July 27, 2011

When it quacks like a duck, it’s a duck: why independent contractor titles don’t matter much

Posted in Discrimination, Fair Labor Standards Act, Independent Contractors, Independent Contractors, Leaves of Absence, Personnel Records, Unemployment Benefits tagged , , at 10:29 am by Tom Jacobson

I often hear employers and employees describe their relationship as an “independent contractor” arrangement, as opposed to an employer/employee relationship.  When I ask why they believe that, a typical response is that they have agreed to call it that.  A recent Minnesota Court of Appeals decision re-affirms that when it comes to independent contractor status, titles don’t matter much.

The case is Haugtvedt v. FJF Enterprises of Ramsey, Inc.  FJF is a tax preparation and accounting services firm, and Cara Haugtvedt was a CPA for the firm from 2005 until 2009.  At the beginning of their relationship Haugtvedt and FJF agreed that she would be considered an independent contractor.  Haugtvedt was terminated when negotiations for her to buy the business failed.  Haugtvedt applied for unemployment benefits.  The Minnesota Department of Employment and Economic Development (DEED) then performed and audit of FJF and concluded that despite her “independent contractor” title, Haugtvedt was an employee of FJF, and an unemployment law judge (ULJ) ultimately awarded unemployment benefits to Haugtvedt.

FJF appealed the ULJ’s decision to the Minnesota Court of Appeals, which affirmed the ULJ’s decision.  In its review of the ULJ’s decision, the appellate court went through a detailed analysis of the actual working relationship between FJF and Haugtvedt.  The court specifically reiterated that “The nature of the relationship of the parties is to be determined from the consequences which the law attaches to their arrangement and conduct rather than the label they might place on it.”  The court then applied the following five factors to the FJF/Haugtvedt relationship:  (1) FJF’s right to control the means and manner of Haugtvedt’s performance; (2) the mode of payment; (3) FJF’s furnishing of materials or tools; (4) FJF’s control over the premises where Haugtvedt’s work was done; and (5) FJF’s right to discharge Haugtvedt.  The court also applied a laundry list of other criteria found in the Minnesota rules for unemployment claims.  After applying all of these factors, the court agreed that despite her independent contractor title, Haugtvedt was indeed an employee of FJF.

This problem is not limited to claims for unemployment.  A misclassification of an employee as an independent contractor can also result in claims for unpaid wages, overtime, and taxes.  It can also mean that the worker is protected by other laws such as the multitude of laws that provide for leaves of absence, reasonable accommodations for disabilities, maintaining of personnel records, etc.

The Haugtvedt case is another reminder that when it comes to employer/employee relationships, if it quacks like a duck, it’s a duck, even if you call it a goose.  So, make sure you know your ducks from your geese.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2011 Swenson Lervick Syverson Trosvig Jacobson, PA

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