The Independent Contractor Monitor

[Reprinted with permission from Contractor Management Services, LLC]

Through regular newsletters, CMS is taking the lead in making sure that everyone is aware of the issues, nationwide, regarding the use of independent contractors because with awareness comes the appropriate action. If you would like others to receive these updates, please use the following link: http://www.icadvantage.com/Email.asp

Rhode Island

Representatives Diaz, Almeida, Slater, Williams and Anguilla introduced House Bill No. 2006-7603 (HB 06-7603) on February 16, 2006, amending the Rhode Island “Temporary Employee Protection Act” by adding a provision defining when a worker is considered an employee under the Act. Sec. 28-6.10-3(c), as proposed, defines an employee as “an individual performing any service for compensation” unless (1) the individual is free from control and direction in connection with the performance of the service, both under his/her contract and in fact; and, (2) the service is performed outside the usual course of business of the employer; and, (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the services performed. The proposed addition also provides that the failure to withhold income taxes or to pay unemployment compensation contributions shall not be considered in determining whether a worker is an employee.

Although proposed HB 06-7603 does not impact the current tests used to analyze a worker’s status as an independent contractor or employee under Rhode Island’s workers’ compensation and unemployment statutes, it reflects a dangerous shift toward a more restrictive test for independent contractors. Further, the bill could be amended as it works its way through the legislature to apply the proposed test to all independent contractor issues. HB 06-7603 should be watched to make sure no changes or amendments are added that attempt to expand this new proposed test to the workers’ compensation and unemployment statutes.

Texas

Businesses operating in Texas that utilize independent contractors know Texas has been historically favorable to the independent contractor model. However, CMS believes the days of the Texas Workforce Commission’s (“TWC”) general acceptance of the use of independent contractors will soon be history. During a recent discussion, a TWC representative acknowledged to CMS the TWC usually upholds a worker’s status as an independent contractor if the worker voluntarily signs an agreement or other document acknowledging his/her status as an independent contractor. However, this representative stated the TWC has recently seen a rise in the number of complaints by persons who have been designated as independent contractors (alleging their signature was coerced or not otherwise voluntary).  As a result, the TWC is starting to look more closely at the independent contractor issue when it feels there might be abuses of the independent contractor model. CMS predicts that Texa s will soon join the vast majority of other states that look beyond the agreement or document signed by the worker, and will start examining the nature of the relationship between the worker and the business to determine whether a true independent contractor relationship exists. Those who do business in Texas should take note and examine their utilization of independent contractors now to avoid problems later.

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Dennis P. Roccaforte
President - Contractor Management Services, LLC.

If you would like to speak to a CMS representative you can contact us at (800) 742-7508 or visit our website at www.ICTheRightWay.com.