The Oregon Court of Appeals released a decision this summer that once again demonstrated how narrowly the law defines an independent contractor. While this is nothing new in Oregon, businesses need to take note.
During this era of economic instability and limited growth, many companies have leaned on hiring independent contractors in Oregon for particular projects or temporary jobs in order to save money. While this sounds like a reasonable alternative, one mistake in classification could cost the company significant amount of money in tax withholdings, overtime, benefit contributions, as well as penalties and attorneys fees. This is especially true since the Oregon Employment and Revenue Departments have increased the regulation of contractor classification.
The Court of Appeals decision in Whitsett v. Employment Department confirmed this hard stance by affirming that a handyman, who occasional did repair work for a laundromat, was an employee and not an independent contractor. The Court determined that the employer, who carries the burden of proof, failed to establish that the handyman met the criteria listed under ORS 670.600(2) and three of the five factors under ORS 670.600(3). Specifically the Court focused on the fact that the handyman did not maintain a separate business location, never took on other clients, and never marketed his business (which lacked a separate business name).
When trying to determine whether someone is an independent contractor, some key factors are as follows:
• The worker maintains control
• The worker maintains an independently established business
• The business maintains a separation location
• The worker bears the risk of loss related to the business or services provided
• The worker routinely provides services to others and/or engages in marketing efforts to seek other opportunities
• The worker significantly invests in his/her business
• The worker maintains the authority to hire others
Though many businesses attempt to roll the dice or try to determine a worker’s classification on their own, it is always best to speak with an Oregon business attorney to avoid a costly mistake.