May 6, 2019

Think You’re Protected by an Independent Contractor Agreement? Think Again.Delivery man holding box in one arm, cell phone in the other

You’ll want to think twice before classifying your new hire as an independent contractor, even if they signed an independent contractor agreement. Here’s why:

In a recent decision filed by an Alabama Federal Court, a judge held that a signed independent contractor agreement is not enough to prove that a worker is in fact properly classified as an independent contractor if other factors indicate that the worker should have been classified as an employee. Though centered on a driver for a delivery company, this case could have serious implications for dental and medical professionals who classify doctors or other workers as independent contractors if the work those individuals do serves the basic functions of the business in question.

The case involves a delivery driver named Steve Nemo, who worked for a company called RR Donnelley Logistics Services (RRD) for a brief period in 2017. He claims that he was fired by the company as a result of his age, race, and gender, and so he filed a discrimation suit against the company after being terminated.

The problem:

According to RRD, Nemo’s claims of discrimation under Title VII of the Civil Rights Act and the Age Discrimination in Employment Act apply only to employees, but Nemo was officially hired as an independent contractor.

The most important piece of evidence in favor of RRD’s motion to dismiss the case was an independent contractor agreement signed by Nemo. The agreement included provisions stating that Nemo agreed to pay for his own fuel, tools, and equipment (an important piece of the independent contractor equation). The agreement also stated that Nemo would “…receive no supervision about how to perform agreed upon delivery services,” suggesting that the independent contractor designation would likely hold up.

But Nemo asserts that his supervisors at RRD had the ability to dictate his delivery routes, and that he was required to use a specific “Real Time Delivery Program” on his personal phone to perform his work. This, he alleged, nullified his independent contractor agreement and implied that he was actually an employee of the company.

The decision:

Though the court held that the independent contractor agreement was “relevant” in this case, it also asserted that “the documents only tell part of the story.”

Evidence submitted by Nemo “constitute(d) disputed issues of fact concerning the degree of control that RRD exercised over Mr. Nemo’s work,” according to the court. The court also held that “Jurors could reasonably infer that drivers are an integral part of a delivery business” — both of which are points that support Nemo’s claim that he was, in fact, an employee of RRD and not an independent contractor (see the section on “Relationship of the Parties” in The CEDR Guide to Employee Classification for more on this subject).

Though Nemo’s discrimination case is still pending, the decision not to dismiss the case based on the fact that Nemo had signed an independent contractor agreement demonstrates the general lack of protection provided for employers by such agreements.

The Takeaway:

Since the plaintiff in this case had initially signed a document stating that his relationship with RRD was that of an independent contractor, it was ultimately Nemo’s responsibility to prove that he was, in fact, treated by RRD as an employee of the company and not as a contractor.

But, by providing text messages that demonstrated the amount of control his supervisors asserted over his duties, offering pay stubs that came from the company’s headquarters, and demonstrating that he was required to use a certain phone app during work, Nemo was allowed to proceed with his discrimination case, despite the fact that he had signed an independent contractor agreement when he was hired.

Having a worker sign an agreement stating that they are an independent contractor is not enough to protect you from potential claims to the Department of Labor or the Equal Opportunity Employment Commission. Even if an employee ASKS to be classified as an independent contractor, unless they meet the numerous tests that determine such a classification, they should still be treated and classified as an employee.

Ultimately, the burden of correct classification falls on you, the employer — not on the workers and employees that you hire, even if those employees “prefer” an alternative classification for whatever reason.

 

Need help with or want to learn more about employee and/or independent contractor classification? Check out the free CEDR Guide to Employee Classification and Wage Compliance.

 

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.

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Please note: CEDR Solutions specializes in providing expert HR support to owners and operators of independently owned medical and dental practices.