Ruling on the imam standing on the far left of the musalla and ruling on the worshippers near him standing on his right
Question

                We pray in a small musalla (prayer room) in the hospital, during work hours. Because the musalla is so small, the imam stands on the far left, and the worshippers all stand on his right, in line with him. Is this permissible? Or is it more correct for the imam to stand in the middle of row, among the worshippers.

Can he stand in line with the worshippers if they pray on his right and his left, or should he be in front of them, if only slightly?
Praise be to Allah.
    Firstly: 

    The Sunnah is for the imam to stand in front of the 
    worshippers, because this is what is proven in the Sunnah.

    Ibn Abi ‘Umar (may Allah have mercy on 
    him) said: The Sunnah is for the worshippers to stand behind the imam. If 
    there are a number of worshippers, the Sunnah is for them to stand behind 
    the imam, whether they are men or women, because the Prophet (blessings and 
    peace of Allah be upon him) used to lead his companions in prayer and they 
    stood behind him. When Jaabir and Jabbaar stood on his right and left, he 
    pushed them until they were behind him, even though they were two. 
    Similarly, Jaabir narrated: I travelled with the   Prophet (blessings and 
    peace of Allah be upon him) on a campaign. He stood up to pray, and I did 
    wudoo’, then I came and stood on his left. He took me by the hand and pulled 
    me around until he made me stand on his right. Then Jabbaar ibn Sakhr came 
    and stood on his left, and he took both of us by the hand and made us stand 
    behind him. Narrated by Abu Dawood. This is also the view of ‘Umar, ‘Ali, 
    Jaabir ibn Zayd, al-Hasan, Maalik, ash-Shaafa‘i, and ashaab ar-ra’y.

    End quote from ash-Sharh al-Kabeer (2/61) 

    In the answer to question no. 66017 
    we explained that it is mustahabb for the imam to stand in the middle of the 
    row.  

    Secondly: 

    If the worshippers stand on the right of the imam, their 
    prayer is valid, but if the imam stands in the middle of the row and they 
    stand behind him, that is preferable. 

    Al-Bahooti (may Allah have mercy on him) said: If the 
    worshippers stand with the imam, on his right, or they stand on both sides 
    of him, that is valid.

    End quote from Kashshaaf al-Qinaa‘ (1/486) 

    Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: It 
    is valid for them to stand with the imam, on his right or on both sides of 
    him. That is, if there are two or more worshippers, they may stand on his 
    left or on either side of him, one on his right and the other on his left. 
    That is preferable to them being on his right only, because ‘Abdullah in 
    Mas‘ood (may Allah be pleased with him) stood between ‘Alqamah and al-Aswad, 
    and he said: This is what I saw the Prophet (blessings and peace of Allah be 
    upon him) do. So if there are two worshippers or more with the imam, there 
    are three ways they may stand:

    1.behind him, which 
    is the best

    2.on either side of 
    him

    3.on his right hand 
    side only.

    End quote from ash-Sharh al-Mumti‘ (4/264) 

    Thirdly: 

    If they pray on his right, and it is possible for the imam to 
    step forward, even a little bit, to indicate who the imam is, and so that no 
    one will stand ahead of the imam, this is the Sunnah; the evidence for it 
    has been mentioned above. 

    Al-Bukhaari (may Allah have mercy on him) included a chapter 
    in his Saheeh entitled Chapter: He should stand on the right of the 
    imam, in line with him, if they are two. 

    Imam Badr ad-Deen al-‘Ayni al-Hanafi (may Allah have mercy on 
    him) said: 

    If they are two, i.e., the imam and the one who is praying 
    behind him – and it is limited to that, because if it is two worshippers 
    with an imam , the ruling is that the imam should step forward.

    End quote from ‘Umdat al-Qaari Sharh Saheeh al-Bukhaari 
    (8/404) 

    But if they form a straight line with the imam, their prayer 
    is still valid, and is not makrooh, because there is an excuse. 

    Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) was 
    asked: 

    Sometimes we are in the trench and it is narrow, so the imam 
    cannot stand in front of us to lead the prayer; rather we make him stand in 
    the middle of the first row. Is that valid? If it is not valid, then where 
    is the correct place for him to stand? Please note that if we pray outside, 
    we may be shelled and die. 

    He (may Allah have mercy on him) replied: 

    It is Sunnah for the imam to stand in front of the 
    worshippers, but if that is not possible because the place is cramped, then 
    there is nothing wrong with him standing with them in the middle of the row.

    End quote from Majmoo‘ Fataawa wa Rasaa’il ash-Shaykh 
    (15/185)

    And Allah knows best.