Pennsylvania Makes It Harder To Classify Workers As Independent Contractors
On April 22, 2020, the Pennsylvania Supreme Court made it harder for employers to classify workers as Independent Contractors.
In the closely watched case, A Special Touch v. UC Tax Services, the employer (a salon) argued several workers were independent contractors. This situation was discovered during an audit by the Pennsylvania Department of Labor. However, these independent contractor challegenes can also arise when a worker applies for unemployment compensation or worker’s compensation.
In A Special Touch, the court disagreed with the employer’s classification of some workers as independent contractors. The court said the work an individual performs is normally considered employment unless:
- the individual’s services are performed free from any control or direction of the purported employer; and
- the individual is customarily engaged in an independently established business.
In other words, to be truly “indepedent”, the employer cannot control how the individual does his or her job and the individual must have a legitimate business serving more than one client.
In A Special Touch, the salon’s ‘independent contractors’ performed babysitting, cleaning, and laundry work for the salon. The court determined the workers were not “acutally involved in” an business. The workers in question did not work for other clients and did not hold themselves out as operating their own businesses. As employees, the employer should have been contributing to the unemployment and worker’s compensation funds, paying the employer’s share of social security wage taxes, and complying with a host of other employee regulations.
This means that if you are the only client of your “contractor” or “consultant” and she does not hold herself out to be a business open and willing to take on other work, then the she is really an employee.
This case makes it much more difficult for workers to qualify as independent contractors. If you have individuals working for you as independent contractors or consultants, I highly advise you consult an attorney to review your worker classifications. Concerto Law is open and available to answer your questions.