Do your “independent contractors” work from your company’s offices? Do they market their own separate businesses? Do they have the right to hire others to perform the work they perform for you? If the answer to any of these questions is no, a recent Oregon decision is reason to worry.
In Broadway Cab LLC v. Employment Department, the Oregon Court of Appeals recently ruled that Broadway’s individual taxi drivers did not fall within the independent contractor exemption to Oregon’s unemployment tax because the drivers did not operate “independently established businesses.”
The Court held that Broadway’s drivers were not independent contractors for tax purposes because the drivers did not maintain a separate work location, did not routinely engage in advertising and marketing, and did not have the authority to hire or fire others.
The Court rejected Broadway’s argument that each taxi constituted a separate work location, noting that the taxis were marked with Broadway’s colors and numbers and operated as an extension of Broadway’s business. The Court also noted that Broadway limited drivers’ access to the vehicles. Next, the Court held that handing out Broadway business cards with the driver’s name was marketing on Broadway’s behalf, not the driver’s behalf, and did not count as advertising and marketing for purposes of the independent contractor exemption. Finally, the Court rejected Broadway’s argument that the authority to hire mechanics and accountants was “authority to hire and fire others” for purposes of the independent contractor exemption. Rather, contractors must have the authority to hire and fire others to perform the services the contractor performs.
Companies that set up their service providers as independent contractors for tax purposes must be careful to ensure that their “independent contractors” are truly independent. Under Oregon law, this means hiring contractors that own and operate a bona fide separate business, which runs out of a separate workplace not controlled by the hiring company, which performs its own separate marketing, and which has the right to hire and fire its own employees to perform the work the purported contractor performs.