A New Jersey appeals court ruling on Thursday may spell bad news for businesses that contract with physicians and hospitals to staff emergency rooms and other treatment facilities.

The Appellate Division held that those businesses can be vicariously liable for medical malpractice if there is a high enough level of control over the contractors or sufficient economic interdependence between the contractor and the business he serves.

The court, in Monk v. Emergency Physician Assocs., A-489-11, reinstated a claim over a patient’s death at Virtua/West Jersey Hospital in Voorhees. The lower court granted summary judgment on the basis that the allegedly negligent doctor, Joseph O’Connell, was an independent contractor rather than an employee of Emergency Physician Associates (EPA), a Woodbury company that staffed the hospital emergency room.

On Sept. 1, 2006, Scott Monk, 43, went to Virtua’s emergency room, complaining of pain from kidney stones and was dead within two hours, allegedly from a painkiller overdose. Monk was allegedly given three two-milligram doses of Dilaudid, a potent derivative of morphine. It was about six to nine times the recommended maximum dose, according to expert testimony.

A little more than an hour after receiving the last dose, Monk was discovered with no pulse and later died. O’Connell was the only doctor on duty.

Monk’s widow, Nancy, sued EPA, O’Connell and Virtua in Camden County. Superior Court Judge Frederick Schuck threw out the claim against EPA, concluding that O’Connell was an independent contractor.

Schuck applied both the control test and the “relative nature of the work” test. The latter, used in case of professionals, requires a court to examine the “extent of the economic dependence of the worker upon the business he serves and the relationship of the nature of his work to the operation of that business.”

O’Connell had been working at the Virtua emergency room under a contract with EPA that was denominated as an independent contractor’s agreement and expressly stated it did not create an employee relationship.

O’Connell was obligated to provide medical care “within the guidelines of good medical practice.” EPA was given no “control or direction” over his work as long as he complied with “currently approved practices” and hospital rules and regulations.

EPA could terminate the contract for cause at any time or on 30 days’ written notice. O’Connell could get out of it at the end of the one-year term or on 90 days’ notice.

The contract specified an hourly rate that EPA was to pay O’Connell and entitled him to bonuses based on the number of patients he saw and the intensity of care he provided. O’Connell had to maintain a set amount of malpractice insurance, but according to him, EPA paid the premiums.

EPA billed patients for O’Connell’s services, sending out invoices in his name, collecting the monies and paying O’Connell what he was owed under the contract.

EPA had a separate contract with Virtua making it the exclusive source of its emergency room physicians, although nonmedical E.R. staff were classified as Virtua employees.

EPA was required to ensure its doctors met minimum qualifications, maintain a performance-review system that met Virtua’s standards, participate in Virtua’s training, performance improvement and patient satisfaction programs, perform teaching duties, maintain medical records and supervise compliance with all reporting statutes and regulations relating to the services provided by its physicians

EPA had to provide a monthly schedule subject to Virtua’s approval but no equipment or supplies.

EPA also provided the hospital’s chief medical director of emergency medical services, who managed the E.R.’s daily operations and was authorized to act on EPA’s behalf, as well as the division heads.

All of that amounted to an independent contractor relationship, according to Schuck, but Appellate Division Judges Francine Axelrad and Mitchel Ostrer found O’Connell qualified as an EPA employee for liability purposes.

They found the control test was satisfied because O’Connell was supervised by EPA doctors, paid by EPA, prohibited from treating his own patients at Virtua and could be fired by EPA.

EPA did not provide O’Connell’s equipment but neither did he. The hospital provided it.

The judges found it not dispositive that EPA did not withhold income taxes or pay unemployment taxes for O’Connell or that it designated him an independent contractor in the contract.

The court found the nature-of-the-work test was also satisfied because O’Connell’s income depended on EPA, his work was integral to the company and EPA retained a continuing contractual and business relationship with him and its other doctors.

Monk’s lawyer, Michael Berger of Andres & Berger in Haddonfield, says “simply labeling a doctor as an independent contractor doesn’t make it so.”

He says he reached a joint settlement of claims with O’Connell, Virtua and a nurse last year but cannot disclose the terms. O’Connell’s physician profile on the Division of Consumer Affairs website shows he paid $500,000 on a malpractice claim on July 28, 2011.

The defense lawyers were George Hardin of Hardin, Kundla, McKeon & Poletto in Springfield and Jay Blumberg of Woodbury (for EPA), Mark Petraske of Buckley Theroux Kline & Petraske in Princeton (for O’Connell) and Thomas Walsh of Parker McCay in Mount Laurel (for Virtua). None returned calls. •