Beginning April 24, Utah Department of Employment Security employees will follow a new set of guidelines to determine if people are employees working for a company requiring the payment of unemployment taxes or if they are independent contractors.
The Legislature passed SB164, which had the support of the State Industrial Commission. As a result, the state definition of what constitutes an independent contractor is similar to that of the Internal Revenue Service, said commission chairman Stephen M. Hadley.Hadley said the factors going into a definition of independent contractor only apply to Employment Security in determining what entities must pay unemployment benefits.
He said the 20 factors outlined in SB164 don't determine who is or isn't an independent contractor but can be used in making that decision. Department employees are now using the "A-B" test.
One part of the A-B test requires that for someone to be considered an independent contractor, they must be free of control from the person purchasing the service. Moreover, the person providing the service must customarily be engaged in an independently established trade, occupation, profession or business.
Allan Zabel, attorney and acting unemployment insurance director for the department, said 98 percent of the independent contractor decisions were based on part B of the two-part test. He believes the new guidelines will make the decision more subjective and that department employees will decide how much weight to give various factors since they apply differently to different occupations.
Because the decisions were based mainly on the B test, Zabel said much of the case law established over the years has "gone by the boards," but now federal law will be the guideline since the state factors match those of the IRS.
Here are some of the factors outlined in SB164 that can be considered by department employees when determining if people are independent contractors:
- Whether the individual works his own schedule or is required to comply with another person's instructions about when, where and how work is performed.
- Whether the individual uses his own methods and requires no specific training from the purchaser, or is trained by an experienced employee working with him, is required to take correspondence or other courses, attend meetings and by other methods indicates the employer wants the services performed.
- Whether the individual's services are independent of the success or continuation of the company, or are merged into the business where success and continuation of the business depends upon those services, and the employer coordinates work with the work of others.
- Whether the person's services may be assigned to others or must be given personally.
- Whether the person has the right to hire, supervise and pay other assistants pursuant to a contract under which the individual is responsible only for the attainment of a result, or the individual hires, supervises and pays workers at the employer's direction.
- Whether the person was hired to do one job and has no continuous business relationship with the person for whom the services are performed or continues to work for the same person year after year.
- Whether the person or the employer sets up the schedule.
- Whether the person is free to work when and for whom he chooses or is required to devote full-time to the business of the employer and is restricted from doing other gainful work.
- Whether the individual uses his own office, desk, telephone or other equipment and is physically within the employer's direction and supervision.
- Whether the person is paid by the job or on a straight commission or is paid by the employer in regular amounts at stated intervals.
- Whether the individual furnishes his own tools or if tools and materials are furnished by the company.