Employee
The U.S. Department of Labor (“DOL”) has introduced a new independent contractor rule, aiming to provide clarity and guidance for both employers and workers. The classification of workers as employees or independent contractors has become increasingly complex in recent years, resembling an endless carousel ride for many businesses, particularly those in the agricultural sector that frequently hire part-time and seasonal help. The DOL's new rule, published under the Fair Labor Standards Act of 1938 (“FLSA”), seeks to put an end to this perpetual uncertainty surrounding worker classification once and for all.
Background
The FLSA establishes federal standards for overtime pay, minimum wage, and child labor. Ohio law explicitly aligns its interpretation of the term "employee" with that of the FLSA for wage and hour purposes. For the FLSA to apply to an agricultural employer, an employment relationship must be established. This entails determining whether a worker is classified as an employee or an independent contractor.
However, the FLSA itself is silent on how to exactly distinguish an independent contractor from an employee. So, for years the DOL relied on the court system to develop the standard for determining whether a worker should be classified as an employee or an independent contractor. The court system developed an “economic realities test” to help determine whether an employment relationship exists with a worker. The economic realities test is a totality of the circumstances test – which means all factors should be weighed evenly – and relies on six factors. These factors are:
- The nature and degree of control over the work;
- The individual’s opportunity for profit or loss;
- The permanency of the work relationship;
- Whether the work being performed is an integral part of the Employer’s business;
- The worker’s investment in facilities and equipment; and
- Skill and initiative.
For decades courts and the DOL have applied these factors, or a similar variation of them, to help define employee and independent contractor under the FLSA. However, courts across the country have applied the factors inconsistently and have given certain factors different degrees of weight.
2021 Independent Contractor Rule
In 2021, the DOL sought to resolve the inconsistent and subjective application of the factors by publishing a formal independent contractor rule (“2021 IC Rule”). This 2021 IC Rule marks the DOL’s first attempt to establish a standardized test for distinguishing between independent contractors and employees.
The 2021 IC Rule used a variation of the economic realities test but gave greater weight to “two core factors” rather than applying each factor equally. The “two core factors” are:
- The nature and degree of control over the work; and
- The individual’s opportunity for profit or loss.
In the 2021 IC Rule, the DOL stated that the two core factors “are the most probative as to whether or not an individual is an economically dependent ‘employee’ . . . and each therefore typically carries greater weight in the analysis than any other factor.” The DOL also stated that if the two core factors “both point towards the same classification, whether employee or independent contractor, there is a substantial likelihood that is the individual’s accurate classification.” This is because, according to the DOL, the other factors are less probative and may not be probative at all and are “highly unlikely, either individually or collectively, to outweigh the combined probative value of the two core factors.”
In other words, the DOL established a rule that looked at two core factors to determine the economic reality of the relationship between a worker and an employer. Thus, under the 2021 IC Rule, the economic realities test looked something like this:
- Core Factors
- The nature and degree of control over the work; and
- The individual’s opportunity for profit or loss.
- Other Factors
- The permanency of the work relationship;
- Whether the work being performed is an integral part of the Employer’s business;
- The worker’s investment in facilities and equipment;
- Skill and initiative; and
- Any additional factors
New 2024 Rule
The carousel ride does not stop at the 2021 IC Rule, unfortunately. In January of 2024, the DOL published another rule, repealing the 2021 IC Rule and reverting back to a totality of the circumstances analysis of the economic realities test in which there are no core factors, and all factors are weighed evenly. The new rule, effective March 11, 2024, evaluates the following factors:
- Opportunity for profit or loss depending on managerial skill;
- Investments by the worker and the employer;
- Degree of permanence of the work relationship;
- Nature and degree of control;
- Extent to which the work performed is an integral part of the employer’s business;
- Skill and initiative; and
- Any additional factors.
Below is a more detailed analysis of the above seven factors.
- Opportunity for profit or loss depending on managerial skill. This factor assesses whether a worker possesses managerial abilities that impact their capacity to generate profit or incur losses. Relevant considerations include:
- Negotiating pay for services rendered
- Having the freedom to accept or decline jobs
- Choosing the order or time in which jobs are completed
- Engaging in marketing, advertising, or other business expansion efforts
- Making decisions regarding hiring, purchasing materials and equipment, or renting space
If a worker lacks the opportunity for profit or loss, they are likely an employee.
- Investments by the worker and the employer. This factor examines whether a worker’s investments are capital or entrepreneurial in nature. Costs incurred by a worker to perform their job, like purchasing tools or equipment, are not indicative of entrepreneurial investment and suggest employee status. Conversely, investments supporting an independent business, such as expanding capabilities, reducing costs, or broadening market reach, suggest entrepreneurial investment and independent contractor status.
- Degree of permanence of the work relationship. If the work relationship is indefinite in duration or continuous, the worker is probably an employee. If the work relationship is definite in duration, non-exclusive, project-based, or sporadic because the worker is in business for himself or herself and marketing his or her services or labor to multiple entities, then the worker is probably an independent contractor.
- Nature and degree of control. This factor assesses the level of control the employer exercises over the work and economic aspects of the relationship. Greater control by the employer suggests and employee relationship, while more control by the worker indicates independent contractor status. Factors include the employer setting the worker’s schedule, supervising work performance, limiting the worker’s ability to work for others, using technological means for supervision, reserving the right to supervise or discipline workers, determining who sets the prices or rates for services provided by the worker, and the marketing of the services or products that the worker provides.
- Extent to which the work performed is an integral part of the employer’s business. This factor evaluates whether the work performed is essential to the employer's business operations. It focuses on the function performed rather than the individual worker. If the service provided is indispensable for the employer's functioning, it favors an employee classification. Conversely, if the work is not crucial to the employer's core business, it leans towards independent contractor status.
- Skill and initiative. The skill and initiative factor evaluates whether the worker utilizes specialized skills and demonstrates entrepreneurial initiative in their work. If the worker lacks specialized skills or relies on employer-provided training, it suggests employee status. Conversely, if the worker brings specialized skills and exhibits business-like initiative, they are likely an independent contractor.
- Any Additional Factors. Additional factors may be relevant in determining the status of a worker. These additional factors may indicate whether the worker operates as an independent business entity or is economically reliant on the potential employer for work opportunities.
Under the new rule, no one factor is dispositive of determining whether a worker is an employee or independent contractor. For example, a landscaper may perform work that does not require specialized skills, but application of the other factors may demonstrate that the landscaper is an independent contractor (e.g. the landscaper may determine the price charged for the work, make decisions affecting opportunity for profit or loss, determine the extent of capital investment, work for many clients, and/or perform work for clients for which landscaping is not integral).
What does it all mean?
In announcing the new rule, the DOL said “[i]t is the Department’s obligation to administer and enforce the FLSA to ensure that workers who should be covered under the [FLSA] are properly classified as employees.” Many seem to suggest that this new rule is more employee friendly and makes it easier to classify a worker as an employee than the 2021 IC Rule.
The new rule, however, only affects a worker’s classification under the FLSA. The same standard does not apply to other federal laws, like the Internal Revenue Code. Nevertheless, those standards used in other federal laws may look eerily similar to the standard used here.
Lastly, the carousel ride may not yet be over. There are already legal challenges to the new rule that might put the DOL’s hopes of ushering in a new period of clarity at risk (See Warren v U.S. Dep’t of Labor, 2:24-cv-00007, N.D. Ga.).
Consequences of Misclassifying Workers.
Misclassifying a worker can come with harsh consequences. An employer that misclassifies a worker may be required to pay unpaid wages owed to the employee, civil money penalties, and/or attorneys’ fees associated with litigation. Furthermore, employers may be held criminally and/or civilly liable under other federal and state statues for misclassifying a worker. It is vital that agricultural employers take classification of a worker seriously because all it takes is one disgruntled misclassified worker or workplace injury to a misclassified worker to seriously jeopardize an operation.
Sources:
Independent Contractor Status Under the Fair Labor Standard Act, 86 CFR 1168
Employee or Independent Contractor Classification Under the Fair Standards Act, 89 CFR 1638
Happy 2024! We hope your new calendar year has gotten off to a delightful start. As we close out the first of twelve months, we bring you another edition of the Ag Law Harvest. In this blog post, we delve into the intricate world of employment contracts and noncompete agreements, classifying workers as independent contractors or employees, Ag-Gag laws, and agricultural policy.
Ohio Man Violates Employer’s Noncompete Agreement.
Kevin Ciptak (“Ciptak”), an Ohio landscaping employee, is facing legal trouble for allegedly breaching his employment contract with Yagour Group LLC, operating as Perfection Landscapes (“Perfection”). The contract included a noncompete agreement, which Ciptak is accused of violating by running his own landscaping business on the side while working for Perfection. Perfection eventually discovered the extent of Ciptak’s side business, leading to Perfection filing a lawsuit.
During the trial, Ciptak testified that Perfection was “too busy” to take on the jobs he completed. Additionally, Ciptak stated that the profits from his side jobs amounted to over $60,000. Perfection countered that they would have been able to perform the work and, because of the obvious breach of the noncompete agreement, Perfection lost out on the potential profits. The trial court ruled in favor of Perfection, ordering Ciptak to pay the $60,000 in profits along with attorney's fees and expenses, exceeding $80,000. Ciptak appealed, arguing that, according to Ohio law, Perfection could only recover its own lost profits, not Ciptak's gains from the breach. He also claimed that Perfection was not harmed as they were "too busy," and Perfection failed to provide evidence of lost profits.
The Eighth District Court of Appeals ultimately found in favor of Perfection. The court reasoned that “[t]his case came down to a credibility determination.” The court held there was no dispute that Ciptak had violated the noncompete agreement. What was in dispute was whether Perfection could have and would have performed the work. The Eighth District held that the trial court’s finding that Perfection could have performed the work was not unreasonable. The Eighth District noted that although Ciptak claimed that Perfection was “too busy” to do any of those jobs, Ciptak “provided no other evidence to support this assertion.” The Eighth District ruled that the evidence presented at trial showed that Perfection would have realized approximately the same amount of profit on those jobs as Ciptak did and, therefore, Perfection was damaged as a result of Ciptak’s breach of the noncompete agreement.
New Independent Contractor Rule Announced by Department of Labor.
The U.S. Department of Labor (“DOL”) has published a final rule to help employers better understand when a worker qualifies as an employee and when they may be considered an independent contractor. The new rule gets rid of and replaces the 2021 rule. As announced by the DOL, the new rule “restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor.” Thus, the new rule returns to a “totality of the circumstances” approach and analyzes the following six factors: (1) any opportunity for profit or loss a worker might have; (2) the financial stake and nature of any resources a worker has invested in the work; (3) the degree of permanence of the work relationship; (4) the degree of control an employer has over the person’s work; (5) whether the work the person does is essential to the employer’s business; and (6) the worker’s skill and initiative. The new rule goes into effect on March 11, 2024.
Federal Appeals Court Reverses Injunctions on Iowa “Ag-Gag Laws.”
On January 8, 2024, the U.S. Court of Appeals for the Eighth Circuit issued two opinions reversing injunctions against two Iowa “ag-gag laws”. At trial, the two laws were found to have violated the First Amendment of the United States Constitution. In its first opinion, the Eighth Circuit Court of Appeals analyzed Iowa’s “Agricultural Production Facility Trespass” law which makes it illegal to use deceptive practices to obtain access or employment in an “agricultural production facility, with the intent to cause physical or economic harm or other injury to the agricultural production facility’s operations . . .” The Eighth Circuit found that the intent element contained within the Iowa law prevents it from violating the First Amendment. The court reasoned that the Iowa law “is not a viewpoint-based restriction on speech, but rather a permissible restriction on intentionally false speech undertaken to accomplish a legally cognizable harm.”
In its second opinion, the Eighth Circuit reviewed an Iowa law that penalized anyone who “while trespassing, ‘knowingly places or uses a camera or electronic surveillance device that transmits or records images or data while the device is on the trespassed property[.]’” The court found that the Iowa law did not violate the First Amendment because “the [law’s] restrictions on the use of a camera only apply to situations when there has first been an unlawful trespass, the [law] does not burden substantially more speech than is necessary to further the State’s legitimate interests.” The court noted that Iowa has a strong interest in protecting property rights by “penalizing that subset of trespassers who – by using a camera while trespassing – cause further injury to privacy and property rights.”
Both cases have been remanded to the trial courts for further proceedings consistent with the forgoing opinions.
USDA Announces New Remote Beef Grading Program.
Earlier this month, the U.S. Department of Agriculture (“USDA”) announced a new pilot program to “allow more cattle producers and meat processors to access better markets through the [USDA’s] official beef quality grading and certification.” The “Remote Grading Pilot for Beef” looks to expand on the USDA’s approach to increase competition in agricultural markets for small- and mid-size farmers and ranchers. The pilot program hopes to cut expenses that otherwise deter small, independent meat processors from having a highly trained USDA grader visit their facility.
Under the pilot program, trained plant employees capture specific images of the live animal and the beef carcass. These images are then sent to a USDA grader that will inspect the images and accompanying plant records and product data, who then assigns the USDA Quality Grade and applicable carcass certification programs. The “Remote Grading Pilot for Beef” is only available to domestic beef slaughter facilities operating under federal inspection and producing product that meets USDA grading program eligibility criteria. More information can be found at https://www.ams.usda.gov/services/remote-beef-grading.
USDA Accepting Applications for Value-Added Producer Grants Program.
On January 17, 2024, the U.S. Department of Agriculture (“USDA”) announced that it is “accepting applications for grants to help agricultural producers maximize the value of their products and venture into new and better markets.” These grants are available through the Value-Added Producer Grants Program. Independent producers, agricultural producer groups, farmer or rancher cooperatives, and majority-controlled producer-based business ventures are all eligible for the grants. The USDA may award up to $75,000 for planning activities or up to $250,000 for working capital expenses related to producing and marketing a value-added agricultural product. For more information, visit the USDA’s website or contact your local USDA Rural Development office.
Tags: Noncompete Agreements, Employment Contracts, labor, Independent Contractor, Employee, Grants, USDA, Department of Labor, Beef
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Farms and other businesses can benefit by using independent contractors to fill labor needs while not having the same financial and legal responsibilities the business has for its employees. But state and federal laws allow those advantages only if the worker is truly an independent contractor. When a worker classified as “independent contractor” functions as an employee in the eyes of the law, a business can be liable for failing to meet its employer obligations for the worker. That’s exactly what happened in a recent case before the Ohio Supreme Court.
The company. The case involved Ugicom (the company), paid by Time Warner Cable under a subcontract to provide workers to install underground cable. Workers used the company’s website to select and document installation jobs and the company paid the workers at rates it determined. The installers were required to wear badges and vests identifying the company and to pass drug tests and background checks, all coordinated by Time Warner. The company required installers to sign a one-year independent contractor agreement containing a “non-compete clause” that prohibited them from providing installation services for competitors. The contract also required installers to respond to service requests within two hours. Installers had to provide their own hand tools, transportation, cell phones, and laptops, but used cable obtained from Time Warner. They could work any day or time consented to by customers. The company paid the installers by the job and did not withhold taxes or provide any benefits.
The Bureau of Workers Compensation (BWC) audit. The BWC audited the company to decide whether it had paid the correct amount of workers’ compensation premiums for all of its employees. The BWC examined the company’s treatment of workers it had hired to install cable as independent contractors. Concluding that the company exercised “too much control” over the installers, the BWC determined that the installers were actually employees for workers’ compensation purposes and the company owed $346,817 in unpaid premiums for the employees. The company unsuccessfully appealed the decision to the agency and the Tenth District Court of Appeals and the case ended up before the Ohio Supreme Court.
The Ohio Supreme Court review. For purposes of the workers’ compensation program, Ohio law provides that the controlling determination in whether a worker is an independent contractor or an employee is “who had the right to control the manner or means of doing the work.” There is not a bright-line test for making such a determination, however. Instead, the Ohio Supreme Court explained, the BWC must consider a set of factors related to who controls the manner or means of the work. Those factors include:
- Whether the work is part of the regular business of the employer
- Whether the workers are engaged in an independent business
- The method of payment
- The length of employment
- Agreements or contracts in place
- Whether the parties believed they were creating an employment relationship
- Who provides tools for the job
- The skill required for the job
- The details and quality of the work
The Ohio Supreme Court’s role was to determine whether the BWC relied upon “some evidence” when reviewing each of the factors to reach its conclusion that the company controlled the manner or means of the installers’ work. The Court concluded that most, although not all, of the BWC’s conclusions were supported by at least some evidence and upheld the BWC’s decision. The factors and evidence that received the most attention from the Court included:
- Independence from the company. The installers’ public image when working identified them as being with the company; they all wore the same badges and vests, and some had signs on their vehicles with the company’s name.
- Method of payment. The company controlled the rate of payment, which was nonnegotiable and did not include a bid process as is typical for independent contractors. The “take-it-or-leave-it” approach indicated control over the installers.
- Length of employment. The installers had an ongoing relationship with the company and did not advertise their services to the community at large.
- Agreements and contracts. The company’s non-compete clause restricted the installers’ freedom to work and indicated a measure of control over the workers.
- Skill requirements. The BWC concluded that the minimal skill required to install the cable was not high or unique, and the company offered no facts to show that the installers required specialized skills.
Disagreement on the court. Two of the Supreme Court Justices, Kennedy and DeWine, dissented from the majority opinion. Their primary point of disagreement was that there was no evidence supporting the BWC decision. The evidence instead suggested that the company controlled only how the installers were paid, and the installers controlled the manner and means of doing their work. The dissent criticized the BWC for jumping to a quick conclusion that the company’s true motives were “to evade the obligations associated with having employees.”
What does this mean for farm employers? Farms often rely on independent contractors for seasonal and intermittent help with work like baling hay, running equipment, and doing books. Are these workers true independent contractors or are they employees? That is a fact dependent question, but we can imagine many scenarios where the farm has a majority of the control over the mode and manner of such work. Farms are subject to Ohio’s workers’ compensation law, so a farm could be audited by the BWC just as the company in this case was and could see similar results for misclassifying employees as independent contractors.
Implications for all businesses. The case carries several implications that raise needs for businesses that use independent contractors:
- Recognize that state and federal tests can differ. Many are familiar with the IRS test for independent contractors but note that the Ohio Supreme Court applied its unique Ohio test for determining independent contractors in regard to BWC premiums. State and federal laws differ. It’s important to apply the appropriate test for the situation.
- Review the manner and means factors for each independent contractor. For each worker claimed as an independent contractor, review the nine factors listed above to ensure that the business isn’t exerting the most control over the manner and means of the work. Where possible, adjust practices that give the business unnecessary control over how and when the work is performed. Consider these:
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- Use employees to do the regular work of the business and independent contractors for high-skill or unique tasks.
- Ensure that the business isn’t controlling the public image of the workers. The workers should not be branded or identifiable with the business through clothing, name badges, hats, vehicles, etc.
- Require independent contractors to submit bids or proposals on the amount and method of payment for their work.
- Avoid using the same independent contractor for an extended period of time and ensure that the worker’s services are available to other businesses.
- Don’t restrict the worker’s freedom to work for others, especially via a contract or agreement.
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- Maintain records and evidence of the work situation. The BWC need only have “some evidence” that the nine factors indicate a high level of control over the mode or manner of work, but the business may offer facts and evidence to the contrary. Good recordkeeping is imperative. A business that can’t provide stronger facts and evidence in favor of the business, like the company in this case, might be at risk of an employee classification by the BWC.
While there are benefits of using independent contractors to meet labor needs, farms must recognize the associated risk of misclassification. For workers' compensation purposes, farms can avoid those risks by ensuring that it is the independent contractor, not the farm, who controls the "manner or means" of doing the work. Read the Ohio Supreme Court’s opinion in State ex rel. Ugicom Enterprises v. Morrison here.
Tags: Independent Contractor, workers' compensation, employment law, Employee
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Agricultural workers are usually categorized in two ways. They are either an “employee” or an “independent contractor.” Depending on how an agricultural worker is labeled determines the duties and liabilities of the agricultural employer.
Generally speaking, if an ag employer has the right to control the work of an ag worker, then the ag worker is probably an employee. This means that the ag employer must abide by a whole host of federal and state laws that relate to labor and employment and can be found liable for any damages caused by their employees under the doctrine of vicarious liability. Vicarious liability is a legal doctrine that may hold an employer responsible for the actions of an employee -- so long as the employee was acting in the ordinary course of business. A good example of the vicarious liability doctrine in action is when a court decides to hold a farmer and/or farm business responsible for any spray drift damages resulting from an employee’s application of herbicide.
On the other hand, ag employers that use independent contractors are usually not liable for any damages that result from the actions of an independent contractor. This obviously makes the use of independent contractors very appealing but comes at a higher cost than using an employee to do the work.
Simple enough right? Be careful with employees and spray drift or use independent contractors and be worry free. Not really. Although a big concern for ag employers are the liability issues that stem from employees’ actions, having employees requires ag employers to fulfill multiple obligations under state and federal labor and employment laws, obligations that otherwise would not exist if an ag employer used an independent contractor to complete the work. Those obligations can include wages, overtime pay, hour restrictions, migrant and seasonal worker protections, tax concerns, and others. So, you see, labeling a worker as an employee or independent contractor goes far beyond just preventing a lawsuit against the ag employer.
Ag employers often think they are using independent contractors to complete work around the farm. But innocently, the ag employer may actually be using an employee to complete work around the farm and is probably violating federal and state law and exposing itself to fines and lawsuits. An ag employer must be careful when determining who is an employee and who is an independent contractor when looking for help on the farm. Below is a brief summary of Ohio and federal law that determine when an ag worker is an employee and when an ag worker is an independent contractor.
How do I determine who is an employee and who is an independent contractor?
The simple answer to that is, it depends. Different tests are used at the federal level and in Ohio. However, one thing that all these tests have in common is the ag employer’s right to control the work being done. This means that if an ag employer can direct, monitor, correct, or otherwise control how the work is being done, then the ag worker is likely an employee. Even if an ag employer never exerts or directly controls how the work is being done, courts only care that the ag employer has or had the ability to do so.
What are the tests to determine if a worker is an employee or independent contractor?
The Economic Realities Test. The Fair Labor Standards Act (“FLSA”) is the federal law that governs minimum wage, overtime pay, recordkeeping, and youth employment standards. “Employee” is defined very broadly under the FLSA and more often than not, a worker is found to be an employee rather than an independent contractor. To help determine who is an employee and who is an independent contractor, the FLSA uses an Economic Realities Test. The Economic Realities Test looks at the reality of the economic relationship between the parties and if a worker is more reliant on the employer for economic gain and security, then the worker is more likely an employee. Factors under this test include:
- The degree of control that an employer can exert over the worker and the work being performed.
- Whether the work being performed is an integral part of the employer’s business.
- The permanency of the relationship.
- The amount of the worker’s investment in facilities and equipment.
- The worker’s opportunities for profit and loss.
- The amount of initiative, judgment, foresight, and skill required for the worker’s success.
The Internal Revenue Service (“IRS”) Standard. The IRS has a separate test to help taxpayers determine whether an individual should be considered an employee or independent contractor for tax purposes. The IRS analyzes three areas – behavioral control, financial control, and the relationship of the parties.
- Behavioral Control – a worker is an employee when the business has the right to direct and control the work performed. Factors include: (a) the type of instructions given; (b) degree of instruction given; (c) evaluation of work done; and (d) training.
- Financial Control – If a business has the right to direct or control the financial and business aspects of the worker’s job, then the worker is likely in employee. A major factor is how the worker is paid. Employees are guaranteed regular pay whereas independent contractors are paid by the job.
- Relationship of parties – the IRS takes into consideration what the parties think their relationship is. The IRS will look at written contracts, whether any benefits are offered, the length and permanency of the relationship, and whether the worker is performing work that is an integral part of the business of the employer.
Ohio’s standard. Ohio uses two separate, yet very similar tests to determine employee or independent contractor status. For wage and hour purposes, Ohio uses the Economic Realities Test that is used by the FLSA.
However, for workers’ compensation, unemployment insurance, and Ohio’s vicarious liability law, Ohio uses a “right to control” test. Under Ohio’s “right to control” test courts consider the following factors:
- Whether the worker is engaged in a distinct occupation or business;
- Whether the worker or the employer supplies the place and tools to complete the work;
- Whether the work is done by a specialist requiring a particular skill;
- How the worker is paid;
- The length of time a worker is employed;
- Whether the work performed is part of the regular business of the employer;
- Whether the employer controls the details and quality of the work to be performed; and
- The terms of any agreements or contracts between the parties.
Why is determining who is an employee and independent contractor important?
First and foremost, determining who is and is not an employee defines an ag employer’s obligations under the law. If an ag employer has employees, then the ag employer must abide by federal and state wage, hour, antidiscrimination, unemployment insurance, workers compensation, and safety laws. Those same obligations do not arise when using an independent contractor.
Secondly, misclassifying a worker as an independent contractor when they are actually an employee can lead to severe legal fines and penalties. Some of the consequences for incorrectly classifying a worker could include:
- Lawsuits for unpaid wages;
- Fines for failing to comply with federal and Ohio antidiscrimination laws;
- Discrimination and wrongful termination claims;
- Lawsuits for the negligence or other civil wrongs of the worker; and
- Fines for failing to maintain Ohio Workers’ Compensation Insurance and Unemployment Insurance.
Conclusion. Determining who is and isn’t an employee defines an ag employer’s legal obligations, so it is always important to ensure that whenever someone is doing work for you, you categorize them correctly. If you have any doubts, it’s always best to air on the side of caution and treat a worker as an employee. If you should have any questions contact your attorney to help you determine what your legal obligations are as an employer, it can save you time, money, and stress.
To learn more about distinguishing between an employee and an independent contractor visit:
U.S. Internal Revenue Service, Understanding Employee vs. Contractor Designation
Ohio Administrative Code § 4141-3-05, Definition of Employment
