Delivery company found to be liable for unemployment insurance contributions for misclassified independent contractors
Speedy Media Associates LLC’s business was to deliver, among other things, newspapers, magazines and beverages. Speedy hired employees but it also used independent contractors to deliver its products. Although the independent contractors signed a written independent contractor agreement, the Department of Labor found that an independent contractor was eligible for unemployment insurance benefits. As part of that decision, the DOL found that Speedy was responsible for making unemployment insurance contributions for all similarly situated misclassified independent contractors going back three years. Speedy filed an appeal to the Appellate Division.
The Appellate Division upheld the DOL’s determination and stated that “[w]hether an employment relationship exists within the meaning of the unemployment insurance law is a question of fact, no one factor is determinative.” In short, the court was stated that a balancing test approach is used to determine a worker’s proper status. One the key factors in the balancing test is the degree and control exerted over the worker and whether the worker engages in the Company’s core business. Specifically, the court stated “[a]n employer-employee relationship exists when the evidence shows that the employer exercises control over the results produced or the means used to achieve the results [although] control over the means is the more important factor to be considered.”
In this case, Speedy’s independent contractor delivery people engaged in the core delivery business, trained other workers, and were given directions by the Company as to how to perform their duties. The court stated that there was sufficient evidence that Speedy exerted control over significant aspects of the contractor’s work and the means used to achieve timely and proper deliveries. The court found that the DOL’s decision was supported by prior decisions involving delivery workers.
Takeaways For Businesses
Some businesses mistakenly believe that they are protected from a misclassification case because they have a signed independent contractor agreement. However, that is not accurate. A signed agreement is merely one factor in the analysis. Indeed, the court stated that a “different finding [reversing the misclassification finding] is not compelled by the existence of a written agreement that identifies claimant as an independent contractor.” While an agreement can be helpful, it is not dispositive. The main focus will center on how much you control and supervise the workers. Companies should have signed agreements in place while maintaining strong guidelines in how the contractors are not to be controlled, directed or perform any work at its premises. The multi factor test is fact specific. Mistakes in these cases can have a significant impact on profit margins and the viability of a business model. Proactive action can be critical and save your money and time. For advice regarding your situation, contact our Award Winning NY Employment Lawyer at (800) 893-9645.
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