
- The extent of control by the company over the details of the work to be performed (such as the hours when work is to be performed, amount of time to be worked, and the level of supervision, if any);
- Whether or not the worker is engaged in a distinct occupation or business;
- The level of skill needed in the particular occupation;
- Which party supplies any tools or devices necessary to perform the work;
- The duration of the working relationship;
- The manner and method of payment to the worker for services rendered;
- Whether the worker has an ownership or proprietary interest in their work product; and
- Whether the worker has significant entrepreneurial opportunity for gain or loss through the work.
The
recent NLRB decision overruled a 2014 decision, FedEx Home Delivery, 361 NLRB 610 (2014), issued by the then Democratic
majority of NLRB members. In that earlier decision, the NLRB modified the
independent contractor test to greatly minimize the importance of the
entrepreneurial opportunity for economic gain factor, making it much harder for
a worker to qualify as an independent contractor. Under the SuperShuttle decision, the NLRB reverts
back to the preexisting test.
Employers must be mindful of numerous legal considerations when
deciding whether they can properly classify a provider of services as an
independent contractor rather than as an employee. Misclassifying a worker as a
contractor can implicate a variety of types of potential liability, such as, wage and hour, benefits, tax,
unemployment, and workers compensation liability. In addition, in some states, other
statutory contexts are implicated, such as a Minnesota statute applicable
to construction contractors. Significant liability can
result from an incorrect independent contractor classification, with harsh
economic consequences.
In the eyes of reviewing authorities like the NLRB, U.S. Department
of Labor, and the IRS, control is a key factor in determining whether a worker
is an independent contractor or an employee. What is said in a company
policy or independent contractor agreement about the relationship between the company
and service provider matters far less than the actual details of day-to-day
control of the worker and their work.
The
bottom line is that employers should have an organized, systematic approach
when determining whether a worker may be properly designated as an independent
contractor rather than an employee. Businesses must
carefully set up contractor relationships, and - even more importantly - monitor
actual, day-to-day contacts and realities with the independent
contractor. Getting the designation wrong may create significant
legal exposure for businesses.
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