Employee v. Independent Contractor: A Domestic Dispute

“Can I pay my nanny or housekeeper as an independent contractor rather than an employee?” This is a frequently asked question. The simple answer is, it depends, but probably not. It is often advantageous to hire an independent contractor rather than an employee. After all, with an independent contractor, you are not responsible for getting an employer ID number, checking immigration documents, getting unemployment and workers’ comp insurance, and most of all – paying taxes.
However, you may not legally be able to call your nanny or housekeeper an independent contractor, regardless of the contract or terms you and your worker agree upon. For example, if you are in charge of what work is done, how it is done, the equipment that is used, and if you are the only family she works for, you have an employee. It does not matter whether she works full time or part time or whether she is paid hourly, weekly or in a lump sum.
On the other hand, if your worker controls how and when the work is done, provides her own supplies and works for multiple families, she is probably an independent contractor. For example, your weekly window washer is probably not your employee, but your Monday – Friday babysitter probably is. There is an exception: If you pay an agency to provide a worker, such as a home healthcare nurse, and that agency determines her pay rate, scope of work and controls payment of her salary, your home healthcare nurse is probably not your employee.
Now here’s the hard part: There is no single definition for who is considered to be an “employee.” The IRS, unemployment bureaus, workers’ compensation bureaus, and state and federal labor departments each have different guidelines for identifying an employee. However, all of these agencies consider the amount of control the worker has over the job she is doing. As a result of the numerous agency guidelines, beware of the many tax, insurance and wage implications that are determined by the distinction between independent contractor and employee. Keep in mind, also, that you must pay at least the state minimum wage to your domestic employee, and she may even qualify for overtime.


Is Your Disabled Employee Requesting ADA Accommodation? You May be Entitled to a Doctor’s Note.

One issue that often puzzles employers is whether they may require medical documentation, such as a doctor’s note, before providing an accommodation to a disabled employee. As most employers know, the Americans with Disabilities Act (ADA) requires them to provide reasonable accommodations to disabled employees. But this obligation extends only to the physical or mental limitations of the disabled employee that the employer knows about. The ADA does not expect an employer to accommodate disabilities of which the employer is unaware.
When the employee’s disability or need for accommodation is not obvious, the employer may ask the employee for documentation about her disability and functional limitations. The employer may require that this documentation come from a health care professional such as a doctor, nurse or physical therapist.
For example, suppose an employee informs her employer that she is having trouble bending over and picking up her tools due to a back injury. If the employee requests an accommodation, the employer may require medical documentation regarding whether the employee has a disability. This documentation might address the nature, severity, and duration of the impairment, and the extent to which the impairment limits the employee’s ability to perform certain activities.
There are limitations on the employer’s right to request medical documentation, however. The employer may only require documentation needed to show that the employee has a disability and that this disability requires accommodation. Generally, the employer cannot request the employee’s complete medical records because these records are likely to contain information unrelated to determining the existence of a disability and the need for accommodation.
Additionally, the employer cannot ask for any documentation when both the employee’s disability and the need for accommodation are obvious. For example, an employee who uses a wheelchair may ask her employer to elevate her desk on blocks so that the arms of her wheelchair fit underneath her desktop. If the employer demanded a doctor’s note before elevating the desk, it would likely violate the ADA.
Often, however, the employee’s disability or need for accommodation will not be obvious to the employer. In these instances, an employee who refuses to provide the documentation requested by the employer is not entitled to reasonable accommodation.



Ohio Supreme Court Gives Further Guidance Regarding Voluntariness of Retirement and Its Effect on Workers’ Compensation Benefits

In an October 4, 2011 decision, the Supreme Court of Ohio addressed the character of an injured workers' retirement as it related to his eligibility for permanent total disability (PTD) compensation. The case, State ex rel. Cinergy Corp./Duke Energy v. Heber, 2011-Ohio-5027, involved a company's long-time employee who was injured in 1970, retired in 1989, and then applied for PTD compensation in 2008. The injured worker's application was granted administratively, and the employer filed a complaint in mandamus in the court of appeals, alleging that the Industrial Commission had abused its discretion in granting the injured worker's PTD application without first ruling on the voluntariness of his retirement.

In its decision, the Supreme Court of Ohio reflected on prior holdings which substantiated the premise that the "character" (i.e., voluntary versus involuntary) of an injured worker's retirement was critical to a PTD analysis. The Court cited State ex rel. Rockwell International v. Industrial Commission (1988), 40 Ohio St.3d 44, for its holding that a retirement initiated by an injured worker for reasons unrelated to the industrial injury is considered voluntary and State ex rel. Baker Material Handling Corp. v. Industrial Commission (1994), 69 Ohio St.3d 202, for its holding that a voluntary retirement from the work force prior to asserting PTD precludes the payment of compensation for that disability.

Regarding the case at hand, the Court stated that, even though the issue of the injured worker's retirement was raised at the hearing, the hearing officer's order granting PTD gave only brief reference to the injured worker’s assertion that he retired because of his injury. The Court said that the hearing officer did not rule on the credibility of the assertion or the voluntariness of the injured worker's retirement. The Court stated that it agreed with the court of appeals that further consideration by the Industrial Commission was merited. The Court, though, disagreed with the court of appeal's implication that the only way an injured worker could substantiate that a retirement was injury induced was through the submission of medical evidence prepared at the time of retirement. The Court stated that Ohio Adm. Code 4121-3-34(D)(1)(d) does not say this but, in fact, says "if" such evidence is submitted, the Industrial Commission must consider it. The Court reinforced the premise that the Industrial Commission is the "exclusive evaluator of the weight and credibility of the evidence presented" and stated that there may be other evidence that substantiates the connection between injury and retirement which the Industrial Commission should be able to consider.

For more information on voluntary retirement and its effect on workers’ compensation benefits, contact one of Roetzel’s workers’ compensation attorneys.



IRS Offers Amnesty for Employers who Voluntarily Reclassify Workers

It’s no secret that the United States Federal Government has devoted significant resources to combat worker misclassification (i.e., classifying workers as independent contractors when they are really employees). Last year, Roetzel & Andress highlighted developments in this area. (See Employment Services Newsletter, June 2010, available at: http://www.ralaw.com/event.cfm?sp=publication&id=308.) On September 21, 2011, the IRS announced a program that permits employers to reclassify workers without penalty. In effect, an employer may reclassify independent contractors as employees without the fear of being held liable for significant back taxes and penalties. The program is called the Voluntary Classification Settlement Program (VCSP). Importantly, employers who take advantage of the program will not be subject to audits related to worker classification for their past actions. To be eligible for the program, an employer must:
  1. Have consistently treated their workers as nonemployees;
  2. Have filed all required Forms 1099 for the workers to be reclassified for the previous three (3) years; and
  3. Not currently be under an IRS, Department of Labor or state agency audit related to worker classification.
Although the usual statute of limitations period is three years, it is important to note that employers must agree to a six-year statute of limitations during their first three years in the program. Additionally, an employer must make a minimal payment of 10% of the employment tax liability due on compensation paid to the reclassified workers in the past tax year. No interest or penalties will be due.
Employers can take advantage of the VCSP by completing Form 8952 (available here: http://www.irs.gov/formspubs/article/0,,id=242970,00.html) at least 60 days prior to treating the workers as employees. Employers must then enter into an agreement with the IRS to finalize the terms of any payment due.
On its face, the VCSP provides employers the opportunity to avoid significant tax liability for misclassifying workers. Appearances may be deceiving, however, as the IRS previously entered into a Memorandum of Understanding with the Department of Labor to share information related to worker misclassification. While the goal of the VCSP is to obtain voluntary compliance and encourage employers to properly classify their workforce, these goals will not be achieved if the IRS shares information with the Department of Labor. The practical effect would be that an employer enters into the VCSP and discloses that it improperly classified workers as independent contractors. The IRS then provides this information to the Department of Labor which institutes an enforcement action to recover overtime wages due to these workers. Unfortunately, the IRS has not stated whether it will share information obtained from the VCSP with the Department of Labor. Presumably, the IRS will provide employers with assurances that it will not share information submitted in the contact of the VCSP, but for now that issue is not clear. Accordingly, employers should consider all the ramifications of entering into the VCSP and be cognizant that entering into the VCSP does not make employers immune from local taxing authorities.

Contact: Jon Secrest


NLRB Judge Upholds Facebook Firing

A National Labor Relations Board (“NLRB”) administrative law judge upheld the firing of a car salesman for posting embarrassing photographs and caustic comments about an auto accident on his Facebook account. The case, Karl Knauz Motors, Inc., NLRB ALJ, No. 13-CA-46452, 9/28/11, involved an unfair labor practice complaint against Karl Knauz Motors, which operates a BMW and Land Rover dealership.
The complaint concerned two incidents that took place in June 2010. In the first incident, the salesman posted photographs on his Facebook account ridiculing management at the BMW dealership where he worked for its decision to offer hot dogs, bags of chips, and discount cookies as the food selection at a prestigious sales event to introduce a redesigned BMW 5 Series automobile, which was described as the dealership’s “bread and butter” product.
In the second incident, the salesman posted pictures of an accident that occurred at the adjacent Land Rover dealership which was also owned by the defendant employer. The accident was caused by a 13-year-old boy who accidentally pressed the gas pedal and drove a truck into a pond, causing a saleswoman who was sitting in the front passenger seat to be thrown from the vehicle. The salesman posted a series of caustic comments along with photographs of the accident on Facebook, including “this is your car; this is your car on drugs,” and “the kid drives over his father’s foot and into the pond in all of about 4 seconds and destroys a $50,000 truck. OOOPS!” 
The dealership learned of the salesman’s Facebook postings relating to both events and fired him a week later.
In reviewing the termination, the administrative law judge determined that the salesman’s comments regarding the marketing event to introduce the redesign of the BMW 5 Series constituted protected concerted activity under the National Labor Relations Act because the marketing event could have had an effect upon his compensation due to his commission structure. However, the judge found that the salesman’s conduct in posting photographs and comments about the accident at the Land Rover dealership was not protected conduct because it had no connection to an employees’ terms and conditions of employment. Therefore, because the salesman’s termination arose from his unprotected conduct in posting comments and photographs on Facebook about the accident, the judge found that the dealership did not violate federal labor law in firing the salesman for that Facebook posting.