In the case of Ernster v. Luxco, the plaintiff sued for age discrimination when she was terminated from her employment and replaced by a younger worker. The plaintiff was hired by the company as a marketing rep and treated as an independent contractor. Since only employees can sue for discrimination (at least in Iowa) she argued that she was in fact an employee. In reviewing the facts the court said she just may be and that it is an issue for a jury to decide.
Here’s the point: The plaintiff comes very close to the definition of an employee even though she was treated like an independent contractor. Now the fate of this business is in the hands of lawyers and 12 people in a jury box! To read the case go to http://www.ca8.uscourts.gov/opndir/10/02/091200P.pdf.
Merchandising Concept Group v. California Unemployment Ins. Appeals Bd. (2010) , Cal.App.4th
Merchandising Concept Group contracted with clothing manufacturers to provide attractive product displays to promote sales of goods in retail stores. The people who made the displays were called detailers, and Merchandising Concept Group classified them as independent contractors.
The Employment Development Department audited Merchandising Concept Group and determined the detailers were not independent contractors but employees subject to employment tax-related deductions. The Employment Development Department issued an assessment totaling approximately $110,000 plus a penalty on Merchandising Concept Group based on the reclassification of 148 of its workers. This assessment included unpaid unemployment insurance contributions, employment training taxes, disability insurance contributions, and personal income tax.
Lesson: Get your 1099 act together! HR That Works Members are encouraged to watch the Independent Contractor Webinar and review the Independent Contractor Training Module which includes a video, report, analysis checklist, sample agreement and more.