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February 01, 2016

Distinguishing between employees and independent contractors

Distinguishing between employees and independent contractors
Matter of Strauss (Commissioner of Labor), 2016 NY Slip Op 00561, Appellate Division, Third Department

RMC Research Corporation, an educational research firm, had a contract with the New York City Department of Education to provide teaching consultants, known as "peer observers," for the purpose of evaluating teachers who had received unsatisfactory ratings from school administrators. RMC had retained former teachers, including Michael D. Strauss, to act as peer observers at various schools within the Department's jurisdiction. The evaluations of the peer observers were used to assist school administrators in determining whether a disciplinary proceeding should be brought to remove the teacher under review from his or her position.

The issue in this action was an Unemployment Insurance Appeals Board’s decision that Strauss and other similarly situated peer observers, were employees of RMC for the purposes of its liability for unemployment insurance contributions based on remuneration RMC paid to Strauss and others engaged as peer observers.

Strauss had entered into a "consultant agreement" with RMC that required him to make 10 site visits to the school where the  teacher rated "unsatisfactory" was assigned, six for observation, three for consultation and one for final assessment. In addition, he was required to prepare specific documents including observation reports, an individualized professional development plan and a final assessment letter in connection with his assignment, and to complete his assignment within 10 weeks.

Noting that the existence of an employment relationship is a factual issue for the Unemployment Insurance Appeals Board to resolve, and its determination in this regard is beyond judicial review if it is supported by substantial evidence,  the court explained that although no single factor is determinative, “where, as here, the services of teaching professionals are involved, ‘the pertinent inquiry’ is whether the purported employer retains control of important aspects of the services performed."

Here, said the court, RMC's hiring process required Strauss to submit an application, undergo an interview and provide references. He subsequently signed a “consultant agreement” and received six hours of training provided by RMC.

Further, Strauss was paid an hourly rate set by RMC, was expected to work three to four hours per week for a total of 36 weeks during the 10-week assignment and submitted a voucher provided by RMC on the 15th of each month to receive payment for hours worked. Significantly, the Appellate Division noted that Strauss was paid for services rendered regardless of whether RMC received payment from the Education Department.

Other items of significance, said the court, included RMC's name appearing at the top of the documents that peer observers were required to prepare; RMC determined the format of such documents; during the course of his or her assignment peer observers interacted with RMC's project director who reviewed their observation reports for comprehensiveness, clarity, spelling and grammar; any complaints about a peer observer’s performance were directed to RMC; and RMC arranged for a replacement if an assignment could not be completed.

In the words of the Appellate Division, “The foregoing illustrates that there is substantial evidence that RMC retained overall control over important aspects of [Strauss’] work to establish the existence of an employment relationship,” and found no reason to disturb the Board’s decision.

As to distinguishing between an employee and an independent contractor, 20 factors being used by the IRS for this purpose. They 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 Strauss decision is posted on the Internet at:


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NYPPL Lawblogger Harvey Randall served as Principal Attorney, New York State Department of Civil Service; as Director of Research, Governor’s Office of Employee Relations; as Director of Personnel for the State University of New York System; and as Staff Judge Advocate General, New York Guard. Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material posted to this blog is presented with the understanding that neither the publisher nor members of the NYPPL staff are providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader is urged to seek such advice from a knowledgeable professional. NYPPL's Email Address = nyppl@nycap.rr.com