South Carolina Court of Appeals
Weighs in on
Definition of 1099 Employees/ Independent Contractors
For many years, the IRS, U.S. Department of Labor and the South
Carolina Courts have all used different tests to determine who
may and who may not be considered as a 1099 employee/independent
On August 9, 2017, in Sellers v. Tech Services, Inc.
the South Carolina Court found that "the primary consideration
in determining if an employer/employee relationship exists is
whether the alleged employer has the right to control the employee
in the performance of the work and the manner in which it is
done." The court went on to list the following four factors which
would be used to determine the right to control:
- Direct evidence of the right or exercise of control.
- The method of payment.
- The right to fire the individual.
In this case, the individual worked for an HVAC company and
was injured in the course of his employment. He subsequently
sought Workers Compensation benefits to help cover the costs
of his medical bills. The company’s Workers Compensation
benefits carrier denied the claim because he was classified as
a 1099/independent contractor.
The Court ultimately found that the individual was indeed an
employee and not an independent contractor and required the Workers
Compensation carrier to cover the claim.
The Court found that:
- The Company had the right to control the time,
place, and amount of the employee’s work. Independent
contractors determine how, when and where to do the work. They
are free to work when they choose and to set their own daily
or weekly schedule.
employee wore a company uniform, carried company business cards
and otherwise held himself out to be an employee.
- The company
paid for the costs associated with the employee’s work
van. Independent contractors are paid on a job basis and must
take care of their own incidental expenses. Independent contractors
furnish their own tools, materials and vehicles.
- There was no
independent contractor agreement in place. Independent contractors
offer their services to the general public. This is indicated
by having an office, hiring assistants, holding a business
license, business telephone listing or advertising in newspapers,
magazines or journals. Independent contractors agree to perform
specific jobs for prices agreed to in advance per the contract
and are paid on a commission or job completion basis.
- The Company furnished
the employee with the tools and equipment to do HVAC construction/repair.
Independent contractors are paid on a job basis and must take
care of their own incidental expenses. Independent contractors
furnish their own tools, equipment and materials.
- The employee
received the majority of his income from the Company and only
small amounts for plumbing and other jobs for different companies.
A continuing or ongoing relationship whereby the individual
is paid on an hourly, daily or weekly basis indicates that
the individual is an employee and not an independent contractor.
- The Company
had the right to fire the employee. Independent contractors
agree to complete a job per the provisions of a specific contract
and are responsible for satisfactory completion or are legally
obligated to make good for failure to complete the job. Independent
contractors cannot be discharged as long as they produce a
result which measures up to the contract’s
This case once again highlights the pitfalls that employers
face when they misclassify workers. It can expose the employer
to significant tax liabilities, statutory penalties and monetary
A company’s best defense against the potential expense
and aggravation related to federal or state law violations is
to proactively review and revise as needed their Human Resources
policies, handbooks, hiring procedures, compensation, benefits,
training programs, communications tools and other functions.
The professionals of PHHR are ready to assist your organization
maintain compliance with the latest state and federal mandates.
Paul Hilton Human Resources Consulting works with our clients to insure that all required documentation is correct and sufficient to successfully defend against a claim to any unemployment compensation commission.
|For assistance with any Human Resources related questions or other
issues, please Contact Us.
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