insurance

Managing the Non-Employee – Freelance Workforce

Managing the Non-Employee – Free Lance Workforce

Schwartz Heslin Group, Inc.

by Frederic J. Buse, Managing Director

Beginning in 1985, the New York State Dept. of Labor began issuing occupation- specific guidelines to clarify who should be classified an employee and who is an independent contractor.

From 1985 to 2005, guidelines covering 10 industries were issued but and none since.

 

Chart 1
Existing NYS Dept. of Labor Guidelines Cover the Following 10 Occupations:

Form Number:   Description

IA318.11:           Agricultural Employment

IA318.16:           Organized Camps

IA318.17:           Performing Artists

IA318.18:           Insurance Sales Industry

IA318.19:           Newspaper and Shopping Guide Publishers

IA318.20:           Translating and Interpreting Industry

IA318.21:           Tour Guide Industry

IA318.22:           Van Operators In The Moving Industry

IA318.23:           Magazine Publishing Industry

IA318.24:           Messenger Courier Industry

Source: (See http://www.labor.state.ny.us/formsdocs/ui/formsandpublications.shtm ).

By  contrast,  California’s  Employment  Development  Department  has  issued  “Information   Sheets”  covering  22  occupations  or  industry  segments.  
(See http://www.edd.ca.gov/Payroll_Taxes/Forms_and_Publications.htm)

It is difficult to determine what constitutes employment to establish employer liability for UI taxes and claimant coverage for unemployment insurance purposes. With the exception   of   certain   specific   exclusions   and   inclusions,   the   term   “employee”   is   not   defined and there is no statutory basis for distinguishing between and employee and an independent contractor.

In most instances, this issue is raised when a worker applies for unemployment benefits. The last employer is contacted by the Dept. of Labor and asked for the circumstances of job loss. If the employer indicates that the worker was an independent contractor and not an employee, information regarding the facts and circumstances of the  claimant’s  work  status  will  be  requested  by  the  Liability  &  Determination  Section  of   the   Dept.   of   Labor   (“L&D”)   — typically from both the claimant and the employer. After completing its fact finding, L&D will issue a determination letter. If they find that the claimant was an employee, the Labor Dept. will notify the office which processed the claim that the claimant is eligible for UI benefits. L&D also will send a determination letter to the employer citing the factors which led to the decision regarding employment, instructing the employer to file amended UI tax returns to include the taxable wages of the claimant and all other similarly situated individuals. The employer has 30 days to appeal the decision to an Administrative Law Judge. The next level of appeal is the UI Appeal Board.

If the employer fails to respond with revised tax returns and does not appeal the decision, he should expect a visit from a Dept. of Labor auditor. The auditor will review payroll information concerning the applicant for unemployment insurance and all other workers with similar work responsibilities. Approximately 10,000 such audits are completed annually. As a result of such an audit, requests/demands for additional UI tax payments plus penalties of $50,000 or more are not unusual.

The NYS Dept. of Labor adjudicates many more employee vs. independent contractor cases than any other state agency. It is increasingly clear that it has targeted considerable audit resources to indentify employers who misclassify employees as independent contractors. At the request of the Labor Commissioner, the Governor on September 9. 2007 issued Executive Order No. 17, establishing a Joint Enforcement Task Force on Employee Misclassification.

(See http://www.ny.gov/governor/press/0907071.html).

The Task Force was directed to strengthen enforcement, avoid duplication by sharing relevant information among various state agencies, and coordinate both investigation and enforcement actions.

The NYS Dept. of Labor has two sections which review decisions of the Administrative Law Judge, the UI Appeal Board and ultimately the Third Department Appellate Division of the Supreme Court (the appellate court to which all disagreements with the rulings of UI Appeal Board must be brought.) Both maintain indexes of precedent cases to assist the local offices in their determinations.

– the  Adjudication  Services  Office  (“ASO”)  focuses  on  decisions  related  to  a   claimant’s  eligibility  for  UI  benefits.

– the Liability & Determination Section concentrates on employer issues.

Summaries of previous decisions by the UI Appeal Board and the Courts relating to claimants are available online. The summaries are indexed by topic and include precise descriptions of the actual decisions.

Chart 2
Online Claimant Eligibility Topics Covered by ASO

Index #               Topic

  • 700:      Availability and Capability
  • 800:      Registration, Reporting and Certification 
  • 900:      Determination of Benefits
  • 1000:    Hearings and Appeals
  • 1100:    Misconduct
  • 1200:    Refusal of Employment
  • 1300:    Industrial Controversy
  • 1400:    Total or Partial Unemployment
  • 1500:    Misrepresentation and Redeterminations 
  • 1600:    Voluntary Separation
  • 2000:    Section 599 (shared work program) 

Source: http://www.labor.state.ny.us/ui/aso/interpservice.shtm

Summaries of previous decisions by the UI Appeal Board and the Courts relating to employers are not online and are only available in paper form in Albany. The detailed summaries are indexed by occupation and listed by statutory inclusions and statutory exclusions which are further broken down by all employers, non-profits and government employers.

Examples of the summaries (the entire list is much longer) related to occupations specifically covered by statute include:  

Index #      Occupation

  • 3150          Statutory inclusions
  • 3150A             Agent-driver or commission driver
  • 3150B             Professional musician
  • 3150C             Traveling salesman
  • 3150D             Professional model  
  • 3200          Statutory exclusions (all employers)
  • 3200A             Spouse or minor child
  • 3200B             Employment subject to federal railroad U.I. Act
  • 3200C             Student  and  student’s  spouse
  • 3200D             Licensed real estate brokers  
  • 3250          Statutory exclusions (non-profits & government)
  • 3250A             Golf caddy
  • 3250C             Baby sitter  
  • 3300          Statutory exclusions (non-profit employers)
  • 3300A              Minister
  • 3300D              Rehab services or work at rehab facility  
  • 3350          Statutory exclusions (governmental employers)
  • 3350A              Elected officials
  • 3350B              Member of legislature or judiciary
  • 3350C              State National Guard
  • 3350D              Inmates of penal institutions  

Examples of the summaries of decisions related to occupations not covered specifically by statute include:

Index #               Occupation 

  • 3800 .005    Accountant/tax preparer
  • 3800 .001    Artist
  • 3800 .025    Attorney/Paralegal
  • 3800 .005    Professional model
  • 3800 .035    Bookkeeper
  • 3800 .045    Cleaner/Maintenance Worker/Janitor
  • 3800 .05      Coach
  • 3800 .06      Construction worker 
  • 3800 .065    Consultant
  • 3800 .07      Delivery person
  • 3800 .080A  Limousine driver
  • 3800 .085    Editor/Proofreader
  • 3800 .09      Engineer/Draftsman
  • 3800 .120B  Nurse
  • 3800 .120D  Physician
  • 3800 .013     Interviewer/Research Interviewer
  • 3800 .075     Officer/Director/Board Member
  • 3800 .215G  Securities Salespersons
  • 3800 .22       Secretary/Stenographer/Typist 
  • 3800 .2255   Teacher/Tutor
  • 3800 .23       Telephone solicitor/Telemarketer
  • 3800 .24      Waiter/Waitress/Service Personnel
  • 3800 .245    Writer/Editor  

There are a large number of summarized employer cases indexed by L&D. For example, precedent cases involving medical occupations (#3800.120A to #3800.120G) number more than 80.

If you receive a determination letter from the Liability and Determination Section, you should request a meeting with them. Prior to the meeting, you are well advised to obtain the case summaries covering the occupation(s) in dispute. You should also review other occupations in the same industry. After reviewing the summaries, you can request copies of the specific UI Appeal Board and NYS Supreme Court decisions identified in each summary relevant to your issues.

  If, after exchanging correspondence or meeting with L&D, you are not satisfied with the Dept. of Labor conclusion, on behalf of your client you can request an informal hearing with L&D. If you still dispute the L&D conclusions, you can request a formal hearing before an Administrative Law Judge.

The formal hearing request must be received on a timely basis. These hearing are usually  conducted  in  Albany  by  ALJ’s  with  experience  in  employer  liability  issues.     Remember, you must establish a complete record at an ALJ hearing. Typically, no new information will be accepted at the next level if you decide to appeal an ALJ decision to the UI Appeal Board. Similarly, the Third Department of the NYS Supreme Court, Appellate Division relies on the record established before the ALJ. The standard followed by  the  court  is  whether  or  not  there  is  “substantial  evidence”  to  support  the   Appeal  Board’s  decision.

One final note – not-for-profit organizations classified 501 C (3) by the Internal Revenue Service  may  request  to  become  “reimbursable”  employers  and  avoid both U.I. taxes and most U. I. audits in exchange for agreeing to reimburse any UI benefits paid to former workers.

SHG can assist employers faced with independent contract questions to minimize the impact on their UI taxes and penalties.

 

Contact: Managing Director Fred Buse — fbuse@shggroup.com