Almost every telehealth company I work with pays at least some of its clinicians on a 1099. Usually the reasoning is the same. The clinicians set their own hours, they work for other companies too, they are licensed professionals exercising independent judgment, and the company is buying clinical services rather than employing people. Sometimes there is a second reason underneath, which is that employing clinicians in a professional corporation across multiple states is expensive and complicated, and contracting is not.
On February 11, 2026, a physician filed a proposed class and collective action in the Northern District of California arguing that this arrangement, at one company, was unlawful. The case is Cioppettini v. Mochi Medical CA, P.C., et al., No. 4:26-cv-01260, naming Mochi Medical CA, P.C., Mochi Medical, P.A., and Mochi Health Corp.
Nothing has been decided. These are allegations, the case is in its early stages, and there are real defenses available. But the complaint is a useful document regardless of how it comes out, because it describes the exact fact pattern that most telehealth companies are operating inside right now.
What is alleged
The named plaintiff is a licensed physician who worked remotely for the defendants for roughly two months, from approximately December 10, 2024 to February 14, 2025, and was compensated on a per patient, per month basis.
The complaint alleges the companies uniformly classified physicians and other health care professionals as independent contractors while exercising significant control over their work, and seeks relief under the Fair Labor Standards Act and California wage and hour law. The claims include failure to pay minimum wage and overtime, failure to provide accurate itemized wage statements, and failure to reimburse business expenses.
Notice who the defendants are. Not just the platform company. The professional corporation and the professional association are named alongside it. That detail is the reason this case matters structurally rather than just as an employment law story.
Why the PC being a defendant is the important part
In a friendly PC model, the clinicians contract with the professional entity, not with the platform. That is by design, because in corporate practice states the platform cannot employ or direct clinicians.
The consequence is that wage and hour liability for those clinicians attaches to the professional corporation. And the professional corporation, in most of these structures, is deliberately thin. It has a physician owner with nominal equity, a management agreement that sends most of the economics to the MSO, and very little on its balance sheet.
So the question every operator should be asking is what happens when a class-wide wage claim lands on an entity that was never capitalized to absorb one. The follow-on question is whether plaintiffs will reach past the PC to the platform on a joint employer theory, which is exactly what naming all three entities sets up.
The classification tests, and why they are hard here
California uses the ABC test, adopted in Dynamex and codified in AB 5. A worker is presumed to be an employee unless the hiring entity proves all three of the following: that the worker is free from the hiring entity's control and direction in performing the work, that the work is outside the usual course of the hiring entity's business, and that the worker is customarily engaged in an independently established trade or business of the same nature.
Fail any one prong and the worker is an employee. The plaintiff argues all three fail: that he was not free from control because the company directed his duties and working conditions, monitored his work, and could discipline or terminate him; that his work was squarely within the company's ordinary course of business; and that he was not operating an independently established medical practice.
Prong B is the structural problem. When your business is providing medical care and your clinicians provide medical care, arguing that clinical work sits outside your usual course of business is a difficult position.
There are real defenses. California's professional services exemptions remove certain occupations from the ABC test and return them to the older, more flexible Borello multi-factor analysis, and physicians are among the categories where an exemption argument is available. Under the FLSA, physicians may qualify as exempt learned professionals. Whether those defenses apply depends on facts about the specific relationship rather than on job title alone. This case is contested, not decided.
The compliance paradox nobody talks about
Here is what makes this genuinely hard rather than just expensive.
Corporate practice doctrine requires that clinical judgment stay with the licensed clinician and that the non-clinical company not direct clinical decisions. Companies use independent contractor status partly to demonstrate exactly that, since contractor status reads as independence.
Meanwhile, running a telehealth operation at volume requires control. Response time standards. Visit templates. Protocol adherence. Quality metrics. Scheduling availability. Chart audits. Removal from the platform for poor performance. Every one of those things is a legitimate operational and quality necessity, and every one of them is also a control fact that a plaintiff will put in a complaint.
So the same operational choices that make your service consistent make your contractor classification harder to defend, while the classification you chose to support your corporate practice posture creates wage and hour exposure in the entity least able to pay it. You cannot solve this by picking one document. It has to be designed.
What to review in your own arrangements
The compensation structure. Per patient and per encounter payment is common and is not itself unlawful, but it interacts badly with minimum wage and overtime claims because it makes hours worked ambiguous. If you cannot reconstruct how many hours a clinician spent, you cannot demonstrate what they effectively earned per hour.
The control facts, honestly assessed. Not what the agreement says, what actually happens. Who sets availability. Whether shifts are assigned or chosen. Whether protocols are mandatory. Whether metrics drive discipline. Whether the clinician can decline patients. Whether exclusivity is required in practice even if not in writing.
Expense reimbursement. California Labor Code section 2802 requires employers to reimburse necessary business expenses. For remote clinicians that reaches internet, phone, equipment, and potentially licensure and DEA costs. A misclassification finding makes every unreimbursed expense a claim, which is why this shows up in nearly every one of these complaints.
Wage statement compliance. California's itemized wage statement requirements carry their own penalties, and those penalties apply per employee per pay period. In a class posture the arithmetic gets ugly quickly, independent of the underlying wage claim.
State by state. The ABC test is not universal. Other states use economic realities or common law control tests, and some have profession-specific rules. A multi-state clinician network has a different answer in each state, which is one more reason a single national contractor template is a risk rather than an efficiency.
Which entity signs. If the PC is the contracting party, look at whether the PC has any ability to bear this liability and whether your management agreement addresses indemnification and funding for it. Most do not, because nobody drafted them expecting this.
What to do about it
The uncomfortable answer is that for many telehealth companies, employing clinicians through the professional entity is the cleaner posture, and it happens to align with what corporate practice doctrine wants anyway. Employment inside the PC, with the PC properly capitalized and the management agreement funding it, resolves the classification question and strengthens the structure at the same time.
If contractor status is genuinely appropriate for part of your network, then make the arrangement match the classification rather than the reverse. That means real scheduling flexibility, no exclusivity, a defined scope of engagement, clinicians who genuinely maintain their own practices, expense treatment consistent with contractor status, and operational practices that match the contract. And it means tracking hours or documenting effective hourly compensation well enough to defend the numbers if you are ever asked.
Either way, this is not a document review. It is an operations review with a document at the end of it.
How I help
At Camino Strategy Group we build and maintain PC/MSO structures and the clinician contracting underneath them across all fifty states, which includes classification analysis, employment versus contractor design, and capitalizing the professional entity so it can actually carry what it is holding. If you are running a 1099 clinician network and have not stress-tested it, reach out and we will walk you through it.
References
- Cioppettini v. Mochi Medical CA, P.C., et al., No. 4:26-cv-01260 (N.D. Cal., filed February 11, 2026)
- Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018)
- California Labor Code sections 2775 through 2787 (AB 5 and subsequent exemptions), and section 2802
- Fair Labor Standards Act, 29 U.S.C. 201 et seq.
- S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989)
This article describes allegations in a pending case. No findings have been made, and nothing here should be read as a statement about the merits.