Independent Contractor Misclassification and Compliance News April 2024

By Nathan Gibson | April 25, 2024

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Key Points

Wisconsin’s Supreme Court upheld a decision that says Amazon drivers are employees for unemployment insurance taxation purposes.

Companies that engage independent contractors are advised to be aware of the state laws governing worker classification in the states where their independent contractors will work.

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

Wisconsin Supreme Court Says Amazon Drivers are Employees for Unemployment Tax Purposes

While there has been an abundance of attention on the United States Department of Labor’s (DOL) new independent contractor rule, many of the more significant decisions affecting companies that engage with independent contractors occur at the state level. The Wisconsin Supreme Court recently upheld the decision of the Wisconsin Court of Appeals that Amazon drivers were employees for Wisconsin’s unemployment insurance taxation purposes. The Court of Appeals, in a 65-page decision, carefully reviewed the Wisconsin statute and determined that the workers were employees for the purposes of unemployment insurance taxation.

The Wisconsin unemployment insurance statute says that workers are presumed to be employees, but that the company can rebut the presumption by showing that the services were free from control or direction by the company (this was not in dispute in this case) and that the company must prove that that the worker met at least six of the following factors:

  1. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
  2. The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.
  3. The individual operates under multiple contracts with one or more employing units to perform specific services.
  4. The individual incurs the main expenses related to the services that he or she performs under contract.
  5. The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
  6. The services performed by the individual do not directly relate to the employing unit retaining the services.
  7. The individual may realize a profit or suffer a loss under contracts to perform such services.
  8. The individual has recurring business liabilities or obligations.
  9. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

The Court of Appeals carefully reviewed each of the factors and concluded that Amazon did not meet the following factors:

  1. The individual advertises or otherwise affirmatively holds himself or herself out as being in business. Signing up on the Amazon app does not qualify as holding themselves out as being in business even though tutors who signed up for a tutoring app where the tutors offered services to multiple clients were considered to be holding themselves out as being in business. The tutors had multiple clients while workers on the Amazon app only worked for Amazon.
  2. The individual operates under multiple contracts with one or more employing units to perform specific services. There was no evidence of multiple employing units.
  3. The services performed by the individual do not directly relate to the employing unit retaining the services. The Court of Appeals concluded that the services directly related to Amazon’s retaining the services.
  4. The individual is not economically dependent upon a particular employing unit with respect to the services being performed. The workers were economically dependent on Amazon.

This case is a reminder that state laws play a role in determining whether to classify a worker as an employee or independent contractor. It also serves as a reminder that states have different laws for different purposes. While this case turned on the unemployment insurance statute which requires that the company prove that the worker meets at least six factors, the test for whether a worker is an employee for workers’ compensation purposes requires the company to prove nine factors.

Companies who engage with independent contractors are well-advised to be aware of the various state laws governing the classification of workers in the states in which the independent contractors will work.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.

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