The often difficult categorization of staff as either employees or independent contractors has made news again – this time in New York. The Supreme Court of New York has overturned a decision by the New York Department of Labor for an unemployment benefits claim of a former blogger for The Nation magazine.
The case surrounds former The Nation blogger Gregory Mitchell. Mitchell is a freelance writer who in 2010 started contributing regular blog posts for that news organization’s website. Though his work at The Nation was not his only freelance work, it did comprise a majority of his writing.
Mitchell was employed by The Nation for three years through an annual contract. Per his yearly contract, he was categorized as a freelance writer for digital content (and some print) and was paid monthly for the content he provided.
In 2014, The Nation chose not to renew the Mitchell contract. Mitchell then filed for unemployment benefits.
Initially, Mitchell was granted unemployment benefits by the New York Department of Labor and was categorized by the state as an employee. The Nation protested the unemployment claim but lost the protest at the Administrative Law Judge level and the state Unemployment Insurance Appeal Board level.
However, when The Nation appealed to the Supreme Court of the State of New York their appeal was upheld.
The final court decision centered around the the IRS’s three-part test for determining if a staffer is a contractor or employee. That three-part test is:
- Behavioral Control. Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial Control. Are the business aspects of the worker’s job controlled by the payer?
- Type of Relationship. Are there written contracts or employee-type benefits? Will the relationship continue and is the work performed a key aspect of the business?
The section of the three-part test that Mitchell did not meet was, according to the court, that there was a lack of direct control by The Nation over Mitchell’s work-related activities. (Mitchell also provided content to several other news organizations and published a book over the three year period.) That opinion of the court overruled the Unemployment Insurance Appeal Board’s opinion that he was an employee. Under New York Unemployment Insurance Law, contractors such as Mitchell are not eligible for unemployment insurance. Now the claim for benefits goes back to the Board, who must now correct their decision to align with the Court’s ruling.
This entire incident shows how difficult it can be to not only accurately classify your staff but also to protect your organization from unfounded unemployment claims. It’s important to carefully classify staff and keep up-to-date contracts and job descriptions. (Both should be reviewed at least by an HR professional and possible an employment law attorney.) Then when a separation occurs it needs to be properly documented and any supporting materials properly and timely filed with the state.
Expect to read about more of these types of unemployment and employment law stories as states try to iron out employer/employee/contractor relationships in the growing ‘gig economy.’
The HR Services Team of 501(c) Agencies Trust regularly provides training on all the material included above. If you are a member organization and have questions, please feel free to contact them at (800) 358-2163 or send them an email.
Hat-tip: Kelly Phillips Erb