The Latest on Independent Contractors
I had a recent victory from the Office of Administrative Hearings setting aside an Employment Department tax assessment based on the purported employee’s status as an independent contractor. The ALJ relied on a line of recent Court of Appeals cases that have trended toward applying a much broader interpretation of the IC test than the Employment Department previously sought to apply. I anticipate additional decisions on the topic from the Court of Appeals in the coming year as they continue to provide guidance on this very fact-intensive inquiry.
In most instances there are two prongs to the independent contractor inquiry. The individual must be 1) free from direction and control over the means and manner in which they provide their services; and 2) engaged in an independently established business. See ORS 657.600. The independently established business test is outlined directly in the statute at ORS 670.600(2). The direction and control test is outlined in OAR 471-031-0181.
I encourage you to read the cases discussed here if you seek a better understanding of the current state of independent contractors in Oregon, but the following message from the Court seems to me to be the most important consideration when applying the direction and control test:
In considering whether a purported employee is “free from direction and control over the means and manner of providing the services, subject only to the right of the person for whom the services are provided to specify the desired results, … one must bear in mind that a person who is compensated for performing services virtually always will be subject to some level of oversight by the entity or individual for whom the work is performed… The critical question is whether that oversight relates primarily to “specify[ing] the desired results ” of the work, … or, instead, to having authority to control the way in which the work is performed (“the means and manner of providing the services”). In making the distinction between those two types of control, it is important to focus on the type of service performed, and consider whether it is that service—not the end result—over which the individual providing services is free from direction and control.”
AGAT Transport, Inc. v. Employment Dept., 256 Or. App. 294, 303 (2013).
The Court of Appeals most recently determined symphony musicians were independent contractors. Portland Columbia Symphony v. Employment Dept., 258 Or.App. 411, ___ P.3d ___ (Sept. 5, 2013). In this case, the Court stressed the importance of considering the nature of the services the musicians were contracted to perform. “The gathering of musicians to play simultaneously a selected program, with particular instruments represented and performing in harmony, is what defines a symphony orchestra performance.” Id, at 7. Those facts relate primarily to the desired result, as opposed to the control indicative of an employee-employer relationship, and in fact the musicians had discretion in all other aspects of performance. Id.
Also consider Court’s other recent decisions:
- Avanti Press v. Employment Dept., 248 Or.App. 450; 274 P.3rd 190 (Feb. 29, 2012). A sales representative of a greeting card company was an IC. The Court went into detailed discussion of the facts relating to their service agreement.
- AGAT Transport, Inc. v. Employment Dept., 256 Or.App. 294, 305 P.3d 122 (April 17, 2013). The Court upheld the ultimate finding that truck drivers who leased truck from AGAT were not an IC, although they disagreed with portions of the ALJ’s reasoning.
- Chelius v. Employment Dept., 258 Or.App. 72, 308 P.3d 290 (Aug. 14, 2013). A bookkeeper for decedent’s estate was not an IC.
- IN Transit, Inc. v. Employment Dept., 258 Or. App. 461, ___P.3d ___, (Sept. 5, 2013). Reversed and remanded for reconsideration of the facts under a correct interpretation of the direction and control test, which does not require absolute freedom from control.
Please do not hesitate to contact me if you have any questions, as I have spent quite a bit of time with this topic recently. You can reach me at: firstname.lastname@example.org or 503.595.2122