Earlier this week, a divided Ohio Supreme Court affirmed a decision of the Bureau of Workers’ Compensation and agreed that there was sufficient evidence to show that workers were employees and not independent contractors under the common law right to control test. State ex rel. Ugicom Ents., Inc. v. Morrison, Slip Opinion No. 2022-Ohio-1689. While some evidence supported the employer, there was sufficient evidence to show that the employer exercised too much control over the workers to consider them independent.
According to the Court’s opinion, following a 2009 audit,
the BWC found that the workers had been misclassified as independent contractors
for the past five years and assessed the employer with $346,817 in unpaid
premiums. The employer appealed and was
initially successful because the BWC had applied the 20-factor test instead of
the common law test. Upon remand and following
an evidentiary hearing, the BWC again found that the workers had been
misclassified.
The employer was a Time-Warner Cable contractor. Workers had to be approved by TWC and pass
TWC’s drug and background checks. The
workers would be assigned jobs at a certain price by the employer, but were not
required to accept them and could schedule them at any time (with the authorization
of the property owner), although they were expected to respond within 2 hours. The cables were supplied by TWC, but the workers
otherwise used their own tools. The workers
drove their own vans (but with the employer’s logo and TWC identified on them) and
wore TWC contractor badges. The workers
were required to sign one-year agreements which contained non-compete clauses (which
did not apply post-employment) and could be terminated on 60-days' notice. A quality inspector checked about 20% of the
work. There was some dispute about the
amount of skill required, but it was once described as just digging and filling
a trench for the cable and connecting it to the house.
There is no bright line test for the common law test, and a
number of factors are considered.
The factors which demonstrated employment status included: The work was an integral part of the employer’s
business. The workers did not seem
independent from the employer because they wore badges and vests and drove vans
with the names of the employer and TWC.
This factor is one of the most important considerations in evaluating
employment status. The jobs were posted
at set prices with a take-it-or-leave it approach and were not negotiated or bid
on by the worker and this was found to exercise control over the workers. The workers did not advertise or offer their
services elsewhere and had long-term and ongoing relationships with the employer. The workers
could not offer their services to the employer’s competitors because of non-compete
clauses. The work involved required
minimal skill or training.
The factors which indicated independent contractor status
included: They signed independent contractor agreements and received 1099 tax
forms. They were able to accept or reject jobs based on their complexity and
distance. The workers supplied their own
tools, ladders, vehicles, cell phones, etc. and the BWC was found to have erred
in not crediting this factor. The BWC
was also found to have erred in construing control over the details and quality
of work, which were factors that supported independent contractor status. No one told the workers where or how to dig. This was not just an indication of competence;
“a lack of supervision is indicative of a lack of control.” They could accept or reject any assignment
and set their own hours of labor. The
quality standards were set by TWC, not the employer. Nonetheless, “even if [the employer] had
prescribed the standards, a contract provision stating that a job shall be
performed subject to the “ ‘approval or satisfaction of the employer * * * is
not an assumption by the employer of the right to control the person employed
as to the details or method of doing the work, but is only a provision that the
employer may see that the contract is carried out according to the plans.’ ”
That TWC might fine the employer for substandard work was not indicative of whether
the workers were employees of the employer.
The Court agreed that the BWC erred in construing piece rate
offers by the employer to be indicative of an employment relationship because
it mistakenly relied on a different test under the FLSA: “the bureau erred in
concluding that the installers’ receipt of piece-rate compensation
(essentially, payment per job rather than payment per hour) was evidence of an
employment relationship.” Nonetheless,
the “take it or leave it” approach and lack of negotiation for making the
offers was evidence of control by the employer.
The Court was also unmoved that the BWC disregarded and gave
no weight to uncontroverted affidavits from a couple of workers confirming that
they believed that they were independent contractors. Similarly, the Court found no abuse of
discretion that the BWC also refused to assign any weight to the independent
contractor label used in the parties’ agreement.
Although the bureau was perhaps too dismissive of the contract—by suggesting that such a contract may be a “red flag”—the bureau’s conclusion that it was not bound by the parties’ labels was nevertheless correct, because “a description by the parties of their future relationship is not necessarily determinative when viewed in light of their actual subsequent activities,”
Ultimately, the Court agreed that while there was evidence
supporting contrary conclusions, it was bound by an abuse of discretion
standard. “[W]e are not called upon to reweigh it here; rather, our function is
to determine whether the bureau abused its discretion by entering an order that
is not based on some evidence in the record.”
Albeit some of the factors weighed in the employer’s favor, there was
enough evidence in the record to support the BWC decision.
The Court also affirmed the BWC decision that the quality
control inspector was an employee and not an independent contractor. Although he held himself out as an
independent contractor and maintained his own workers’ compensation policy, the
employer was his sole source of income, making him financially dependent on the
employer.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to different
results. Information here can change or be amended without notice. Readers
should not act upon this information without legal advice. If you have any
questions about anything you have read, you should consult with or retain an
employment attorney.
