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Wednesday, December 17, 2014

Determining if an individual is an employee or an independent contractor of an entity

Determining if an individual is an employee or an independent contractor of an entity
Lustgarten (New York Psychotherapy & Counseling Ctr.--Commissioner of Labor), 2014 NY Slip Op 08538, Appellate Division, Third Department

Samuel H. Lustgarten, a psychiatrist, provided services for clients of New York Psychotherapy and Counseling Center (NYPCC) for approximately 10 years. After his employment ended, he applied for unemployment insurance benefits. The Department of Labor initially determined that claimant was an employee of NYPCC and that NYPCC was liable for contributions based on remuneration paid to Lustgarten and others similarly situated.

NYPCC objected, contending that Lustgartenwas an independent contractor. An Unemployment Administrative Law Judge sustained the initial determination that Lustgarten was eligible for unemployment insurance benefits, which decision was affirmed by the Unemployment Insurance Appeal Board.

NYPCC appealed the Board's determination, which ruling was sustained by the Appellate Division.
The court explained that "Whether there exists an employee-employer relationship is a factual question to be resolved by the Board and we will not disturb its determination when it is supported by substantial evidence in the record.” With respect to medical professionals, the pertinent inquiry is whether the alleged employer exercised overall control over the work performed."

In this instance the record revealed that NYPCC [1] referred the patients to Lustgartenand scheduled their initial appointments; [2] paid Lustgarten an hourly wage for the time he treated the patients and [3] billed the patients for the services provided by Lustgarten.

Further, said the court, Lustgarten was paid by NYPCC regardless of whether it was reimbursed by the patients or their health plans.

Additionally Lustgartenworked in an office provided by NYPCC on NYPCC's premises for which he only paid a nominal weekly fee of $9.87 and would generate a treatment record that is accessed by NYPCC's doctors and staff. 

Affirming the Board's determination, the Appellate Division decided that substantial evidence in the record supported the Board's determination that NYPCC retained sufficient overall control over the work performed by Lustgarten [and those similarly situated] to establish an employee-employer relationship despite other proof in the record that could support a contrary result.

To assist in determining whether an individual is an employee under the common-law rules, the IRS has identified 20 characteristics as guidelines in determining whether sufficient control is present to establish an employer-employee relationship. 

Not every factor is applicable in every situation, and the degree of importance of each factor varies depending on the type of work and individual circumstances. In any event, all relevant factors are considered in making a determination as to the status of an individual as an employee or an independent contractor and no one factor is decisive.

The 20 factors being used by the IRS are:

1. Instructions. An employee must comply with instructions about when, where, and how to work. Even if no instructions are given, the control factor is present if the employer has the right to control how the work results are achieved.

2. Training. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods and receive no training from the purchasers of their services.

3. Integration. An employee's services are usually integrated into the business operations because the services are important to the success or continuation of the business. This shows that the employee is subject to direction and control.

4. Services rendered personally. An employee renders services personally. This shows that the employer is interested in the methods as well as the results.

5. Hiring assistants. An employee works for an employer who hires, supervises, and pays workers. An independent contractor can hire, supervise, and pay assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.

6. Continuing relationship. An employee generally has a continuing relationship with an employer. A continuing relationship may exist even if work is performed at recurring although irregular intervals.

7. Set hours of work. An employee usually has set hours of work established by an employer. An independent contractor generally can set his or her own work hours.

8. Full-time required. An employee may be required to work or be available full-time. This indicates control by the employer. An independent contractor can work when and for whom he or she chooses.

9. Work done on premises. An employee usually works on the premises of an employer, or works on a route or at a location designated by an employer.

10. Order or sequence set. An employee may be required to perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control.

11. Reports. An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of control.

12. Payments. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job or on straight commission.

13. Expenses. An employee's business and travel expenses are generally paid by an employer. This shows that the employee is subject to regulation and control.

14. Tools and materials. An employee is normally furnished significant tools, materials, and other equipment by an employer.

15. Investment. An independent contractor has a significant investment in the facilities he or she uses in performing services for someone else.

16. Profit or loss. An independent contractor can make a profit or suffer a loss.

17. Works for more than one person or firm. An independent contractor is generally free to provide his or her services to two or more unrelated persons or firms at the same time.

18. Offers services to general public. An independent contractor makes his or her services available to the general public.

19. Right to fire. An employee can be fired by an employer. An independent contractor cannot be fire so long as he or she produces a result that meets the specifications of the contract.

20. Right to quit. An employee can quit his or her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to complete it.

Additional information concerning the status of an individual as an employee or as an independent contractor is posted on the Internet at: 
The Lustgarten decision is posted on the Internet at:


Handbooks focusing on State and Municipal Public Personnel Law continue to be available for purchase via the links provided below:

The Discipline Book at http://thedisciplinebook.blogspot.com/

A Reasonable Penalty Under The Circumstances at http://nypplarchives.blogspot.com

The Disability Benefits E-book: at http://section207.blogspot.com/

Layoff, Preferred Lists at http://nylayoff.blogspot.com/

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