Sometimes Persistence Pays Off
Sometimes clients make decisions on the basis of principle and future ramifications, not cost. That is precisely what happened in the case of our client, CE Credits Online (hereinafter "CEC"), a provider of online professional responsibility training for teachers. The issue of independent contractor v. employee status was not a new one. Indeed, lawyers have been arguing about the status of these persons for decades. The twist in the CEC case was that the person at issue did computer work from her home in the Northern Tier of Pennsylvania as an online moderator, at times of her choosing for CEC, based in Washington State, three time zones away. She had to supply her own computer and internet connection. She also worked simultaneously for other companies.
The context of the case was her claim for Unemployment Compensation benefits, a benefit available to employees, but not independent contractors. The Pennsylvania Department of Labor and Industry initially ruled that she was an employee, and so did the Referee and the Unemployment Compensation Board of Review.
CEC persisted, and we appealed the case to the Commonwealth Court. The Commonwealth Court reversed and found that the moderator was an independent contractor. The claimant petitioned the Pennsylvania Supreme Court to review. On Friday, May 8, 2009, CEC learned that the Pennsylvania Supreme Court declined to review the case and, therefore, the Commonwealth Court's decision in CEC's favor stands.
All of this took approximately three (3) years, lots of determination and persistence. Since CEC had multiple persons in this moderator classification, CEC deemed the principle and longer term ramifications (including business, payroll tax issues, coverage under discrimination laws and employee benefits) to be worth the cost and effort; despite the fact that paying the UC taxes in Pennsylvania would have been much cheaper than the appellate costs.
We expect to see this type of issue again on both the federal and the state level. The anticipated federal Employee Misclassification Prevention Act, supported by then Senator Obama in the last Congress, would add additional fines and penalties for misclassification. Under the federal proposal, the state unemployment compensation authorities would determine the person's status, just as they did in our case.
Bottom Line: You can always treat a person as an employee. Under limited circumstances a person can be appropriately classified as a bona fide independent contractor. Careful consideration of the issue before the person goes to work for you can save lots of aggravation later. Sometimes though, persistence pays off as it did with CE Credits Online. Call me if you want to discuss your company's situation. For the text of the CEC opinion, copy and paste the following link into your web browser: http://www.pacourts.us/OpPosting/Cwealth/out/1269CD07_4-24-08.pdf.
Skarlatos & Zonarich LLP is a full-service law firm with highly skilled professionals dedicated to providing clients with sound advice and aggressive advocacy. For more information, visit skarlatoszonarich.com.
