Independent contractor versus employee: “Control” is the issue

by Michael Haberman on July 7, 2015 · 0 comments


How much control an employer exercises is key in independent contractor agreements.

How much control an employer exercises is key in independent contractor agreements.

In a widely publicized decision in June 2015 the California Labor Commission declared that an individual that drove for Uber was not an independent contractor but was an employee and subsequently owed for mileage, tolls and interest on her car. (Interestingly they did not pay her wages for hours worked, but that was mostly due to her inability to produce proper documentation of those hours worked.) The decision came down to the Commission’s determination about the amount of control Uber exercised in the driver’s activities.

Control or influence

One of the key tenets of the independent contractor is that they live up to the word “independent.” The more control a company exercises in the when, where and how of an independent contractor’s performance the more likely that individual is going to be seen as an employee and not a contractor. Uber claimed they are just a technology platform to connect riders with drivers and they exercised little control over the actual driver. The driver claimed otherwise and was able to argue her “employee” status successfully.

Uber is claiming this decision applies only to this one employee, but the decision certainly signals to many others the possibility of the breakdown of the model that has been growing in what is being called the “Service Economy.” Indeed there already some moves for class actions against Uber that may expand the California result.

Beyond Uber

There is no secret that Federal, state and local governments have been clamping down on the use of independent contractors. According to attorney Connor Sabatino the major issue in these actions is the same that occurred in the Uber case; control or influence the employer exercises over the independent contractor. As Sabatino puts it “Whether you are a company utilizing general contractors, a company that works with affiliates, or a franchisor with numerous franchisees, the key question to ask is how much influence do you wield over any purported employee?”

In the past it has generally been the IRS, the US Department of Labor, or state workers’ compensation boards that have been mostly concerned with the status of an independent contractor. Now the National Labor Relations Board is also weighing into the fray by saying that because of the amount of influence and control McDonald’s as a franchiser exercises over its franchisees the NLRB considers them to be joint employers when it comes to labor issues. Attorney Christopher Ward says that this attack on the franchise method of business could be to the “significant benefit of agitating employees and labor unions.” This decision is based on the perceived level of influence and control that the franchiser exercises over the franchisee.

Sabatino says that this could even extend to employees of one company being seen as being controlled by another company and thus leading to some co-employment relationships. I remember reading an article about a New Jersey carpet installer being declared under the control of a company that sold carpet, even though the installer had been a separate business for 20 years. It took 10 years of hearings to clear that one up.

Sabatino offers some very sage advice when he says:

“It is important for businesses to maintain documentation of their relationships with general contractors, affiliates, franchisees and other entities. Moreover, it is essential to stick to the boundaries of those relationships as they are documented, to avoid unnecessary meddling in another entity’s labor practices in a way that might lend itself to a finding of ‘control’ or ‘influence.’”


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