Appendix C - Independent Contractor Case Studies




TWC Case 1 - Facts:

The employer failed to report wages for a worker who had been hired to repair and otherwise maintain appliances sold by the employer's company. The claimant's initial claim was disallowed due to lack of wage credits, and the claimant successfully appealed to the Appeal Tribunal, which ruled that the claimant was an employee whose wages should have been reported to TWC. At the hearing, the employer testified that it based its belief that the claimant was an independent contractor on the facts that the claimant furnished some of the tools for the work, used his own truck, and paid for his gas. However, the evidence also showed that the claimant worked only on jobs secured by the employer, charged fees set by the employer, and that customer payments went not to the claimant, but to the employer. Also, the employer essentially paid for the claimant's work expenses. After losing at the Appeal Tribunal level, the employer appealed to the Commission, but lost again, all three Commissioners voting that the claimant was an employee, rather than an independent contractor.

Analysis: The evidence as a whole showed that the employer had sufficient control over the claimant to be considered his employer. In any case involving the issue of whether a given worker is an independent contractor or an employee, TWC looks for evidence that the worker is in effect an independent business entity in a position to make a profit or loss based upon how he manages his own enterprise. Several factors show that this claimant was not in such a position.

The only aspect of the work relationship over which the claimant had a significant amount of control was that of his hours. The claimant usually determined the time of his work by agreement with the employer's customers. However, that small factor is inconsequential when taken together with the other factors discussed above.

This claimant was not in business for himself. For the reasons noted above, the claimant was an employee, and his wages should have been reported as such to TWC.

TWC Case 2 - Facts:

The employer was an accounting firm. The claimant was hired to perform contract bookkeeping services for the employer's clients who needed such services. He worked only on jobs assigned to him by the employer and was paid a commission for the work; the commission was based on fees paid by the clients to the employer, and the employer determined the level of fees. The claimant was paid on a weekly basis. He used the employer's office space, equipment, and supplies. The employer reviewed the claimant's work and returned faulty work to the claimant for corrections before delivering the work to clients.

The claimant's initial claim had been disallowed due to insufficient wage credits; the claimant appealed, and the Appeal Tribunal awarded wage credits, finding that the claimant had been an employee of the employer. The employer appealed, and the Commission unanimously ruled that the Appeal Tribunal decision was correct.

Analysis: This claimant was not an independent contractor. Several factors lead to that conclusion:

Conclusion: this claimant was an employee - the wages should have been reported.

TWC Case 3 - Facts:

The claimant was paid on an hourly basis to serve as a contract office manager; her main duties were to train the employer's employees how to do their jobs, monitor the quality of their work, and to perform clerical duties in the office. The claimant had signed a written agreement specifying that she was an independent contractor. The claimant's initial claim had been disallowed for lack of wage credits, but the Appeal Tribunal ruled that the claimant was an employee. The Commission upheld the hearing officer's ruling in a unanimous decision.

Analysis: An hourly pay rate is strongly indicative of an employment relationship, whereas most independent contractors are paid by the job or project. In this case, the claimant had no opportunity for a profit or loss, since all materials and facilities were supplied by the employer. Since the claimant's job was to train the employer's employees and monitor the quality of their work, she essentially functioned as their supervisor - it is difficult to imagine a job function that would be more directly integrated into the employer's business. In addition, the fact that the claimant also performed a number of routine clerical tasks associated with the employer's business raises a presumption that she was an employee. The fact that the claimant had agreed in writing that she was an independent contractor is irrelevant, since the facts show that she was an employee. The claimant's wages should have been reported as wages from employment.

TWC Case 4 - Facts:

The employer's company was a car rental agency in a major city, with locations downtown and at area airports. The claimant performed services as the driver of a shuttle van for the employer under a written contract specifying that he was an independent contractor. He was paid a set rate per mile plus an hourly rate for waiting time; paydays were at regular intervals. There was no evidence that he had negotiated the pay rate. He worked only on assignments given to him by the employer and did all work in the employer's name. He had to be on 24-hour call. He was told by supervisors at various levels that he would be fired if he refused to make runs as directed by the employer. The claimant worked for the employer on a continuous basis for about a year.

Analysis: The claimant was an employee based upon the following factors:

In view of the above facts, the written agreement that the claimant was an independent contractor had no effect concerning this employer's legal obligation to report the claimant's wages and pay the appropriate state UI tax.

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