August 22, 2012
August 22, 2012
Occasional handyman is an employee for Oregon unemployment tax purposes
Ater Wynne LLP
NW Law frim
The Oregon Court of Appeals held that a handyman was an employee, and not an independent contractor, for unemployment tax purposes. Under Oregon law, an independent contractor must be both “free from direction and control over the means and manner of providing the services, subject only to the right of the person for whom there services are provided to specify the desired results” and “customarily engaged in an independently established business.” ORS 670.600(2).
According to ORS 670.600(2)(b) and (3), the employing entity has the burden to demonstrate that the purported independent contractor is customarily engaged in an independently established business by showing that the person meets three of the following five requirements:
(a) The person maintains a business location:
(A) That is separate from the business or work location of the person for whom the services are provided; or
(B) That is in a portion of the person’s residence and that portion is used primarily for the business.
(b) The person bears the risk of loss related to the business or the provision of services as shown by factors such as:
(A) The person enters into fixed-price contracts;
(B) The person is required to correct defective work;
(C) The person warrants the services provided; or
(D) The person negotiates indemnification agreements or purchases liability insurance, performance bonds or errors and omissions insurance.
(c) The person provides contracted services for two or more different persons within a 12-month period, or the person routinely engages in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.
(d) The person makes a significant investment in the business, through means such as:
(A) Purchasing tools or equipment necessary to provide the services;
(B) Paying for the premises or facilities where the services are provided; or
(C) Paying for licenses, certificates or specialized training required to provide the services.
(e) The person has the authority to hire other persons to provide or to assist in providing the services and has the authority to fire those persons.
In Whitsett v. Employment Department, a laundromat intermittently paid the handyman to repair equipment and help maintain the property. The handyman did not work specific days or hours, but was paid $25 per hour when he did work. During the time at issue, he did not engage in similar work for any other businesses, nor did he engage in marketing to obtain other clients. He was not licensed by a state board, which is also a requirement for independent contractors performing work which requires a license; the laudromat argued that he was exempt from such licensing requirements.
The Court of Appeals held that the handyman was not “customarily engaged in an independently established business,” and therefore could not be considered an independent contractor. The court held that the handyman met not more than two of the five criteria for an independently established business: (1) there was testimony that he would correct defective work, which may meet the “risk of loss” criteria and (2) he once hired his brother to perform electrical work, which may meet the “authority to hire other persons” requirement. He did not, however, engage in marketing; work for other clients; have a business card, maintain a separate place of business or even a business name; or make a signficant investment in his business, which required only small tools and the occasional part paid for by the laundromat.
This case is reminder that intermittent employment, even with a certain freedom from supervision, does not necessarily mean a worker is an independent contractor.
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