Today’s Tip: Beware of Multi-State Issues (and Rudolf is a girl?!)

Neil deGrasse Tyson broke the news last week that Santa’s reindeer must be female, since they still have their antlers in the winter. Mind blown: Rudolf is a girl. #girlpower

It seems like should have figured that out earlier. Sometimes things are not as they seem. So let’s play some reindeer games.

Assessing independent contractors status isn’t always as it seems either. Do you pass the IRS Test? Congratulations, but that tells you nothing about whether your relationship meets state law tests. Did you win an unemployment claim on the basis that your contractor was not your employee? Congratulations, but that tells you nothing about whether your relationship has contractor status under federal wage and hour law.

To determine whether an independent contractor relationship is legitimate requires you to look at multiple tests across multiple laws across multiple jurisdictions.

Companies that retain contractors across multiple states should pay particular attention to the differences among multiple states and across multiple laws. The same relationship can be deemed employment under one test and independent contractor under another.

For example, in my home state of Ohio, the analysis of whether a worker is an independent contractor or an employee is subject to a long list of competing legal standards:

  1. Federal Income Tax: Right to Control (IRS factors)
  2. Ohio Income Tax:  Follows IRS
  3. ERISA, ADA, Title VII, ADEA: Right to Control (Darden Test)
  4. Affordable Care Act: Right to Control (Treasury Regs.)
  5. FLSA: Economic Realities Test
  6. NLRA: multi-factor hybrid/right to control test
  7. OH Unemployment (ODJFS): IRS old 20-Factor Test
  8. OH Workers Comp / Construction: Need 10 of 20 old IRS Factors
  9. OH Workers Comp / Other: Ohio Right to Control Test
  10. OH Discrimination (RC 4112): Ohio Right to Control Test

The complexity is similar in every state.  In Illinois, the list is about as long, but with different state law tests and standards:

  1. Federal Tax: Right to Control (IRS factors)
  2. ERISA, ADA, Title VII, ADEA: Right to Control (Darden Test)
  3. Affordable Care Act: Right to Control (Treasury Regs.)
  4. FLSA: Economic Realities Test
  5. NLRA: multi-factor hybrid/right to control test
  6. IL Unemployment: ABC Test
  7. IL Wage Payment & Collection Act: ABC Test
  8. IL Workers Compensation: Various factors, including control, relationship to company’s business
  9. But, if Construction, then Employee Classification Act:
    – Presumption is employee,
    – Then apply ABC Test,
    – Then apply 12-factor test to prove sole proprietorship or partnership is IC

And there are 48 more states just like these (but different).

So bottom line: Just like you can’t make assumptions about your reindeer’s gender based on its name, you can’t make assumptions about your contractor’s status based on what you call the relationship. You’ve gotta check the antlers — or the appropriate law.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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