Employers take a risk when they classify someone
performing services for them as an independent contractor instead of an
employee. Because employers owe contractors far fewer obligations than
employees, employers risk each of the following if a court determines that a misclassification
Do you know, however, how to spot the difference? Troyer
v. T.John.E. Productions, Inc. [pdf] [an enhanced version of this opinion is available to lexis.com
subscribers], decided yesterday by the 6th Circuit, provides some
The issue in the case was whether the company failed to
pay overtime to three individuals who performed road crew services (setting up
and breaking down displays) at the company's collegiate and corporate events.
The court determined that the company had mis-classified them, and owed them
unpaid overtime as employees:
Plaintiffs testified that their working relationship with
Defendants was relatively permanent, they worked hundreds of hours of
uncompensated overtime over several months, and that Defendants exercised
strict control over their schedule and day-to-day activities while out on the
road. Defendants countered that Plaintiffs worked on a job-by-job, independent
contractor basis, that the Plaintiffs had a great amount of autonomy regarding
how they completed their work.
In determining whether an worker is an employee or an
independent contractor, the IRS looks compares the degree of control exerted by the
company to the degree of independence retained by the individual. Generally,
the IRS examines this relationship in three ways:
If you are considering classifying someone performing
services for you as an independent contractor, your answers to these three
questions will determine whether that individual is a bona fide contractor, or
instead, is a employee. When in doubt, err on the side of caution. The
government applies these tests aggressively to find employee-status whenever it
can. You should too, and the risks are too high to make a mistake.
Visit the Ohio Employer's Law Blog for more
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