Governments at all levels continue to struggle to pay their bills and deliver the services their constituents desire and deserve. From the federal government to states and municipalities, the last several years have been fiscally challenging. To address revenue shortfalls, some states have looked to curtail the notion that a worker who is not paid a salary is an independent contractor immune from various requirements attendant to employees. Many employers, on the other hand, cling to the notion that not paying a salary absolves them from requirements of minimum wage or overtime laws.
Massachusetts is no state in which to bet on independent contractor status
The Commonwealth of Massachusetts took strong legislative action not long ago when it enacted a three-pronged statute placing the burden on employers to demonstrate that a worker is an independent contractor. The employer must satisfy each of the legislation’s three elements to effectively label a man or woman in its employ as an independent contractor:
- The employee must be free from the employer's control
- The services that are provided must be rendered outside the employer's usual place of business
- The worker must be engaged in an independent trade, occupation or business of the same nature as the employer
Several recent cases illustrate the problematic nature of this statute for employers seeking to classify workers as independent. Oliviera v. Advanced Delivery Systems, Inc. involved workers at a home services delivery management company who were required to wear uniforms, use cell phones, adhere to daily manifests and consent to monitoring by an agent of the employer. In finding the workers to be employees, the court's opinion emphasized the employer’s control.
In Fucci v. Eastern Connection Operating, Inc., the employer required delivery service workers to sign a contract indicating that they had control of their work life. Nonetheless, the court found the workers to be employees because, while the parties' agreement indicated that the plaintiffs controlled their work environment, it also related that they had to comply with the company's logistical and pick-up regimen.
Massachusetts courts have not limited their opinions to everyday business operations. Even strip club operators have attempted unsuccessfully to suggest that exotic dancers are independent contractors. In two similar cases (Sandoval v. M. J. F. Bowery Corp. and Jenks v. B & B Corp. d/b/a The Golden Banana), the Superior Court found that nude dancers were employees because they did not provide their services outside the employer's usual place of business and they were not engaged in an independent trade of the same nature.
Illinois and Oregon take an equally dim view of independent contractor designation
Massachusetts is not alone in its stringent view of independent contractor status. Oregon has adopted a four-part test, each prong of which must be satisfied for an employer to prove a worker is independent. Among the four elements are a lack of control by the employer and the employee being engaged in an independent business or trade. Oregon courts have strictly construed this provision. Last November, in McKenzie Fence Co. v. Department of Revenue, a court determined that an individual construction worker who performed services more or less when and how he wished was nonetheless an employee because he was not engaged in an independent business.
Illinois has a statute similar to one enacted in Massachusetts. Its independent contractor test, too, is conjunctive, placing the burden on the employer to show that the employee is free from its control and that his or her services are part of an independent trade or business. Thus, in Emergency Treatment, S. C. v. The Department of Employment Security, the court found that doctors working at a medical center staffed by a service with which the center had a contract were, in fact, employees.
In-house counsel need to be wary of local independent contractors provisions
The moral of the story is that in-house counsel need to know the requirements of the states in which they engage those who work for the businesses they advise. States are scrutinizing the status of independent contractors with a far more critical eye than they have historically and the courts are supporting them. While it may appear at first that a worker is independent, it may well be that he or she is not independent enough for an employer to avoid the often burdensome legal requirements attendant to employees.