employee concerns.

The contractual relationship with the facility should not be treated as a substitute for reviewing the staffing company’s own responsibilities as an employer.

Create a Reliable Healthcare Credentialing Process

A staffing agency supplying personnel to healthcare organizations should establish a consistent process for confirming that the people it places are qualified for the assignments they accept.

The appropriate verification process will depend on the worker, assignment, client facility, and services being performed. Depending on those circumstances, a process may need to address items such as:

• professional license or certification verification;
• expiration-date monitoring;
• experience and qualification requirements;
• facility-specific credential requirements;
• background or screening requirements where applicable;
• required training or certifications for a particular assignment; and
• documentation showing that verification was completed.

Avoid assuming that one checklist will work for every healthcare worker or every client facility. Credentialing should match the personnel and assignments the staffing business actually accepts.

Prepare the Agreement Between the Staffing Agency and the Healthcare Facility

One of the most important documents in a staffing business is the agreement between the staffing agency and the healthcare facility receiving personnel.

A well-developed agreement should reflect how the particular staffing relationship works rather than relying on a generic contract copied from another company.

Depending on the engagement, subjects to address may include:

• staffing and billing rates;
• overtime and premium-rate situations;
• scheduling and assignment procedures;
• cancellations and no-shows;
• worker credential requirements;
• supervision and responsibilities at the worksite;
• timekeeping and approval of hours;
• insurance requirements;
• confidentiality and information handling;
• replacement personnel;
• payment terms;
• allocation of responsibilities between the staffing company and facility; and
• termination of the relationship.

Which provisions are appropriate will depend on the staffing model and the client relationship. This is an area where legal review before the first placement can prevent the business from building its operations around an inadequate agreement.

Develop Employee Documentation and Internal Policies

If the agency is the employer, it should also develop its own employment documents and internal procedures rather than relying entirely on policies supplied by the client facility.

Depending on the workforce, these materials may include employment and onboarding documentation, assignment procedures, timekeeping rules, workplace-safety policies, confidentiality requirements, complaint and reporting procedures, and policies explaining expectations while an employee is assigned to a client.

For more general information on workplace policies, see our guide on
why an employee handbook can be important for a California business.

Do Not Assume Nurses Can Simply Be Classified as Independent Contractors

Worker classification is another area where terminology can create confusion.

California’s statutory nurses’ registry framework discusses a private-duty model involving self-employed nurses. That does not automatically mean a different company that hires healthcare personnel and assigns them to facilities can label those workers independent contractors.

The classification analysis depends on the actual relationship and applicable California law. Before building the business model around independent contractors, the company should review whether that classification is appropriate for the work being performed.

IA has additional background on California’s worker-classification rules in our article on
independent contractors and California businesses.

When the Business May Actually Be a Nurses’ Registry

Some entrepreneurs researching a “nursing staffing agency” are actually planning a business model that more closely resembles California’s statutory nurses’ registry framework.

If the business will refer private-duty nurses directly to patients rather than hire personnel and supply them to healthcare facilities, the registry rules deserve separate analysis. Those rules address subjects such as the registry relationship, private-duty nursing, required records, disclosures, and a statutory bond.

We cover those requirements separately so they are not confused with the obligations of every business using the phrase “nursing staffing agency.”

California Nursing Staffing Agency Startup Checklist

Rather than beginning with a predetermined entity type or regulatory checklist, work through the business in this order:

Frequently Asked Questions About Starting a Nursing Staffing Agency in California

What is the difference between a nursing staffing agency and a nurses’ registry?

The terms are sometimes used interchangeably in ordinary conversation, but the legal analysis depends on how the company operates. A business that hires personnel and supplies them to client facilities can raise staffing and employer issues, while California also has a separate statutory framework addressing certain private-duty nurses’ registries. The actual relationship among the company, worker, patient, and client facility matters.

Can a nursing staffing agency be an LLC in California?

Entity availability should be evaluated after the services and operating model are defined. The fact that a business staffs nurses does not, by itself, answer whether an LLC, general corporation, professional corporation, or another structure is appropriate. Businesses that themselves render licensed professional services can raise different entity issues from companies functioning primarily as staffing employers.

Does a nursing staffing agency need the $3,000 nurses’ registry bond?

California’s $3,000 surety-bond requirement is part of the statutory nurses’ registry framework. A business should first determine whether that registry framework actually applies to its operations rather than assuming the bond applies simply because the company places nurses.

Does a nursing staffing agency need workers’ compensation insurance?

California generally requires employers with employees to maintain workers’ compensation insurance. If the staffing company is hiring and employing the personnel it places, workers’ compensation should be part of the company’s startup planning.

Are the nurses employees of the staffing agency or the healthcare facility?

That depends on the relationship and operating model. California recognizes staffing arrangements in which the staffing agency is the hiring employer even though the employee performs work for another business. The particular agreements and facts should clearly establish how the relationship is structured.

Can a staffing agency classify its nurses as independent contractors?

A company should not assume that licensed status, temporary assignments, or the use of the word “registry” automatically makes a worker an independent contractor. Worker classification depends on the actual relationship and applicable California law.

Does California require a special license to operate a nursing staffing agency?

The answer can depend on what the company actually does, which healthcare workers it supplies, who receives the services, and whether the company is functioning as an employer, referral business, healthcare provider, nurses’ registry, or another regulated operation. This is an issue to confirm for the proposed business model before launch.

What contracts should a nursing staffing agency have?

A staffing company commonly needs documentation governing its relationship with client facilities and its workforce. The appropriate agreements depend on whether the workers are employees, what services are being staffed, and how responsibilities such as scheduling, payment, supervision, insurance, and workplace obligations are divided.

Can a nursing staffing agency place RNs, LVNs, and CNAs?

The personnel a staffing business can place and the requirements attached to those placements depend on the roles, qualifications, services, settings, and client requirements involved. A credentialing process should be built around the specific worker categories and assignments the company intends to accept.

The First Legal Question Is Not “LLC or Corporation?”

Marcus began with a familiar startup question: should his nursing staffing company be an LLC or corporation?

But the more important question came first:

Defining that model before formation makes it easier to evaluate the proper entity, employment responsibilities, contracts, credentialing procedures, and regulatory requirements before the company begins doing business.