Beaches, barbeques, and beers. Three staples of a fun summer. Summer also represents construction, and landscaping seasons, as well as internships. Many companies view such workers as independent contractors. Just 1099 them and get on with it, the thinking goes. Well, in New York State the line between contractors and employees is not always so clear. As seasonal work gets underway here’s a brief primer of how to asses if a worker is an independent contractor or an employee.
For trucking firms, the “NYS Commercial Goods Transportation Industry Fair Play Act” has been on the books for four years now. This law presumes that such workers are employees unless payments for their services are reported on a federal income tax form 1099 (if required by law).
In addition, they must be a separate business entity, or they must be:
- Free from control and direction in performing the job, both under contract and in fact;
- Performing services outside of the usual course of business for the employer; and
- Engaged in an independently-established trade, occupation or business that is like the service they perform.
The IRS uses the “Common Law Test” to determine the difference. These factors include:
- Is the worker subject to the control and supervision of the employer in performing the job?
- Is the work performed part of the usual work of the employer’s business?
- Does the worker have an independently established business offering similar services to the public?
New York State takes the “Common law Test” and expands it to seventeen questions. Employers must apply these questions to determine if they have a contractor or an employee on their hands:
- Provided a copy of any contracts, or substance of oral agreement
- Describe the services performed
- Are these individuals in an independently established business?
- Can similar services be performed for others in a competitive business?
- Can work assignments be refused?
- Is there a requirement to devote a specific amount of time to the services performed?
- Are they covered under your insurances?
- Are deductions made?
- Who provides tools or supplies, materials or equipment?
- When services are not performed (illness), who furnishes a replacement?
- Who sets the rate of pay and what is the basis of compensation?
- How are services obtained?
- Where are services performed?
- Is there a requirement to report at established times?
- Do you supervise or review their work?
- Do you provide reimbursement of expenses? Fringe benefits?
- Do you provide training or require attendance at training sessions?
While looking at the NYS seventeen, it is likely that in terms of construction and landscaping work, companies are hiring employees NOT contractors. As such, these industries are ripe for an audit by the Department of Labor. Expanding the target on the backs of construction and landscaping is the heightened concern about immigration and searches for undocumented aliens, throw in the fact that these industries are more likely than trucks delivering consumer goods to run overweight vehicles and it’s easy to see how a company can find itself with some legal issues.
New York prides itself as being one of, if not the best states for workers. Right or wrong, true or false, that is the standard that employers must contend with. Properly identifying employees and independent contractors is a necessity in such a climate.