Independent Contractors or Employees

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parsonsbehle.com
June 16, 2022 | Marriott City Center Hotel
Independent Contractors and Employees
Christina M. Jepson
801....

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This presentation is based on available information as of June 16,
2022, but everyone must understand that the informati...

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INTRODUCTION
 Why do we care who is an employee?
 Why do we care who is an independent contractor?

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Ad Examples

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Ad Examples

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Ad Examples

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Local News
 2021: Employees sued Utah’s Department of Alcoholic Beverage
Control (DABC) accusing the agency of misclass...

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Local News
 2017: the Utah federal court certified a class action lawsuit against
CR England
 Filed by two independent...

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Local News
 2016: the US Labor Department sued a Utah drywall contractor
alleging it misclassified workers as independe...

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National News - Gig Employers
 Uber spent nearly $200 million resolving
misclassification suits; other gig employers
f...

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National News - FedEx
 Between 2014-2016, FedEx settled
driver misclassification suits for
nearly $500 million
 Court...

Benefits of Using Independent
Contractors

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Benefits of Using Independent Contractors
Because independent contractors are not employees, companies
that use them ca...

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Employee Benefits
Companies often provide benefits to their employees that are
not available to independent contractors...

Consequences of Misclassification
Consequences of Misclassification

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Consequences of Misclassification
The penalties for misclassification can be serious. If a company
misclassifies an emp...

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Employment Law Compliance
Improperly classifying an employee as an independent contractor
could lead to claims for:
• U...

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Tax and Insurance Obligations
The tax and insurance liabilities for misclassification are significant
and can include:
...

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Targets of Enforcement and Litigation
Industries particularly susceptible to regulatory enforcement for
independent con...

Who Is an Independent Contractor?

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Who Is an Independent Contractor?
What do you think?
What does the public think?
Why does it matter?
Who cares?
Can the...

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What Is an Independent Contractor?
Generally, an independent contractor is a worker who:
 Offers their services to the...

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What Is an Independent Contractor? (cont'd)
An independent contractor typically:
 Charges a fee for their services
 I...

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What Is an Independent Contractor?
An independent contractor typically does not:
 Receive company-sponsored benefits, ...

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Independent Contractor vs. Employee
An employee, by comparison, is subject to significant
oversight and control by the ...

Tests for Independent
Contractor Status

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Classification: Overview
 Do not rely on generalizations or labels to determine employee or
independent contractor sta...

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Tests for Independent Contractor Status
 There is no single test to determine independent contractor status
for all pu...

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Economic Realities Test
 Used to assess independent contractor status under the Fair Labor
Standards Act (FLSA)—minimu...

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Economic Realities Test
 On January 6, 2021, the Department of Labor (Department)
announced a final rule clarifying th...

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Economic Realities Test
 In the final rule, the Department reaffirms an “economic reality” test to
determine whether a...

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Economic Realities Test
 Identifies three other factors that may serve as additional
guideposts in the analysis, parti...

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The Control Test: The IRS Standard
 Used to determine whether a worker is an employee for federal tax
purposes
 Analy...

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The Common Law Darden Test
 Commonly used in the context of:
o Title VII of the Civil Rights Act (Title VII)
o America...

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The Common Law Darden Test
The test considers the following factors:
• Skill required
• Source of supplies and tools
• ...

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The Common Law 20-Factor Test
 Previously used by the IRS, this test is commonly used by state
agencies making indepen...

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The Common Law 20-Factor Test
8. Full time or exclusive work
9. Location where services are
performed
10. Specifying th...

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State Law Tests (ABC Test)
 State independent contractor tests can impose a more narrow definition than
the federal eq...

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Utah Unemployment Test – Right to Control
Utah unemployment statute defines “Independent Contractor” as
(a) The individ...

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Utah Unemployment Test – Right to Control
Factors in determining whether an individual is engaged in an
independently e...

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Utah Unemployment Test – Right to Control
Factors in determining whether an individual is engaged in an
independently e...

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Utah Unemployment Test – Right to Control
Factors in determining whether an individual is under control or
direction
 ...

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Utah Unemployment Test – Right to Control
Factors in determining whether an individual is under control or
direction
 ...

Gig Economy

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Gig Economy
 Then came Uber, Lyft, Grub Hub, Door Dash, Uber Eats
 Disrupted certain sectors of the economy including...

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Gig Economy
 No set schedule/flexibility
 No tools or equipment provided
 Expenses paid by worker
 Simple payment, ...

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Gig Economy
 California has gone to war with Uber and Lyft
 ABC test—must meet all three
o Worker is free from contro...

Best Practices

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Best Practices
To ensure that the independent contractor classification requirements
are satisfied:
• Do an analysis be...

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Best Practices (cont'd)
 Pay contractors by the project or by
an agreed-on flat fee at regular
intervals, not by the h...

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Best Practices (cont'd)
 Do not invite contractors to
employee-only events or meetings
 Do not provide contractors wi...

Thank You
To download a PDF handbook of today’s seminar,
including presentations and materials, please visit
parsonsbehle....

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For more information, contact:
Christina M. Jepson
801.536.6820
cjepson@parsonsbehle.com

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