Physical Therapists' Quandry – Working for a Layperson-Owned General Corporation

A question that the attorneys at Simas & Associates, Ltd. often get is whether it is legal for a physical therapist to be employed by a layperson-owned and fully legal general corporation.  It is what many clients find surpising with the law, but attorneys know all to well – legal "gray areas."  

The law is not always black or white.  Rather, when dealing with a tripartite form of government holes begin to form almost immediately as legislation is proposed, drafted, amended, voted on by two chambers of the legislature, modified through conference, signed by the Governor accompanied with a signing statement, and finally interpreted and enforced by the underlying executive agency.  While glaring holes are filled by the executive agency, how it is filled can be circumspect and overturned by the judicial branch.

As for this particular question, the hole has not been filled.  And neither of the appropriate agencies seem interested in doing so.  Specifically, neither the Physical Therapy Board or the Office of Attorney General has presently offered an official opinion.  In fact, not even an unofficial opinion or statement.  Nor have regulations been drafted and enforced clarifying the discrepancy.  Rather, it remains unknown.  Arguments can be made both for and against it.  Even the recently passed Assembly Bill 1000 provides ammunition for both sides of the debate.

At one time there was certainty.  Under the advice of its then legal counsel, the Physical Therapy Board adopted a policy in 1990 stating that physical therapy licensees are not prohibited from working for corporations that are not professional corporations.  Effectively, the 1990 policy stated that although the Physical Therapy Practice Act established the requirements for physical therapy corporations, this law did not prohibit non-professional corporations from providing physical therapy services or physical therapist from being employed therein.

However, in 2010 the Physical Therapy Board rescinded the 1990 policy because the resolution was likely an underground regulation.  Furthermore, the 1990 policy conflicted with existing law and the California spirit of barring the corporate practice of healthcare.  The executive officer at the time did recommend grandfathering existing layperson-owned general corporation’s that were practicing physical therapy through employed physical therapists.  This recommendation on grandfathering would have let the owners retain his or her status and continue to operate the corporation, and the employed physical therapists continue to practice through the corporation.  However, on advice of its legal counsel, the board did not move to adopt this resolution.

In 2012, the California legislature passed SB 543, which prohibited the Physical Therapy Board from disciplining a physical therapist licensee for his or her employment as a physical therapist with a medical, podiatric, or chiropractic corporation.  In 2014, the California legislature passed the aforementioned AB 1000, which opened up a number of health care-related professional corporations for which physical therapists can be employed.  However, these laws did not directly address the layperson-owned general corporation.

As of 2014, the Physical Therapy Board has not yet been tested on the issue.  Meaning, since the Board rescinded the 1990 policy, it has not yet received a complaint or pursued license discipline related to a licensee working for and providing physical therapy for a non-professional or layperson owned corporation. 

Given the uncertainty, Simas & Associates, Ltd.'s advice to licensees who find themselves in such a dilemma is to not enter into an employment agreement with the layperson-owed general corporation.  Rather, incorporate your own practice and contract with the third party as an independent contractor, if the service to be provided is internal.  If it is to the third parties’ consumers, then just work independently, letting the third party refer the consumers to you.