May 22, 2015

Designating an individual an “independent contractor” rather than an “employee” does not control the relationship of that individual to the employing entity

Designating an individual an “independent contractor” rather than an “employee” does not control the relationship of that individual to the employing entity

Viau (New York State Off. of Ct. Admin.—Commissioner of Labor), 125 AD3d 1223

The Unemployment Insurance Appeal Board, ruled, among other things, that the New York State Office of Court Administration [OCA] is liable for unemployment insurance contributions on remuneration paid to a claimant [Worker] for unemployment insurance benefits.

While awaiting notification that her name was reachable on the eligible list for appointment to the position of “interpreter,” Worker was told she could submit an application to be put on OCA's registry of voucher paid interpreters from which interpreters are selected on an "as-needed basis."*

According to the decision, for years Worker received only sporadic assignments until in December 2009, she commenced working in the Bronx Family Court where she continued to work every day until March 2012. When Worker applied for unemployment insurance benefits, the Department of Labor found her to be an employee of OCA and, as such, found OCA liable for contributions on remuneration paid to Worker and others “similarly situated.” OCA objected on the ground that claimant was an independent contractor.

After a hearing, an Administrative Law Judge upheld the Department's initial determination. The Unemployment Insurance Appeal Board affirmed the Administrative Law Judge's decision.

OCA appealed the Board’s determination contending that the Board had:

1. Ignored the essential independence of per diem interpreters:

2. Relied on minor factors to find the existence of an employer-employee relationship; and

3. By its decision, the Board interfered with OCA's “constitutional mission to deliver services in a responsible and cost-effective manner and failed to defer to the judgment of the Chief Administrative Judge in assessing the operational needs of the Unified Court System.”

The Appellate Division said the existence of an employer-employee relationship "is a factual issue for the Board to resolve and its decision will be upheld if supported by substantial evidence." The court said that it found that substantial evidence supported the Board's decision that OCA exercised sufficient supervision, direction and control over Worker to establish an employer-employee relationship. However the court decline to extend this holding to others "similarly situated."

Further, the court found that the Board's decision “did not improperly interfere with the powers or duties of the Chief Administrative Judge in assessing the operational needs of the Unified Court System.” The Appellate Division explained that although the powers of the Chief Administrative Judge may be extraordinarily broad, his or her authority "does not exempt compliance with the Unemployment Insurance Law" and contrary to OCA's contention, the Board's decision does not impinge on any aspect of the functional or structural independence of the Judiciary.

Another argument advanced by OCA was that the Board had ignored its prior precedent in determining that Worker was an employee rather than an independent contractor. The Appellate Division said that the "prior determination" relied on by OCA was not made by the Board but by a reviewing examiner for the Department of Labor and, as such, the Board is not bound by it.

The Appellate Division modified the Supreme Court’s decision by reversing so much of the ruling that found that all persons “similarly situated” to Worker to be OCA employees and, as so modified, affirmed the lower court’s decision.

This suggests that where an employer contends that an applicant for unemployment insurance benefits is an independent contractor and not an employee, the Board must make a "case by case" evaluation of the applicant's eligibility for benefits and, further, make an assessment of any liability for employer unemployment insurance contributions on a case by case basis as well.

As to distinguishing between an employee and an independent contractor, the 20 factors being used by the IRS for this purpose 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 decision notes that in 2012 OCA employed approximately 300 staff interpreters and maintained a registry of 700 per diem interpreters.

The decision is posted on the Internet at:


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