Question of the Month

December 2017

Question
What is your area’s definition of “independent contractor?”
Answer from Alabama

Alabama generally applies the same standards as the IRS.

For more information please contact David Middlebrooks at dmiddlebrooks@lehrmiddlebrooks.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from California

California does not have a single definition of the term “independent contractor.” In general, courts and administrative agencies begin with the presumption that a worker is an employee. Employers can rebut the presumption based on various factors. The California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341 adopted the “economic realities” test, while the Employment Development Department (EDD) applies a test that reviews the “right to control” of a worker.

For more information please contact Michael Foster at mfoster@fosteremploymentlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Hawaii

Hawaii does not have a clear or consistent definition of “independent contractor” for all purposes.  For state wage and hour purposes, the Hawaii Department of Labor and Industrial Relations (“DLIR”) has historically adopted the FLSA independent contractor test.  For the Hawaii Prepaid Healthcare Act and Employment Security Law, the applicable statutes or administrative regulations use the “ABC test,” which is strictly construed AGAINST finding independent contractor status:

• “The individual has been and will continue to be free from control or direction over the performance of [his/her] service, both under the individual’s contract of hire and in fact; and”

• “The service is either outside the usual course of business for which the service is performed or . . . the service is performed outside of all the places of business of the enterprise for which the service is performed; and”

• “The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the contract of service.”

Hawaii’s Temporary Disability Insurance and Workers’ Compensation statutes require satisfaction of BOTH the “control” test and the “relative nature of the work” test in order to find independent contractor status, again construed strictly against finding such status:

Control test under Hawaii common law:

Examines whether “the person on whose behalf the work is done has the power, express or implied, to dictate the means and methods by which the work is to be accomplished.”

An “independent contractor” is “[o]ne who contracts with another to do a specific piece of work for him, and who furnishes and has the absolute control of his assistants, and who executes the work entirely in accord with his own ideas, or with a plan previously given him by the person for whom the work is done, without being subject to the latter’s orders in respect to the details of the work, with absolute control thereof, is not a servant of his employer, but is an independent contractor.”

Relative nature of the work test under Hawaii common law:

This test “involves a balancing of factors regarding the general relationships which the employee has with regard to the work performed for each of his [or her] employers.”  Factors to be considered include:  “whether the work done is an integral part of the employer’s regular business; and whether the worker in relation to the employer’s business, is in a business or profession of his own.”

For more information please contact Sarah Wang at SWang@marrjones.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Kentucky

There is no statutory definition under Kentucky law. Below are factors that Kentucky courts have used to determine independent contractor status.

The factors for determining whether a person is an employee or independent contractor are as follows:

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation  or business;

(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer; and

(i) whether or not the parties believe they are creating the relationship of master and servant.

Ratliff 396 S.W.2d at 324-325. Several years later, Chambers, 436 S.W.2d 265, clarified which Ratliff factors were the most important in determining whether an individual was an independent contractor. "While many tests are appropriately considered, we think the predominant ones encompass the nature of the work as related to the business generally carried on by the alleged employer, the extent of control exercised by the alleged employer, the professional skill of the alleged employee, and the true intentions of the parties." Id. at 266; see also Uninsured Employers' Fund v. Garland, 805 S.W.2d 116, 118-119 (Ky. 1991).

Gogel v. Hancock, 2013 Ky. Unpub. LEXIS 1 *, 2013 WL 674498 (Ky. Feb. 21, 2013)

For more information please contact Jacob Crouse at jwc@smithandsmithattorneys.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Maryland

As the Maryland Department of Licensing and Labor Regulation has observed, https://www.dllr.state.md.us/workplace/wfempfaqs.shtml:

For purposes of the Workplace Fraud Act as well as Maryland's Unemployment Insurance law, the State has adopted what is commonly referred to as the "ABC Test."  Other agencies utilize a common law test of direction and control or an economic realities test for other purposes.  Although the tests are not identical, they have certain elements in common.  In particular, the tests examine the degree of direction and control exercised over the worker as well as the financial aspects of the relationship.

Under the ABC Test, a worker is presumed to be an employee unless:

A.    The individual is free from direction and control;

B.    The individual customarily is customarily engaged in an independent business of the same nature as that involved in the work; and

C.    The work is outside the usual course of business of the person for whom it is performed OR the work is performed outside any place of business of the person for whom it is performed.

For more information please contact Fiona Ong at fwo@shawe.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Massachusetts

MGL c. 149, sec. 148B is the MA Independent Contractor Law.   In summary, to be an independent contractor, an individual must be free from control, perform services outside the usual course of the employer’s business, and be engaged in an independent business.

For more information please contact Marylou Fabbo at mfabbo@skoler-abbott.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Michigan

In most respects, Michigan follows the Economic Realities test.  This test takes into account the totality of the circumstances, with an emphasis on the following factors:

"(1) the control of a worker's duties, (2) the payment of wages, (3)  the right to hire and fire and the right to discipline, and (4) the performance of the duties as an integral part of the employer's business towards the accomplishment of a common goal."

For purposes of Workers Compensation (seeking benefits or asserting the exclusive remedy defense), to be considered an independent contractor, the worker must meet all three of the following statutory criteria:

“the person…does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to th[e] act.”

In some tort (e.g., malpractice) actions, courts use the “right of control” test to determine vicarious liability.

Employers in Michigan are cautioned that Michigan’s Elliott Larsen Civil Rights Act protects non-employees (independent contractors) under certain circumstances.  If the defendant is a statutory employer,  the plaintiff need not be the employee of the statutory employer, but can sue where  the non-employer 1) has the authority to control and affect the terms and conditions of the plaintiff’s employment, and 2) actually uses such authority by taking adverse action against the plaintiff (e.g., by barring a vendor’s employee from the premises). 

For more information please contact David Masud at dmasud@masudlaborlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Minnesota

The definition of an independent contractor will vary on the legal issue at hand.  For instance, the Minnesota Workers Compensation Act reviews a nine-factor test to determine an individual’s status as either an employee or independent contractor.   A detailed explanation can be found on the Minnesota Department of Labor and Industry’s website at http://www.dli.mn.gov/WC/IndpCont.asp.

For more information please contact Tom Revnew at TRevnew@seatonlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Missouri

Missouri defines independent contractor by applying the IRS’s 20-factor test. Generally, giving a worker direction on when, how and where to complete work; paying by the hour, week or month; reimbursing for business and travel expenses; performing work on the business's premises or having a continuing relationship between the worker and the employee all may point to a worker being an employee under the law.

For more information please contact Stephen Maule at maule@mcmahonberger.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Nevada

For purposes of wage and hour law, Nevada law presumes a person to be an independent contractor if:

a) Unless the person is a foreign national who is legally present in the United States, the person possesses or has applied for an employer identification number or social security number or has filed an income tax return for a business or earnings from self-employment with the Internal Revenue Service in the previous year;

b) The person is required by the contract with the principal to hold any necessary state business registration or local business license and to maintain any necessary occupational license, insurance or bonding; and

c) The person satisfies three or more of the following criteria:

 1) Notwithstanding the exercise of any control necessary to comply with any statutory, regulatory or contractual obligations, the person has control and discretion over the means and manner of the performance of any work and the result of the work, rather than the means or manner by which the work is performed, is the primary element bargained for by the principal in the contract.

 2) Except for an agreement with the principal relating to the completion schedule, range of work hours or, if the work contracted for is entertainment, the time such entertainment is to be presented, the person has control over the time the work is performed.

 3) The person is not required to work exclusively for one principal unless:

    (I) A law, regulation or ordinance prohibits the person from providing services to more than one principal; or

    (II) The person has entered into a written contract to provide services to only one principal for a limited period.

 4) The person is free to hire employees to assist with the work.

5) The person contributes a substantial investment of capital in the business of the person, including, without limitation, the:

    (I) Purchase or lease of ordinary tools, material and equipment regardless of source;

    (II) Obtaining of a license or other permission from the principal to access any work space of the principal to perform the work for which the person was engaged; and

    (III) Lease of any work space from the principal required to perform the work for which the person was engaged.

Nevada Revised Statutes 608.0155.

For more information please contact Scott Abbott at sabbott@kzalaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from New York

The New York State Labor Law does not define the term independent contractor, rather New York courts apply a common law test to determine if a worker is properly classified as an independent contractor. According to guidance from the New York Department of Labor, independent contractors are (1) in business for themselves, (2)  make their services available to the public, and (3) perform services free from supervision, direction, and control. The New York Department of Labor has outlined additional factors here: https://labor.ny.gov/formsdocs/ui/ia318.14.pdf.   Note that New York City recently passed a law regulating contracts with freelance workers (The Freelance Isn’t Free Act). Under the new law, a freelance workers is defined as “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation,” but not including sales representatives, as defined by the New York Labor Law, licensed individuals retained to practice law, and licensed medical professionals.

For more information please contact Amanda Baker at abaker@cfk-law.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from North Carolina

North Carolina adopts the definition used by the DOL and the IRS.

For more information please contact Bryan Adams at bryan.adams@vradlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Oregon

ORS 670.600 sets out the detailed definition of an “independent contractor” for the Department of Revenue, the Employment Department, the Construction Contractors Board and the Landscape Contractors Board.

For wage and hour purposes, Oregon Courts and the Oregon Bureau of Labor and Industries use an “economic realities” test to determine whether someone is an employee.  The “economic realities” test includes five regulatory factors that are most relevant to determining independent contractor status: (1) the nature and degree of control exercised by the putative employer over the employee, (2) the degree of the putative employer's supervision of the employee's work, (3) the putative employer's power to determine the amount and method of the employee's pay, (4) the putative employer's right to hire, fire, or change the terms and conditions of employment of the employee, and (v) the putative employer's responsibility to prepare payroll and to pay the employee's wages.

The Oregon Bureau of Labor and Industries uses a “right to control test”  for purposes of determining if someone is an employee for civil rights law, analyzing the following factors:  (1) direct evidence of the right to, or the exercise of, control; (2) the method of payment; (3) the furnishing of equipment; and (4) the right to fire. 

For more information please contact Chris Duckworth at cduckworth@bullardlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Pennsylvania

Most Pennsylvania employment-related statutes do not contain a specific definition of the term “independent contractor”.  To fill the gap, courts will examine a variety of factors, including but not limited to a putative employer’s right to control the manner work is to be done; the contractor’s responsibility for result only; the terms of the agreement between the parties; the nature of the work or occupation; the skill required for performance; whether the contractor is engaged in a distinct occupation or business; which party supplied the tools; whether payment is by the time or by the job; whether work is part of the regular business of the employer, and also the right to terminate the engagement at any time.  See Universal Am-Can v. Workers' Comp. Appeal Bd. (minteer), 563 Pa. 480, 490 (Pa. 2000).

A subtly different test exists under the Pennsylvania Unemployment Compensation Law, which defines an independent contractor relationship will generally be found to exist where an individual (1) has been and will continue to be free from control or direction over the performance of such services both under contract of service and in fact; and (b) as to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.  43 P.S. § 753 (2017).

For more information please contact John Ellis at jellis@ufberglaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Texas

Texas follows the federal/IRS definition.

For more information please contact John Freeman at jfreeman@keyharrington.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Virginia

The Virginia Employment Commission follows IRS Revenue Ruling 87-41 (the well-known “Twenty Factor Test”) in determining whether an individual who receives remuneration in exchange for services is an employee or independent contractor.  Statutory exceptions to “employee” status exist for a variety of individuals, including but not limited to: Truck owner-operators or lessees; commission-based real estate and insurance sales; many farm laborers; crew members on certain fishing vessels; some medical interns; and court reporters.

For more information please contact Michael Lorenger at MLorenger@lorengercarnell.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Washington

The Washington Supreme Court has decided that the “economic realities” (also known as the “economic dependence”) test applies. This test is the same one used for determining employment status under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.; Anfinson v. FedEx Ground Package System, Inc., 174 Wn.2d 851, 281 P.3d 289 (2012). The Supreme Court did not specify the elements, but one federal judge interpreted the test to require proof of the following non-exclusive list of factors: 1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; 2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6) whether the service rendered is an integral part of the alleged employer’s business.  David v. Bankers Life and Casualty Co., 2015 WL 3994975 (W.D. W.A. June 30, 2015), citing Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir.1981).

For more information please contact Ken Diamond at ken@winterbauerdiamond.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Wisconsin

Wis. Stat. § 102.07(8)(b), sets forth a  nine-part statutory test a person must satisfy to be considered an independent contractor and includes the requirements that the employee:

1. Maintain a separate business.
2. Obtain a Federal Employer Identification number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on the work or service in the previous year.
3. Operate under specific contracts.
4. Be responsible for operating expenses under the contracts.
5. Be responsible for satisfactory performance of the work under the contracts.
6. Be paid per contract, per job, by commission or by competitive bid.
7. Be subject to profit or loss in performing the work under the contracts.
8. Have recurring business liabilities and obligations.
9. Be in a position to succeed or fail if business expense exceeds income.

For more information please contact Laurie Petersen at LPetersen@lindner-marsack.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

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