N.H. businesses should beware the minefield of independent contractor tests

In September 2010, Gov. John Lynch created the Joint Agency Task Force on Employee Misclassification Enforcement. Its goal is to ensure that New Hampshire businesses pay their fair share to operate in the state, including payments based on the correct classification of individuals as employees or independent contractors. The Task Force consists of the Department of Labor, Department of Employment Security, Department of Revenue Administration and Department of Insurance.

In its September 2013 report, the Task Force is likely to propose language for legislation that would significantly enhance the ability of its agencies to enforce rules on employee classification. Enforcement measures might include the coordination of sanctions among agencies, stop-work orders and a “disbarment list” (a blacklist of employers that would be barred from doing business with the state because of continued violations).

Although businesses would agree that companies that intentionally misclassify workers as independent contractors should face repercussions, just working through the rules gives New Hampshire businesses a headache as they try to make sense of the multiple independent contractor tests. Even Task Force agencies have different tests: the Department of Labor has a seven-part test and Employment Security has a three-part test, not to mention the Commission for Human Rights’ “Right to Control” test and the IRS’s huge 14-part test.

Given this minefield of tests, it is not surprising that companies could have a good faith belief that they have engaged in an independent contractor relationship where one of those tests is met, but in fact are not in compliance with all tests.

New Hampshire is not alone in grappling with this issue: Maine recently adopted a new uniform independent contractor test that applies to workers’ compensation, unemployment and wage and hour laws, and imposes fines of up to $10,000. Previously, Maine’s agencies also had multiple tests. Sound familiar? Before the Task Force is given further enforcement power for rules that are inconsistent and confusing, they should work together with New Hampshire businesses to propose legislation that would enact a uniform independent contractor test, thereby leveling the playing field and easing the burden and potential sanctions on New Hampshire businesses.

Attorney Beth Deragon’s legal practice focuses on advising businesses on employment practices, including employment contracts, independent contractor issues, internal investigations, hiring, disciplining and terminating employees, medical leaves of absence, handbooks, anti-discrimination training and severance packages. Beth also defends businesses in employment litigation, appearing before agencies and state and federal courts. Visit her blog: nhemploymentlawblog.com and follow her on Twitter: https://twitter.com/BethADeragon.

Categories: Legal Advice