Arkansas, Indiana, Nevada, and South Dakota enacted legislation this year affecting the determination of whether a worker is an employee or independent contractor for certain purposes. On balance, the changes are supportive of independent-contractor status. The specific provisions are discussed below.
I. Arkansas
Arkansas enacted two new laws, namely, one modifying the state’s “ABC” test and the other concerning the “sharing economy.”
H.B. 1540 modified the state’s “ABC” test for determining whether a worker is an independent contractor for unemployment purposes. The new law provides that effective April 2, 2015, an independent-contractor relationship is established if the relationship satisfies factors A and either B or C. The prior version of the test was met only if all three factors, namely, A and B and C, were satisfied. The effect of this change is to expand the definition of independent contractor for purposes of unemployment.
The amended “ABC” test provides:
(e) Service performed by an individual for wages shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the director that:
(1) The individual has been and will continue to be free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and
(2)
(A) The service is performed either outside the usual course of the business for which the service is performed or is performed outside all the places of business of the enterprise for which the service is performed; or
(B) The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.
Representative Robin Lundstrum (R) introduced H.B. 1540 on March 2, 2015, and Governor Asa Hutchinson (R) signed it into law on April 2, 2015.
In addition, Arkansas enacted S.B. 800, which deems certain transportation network company (“TNC”) drivers to be statutory independent contractors for workers’ compensation purposes. The common law test is otherwise used to determine an individual’s status for these purposes.
The new provisions, which are contained in the state’s Motor Vehicle law, define a TNC to mean “an individual or entity licensed under this subchapter that operates in this state and uses a website, digital network, or software application to connect passengers to transportation network company services provided by transportation network company drivers.” Uber and Lyft likely could qualify as TNCs if they are licensed.
S.B. 800 deems TNC drivers to be independent contractors relative to a TNC if the following five factors are satisfied:
(1) The transportation network company does not prescribe specific hours during which a transportation network company driver must be logged into the transportation network company’s website, digital platform, or software application;
(2) The transportation network company imposes no restrictions on the transportation network company driver’s ability to utilize a website, digital network, or software application of other transportation network companies;
(3) The transportation network company does not assign a transportation network company driver a particular territory in which transportation network company services may be provided;
(4) The transportation network company does not restrict a transportation network company driver from engaging in any other occupation or business; and
(5) The transportation network company and transportation network company driver agree in writing that the transportation network company driver is an independent contractor of the transportation network company.
Senator Jason Rapert (R) introduced S.B. 800 on March 4, 2015, and on April 4, 2015, Governor Hutchinson signed it into law.
II. Indiana
Indiana created a comprehensive regulatory scheme governing TNCs. The new law, enacted as H.B. 1278, also provides that effective July 1, 2015:
Except as otherwise provided in a written contract:
(1) a TNC driver who connects to a TNC’s digital network is an independent contractor of the TNC; and
(2) a TNC is not considered to do either of the following:
(A) Control, direct, or manage a TNC driver who connects to the TNC’s digital network.
(B) Own, control, operate, or manage a personal vehicle used by a TNC driver to provide prearranged rides.
The new Indiana law defines “TNC” to mean an entity that “(1) does business in Indiana; and (2) uses a digital network to connect TNC riders to TNC drivers to request prearranged rides.” A “digital network” means “an online enabled application, software, web site, or system offered or used by a TNC to enable the prearrangement of rides with TNC drivers.” Examples of TNCs likely could include Uber and Lyft.
H.B. 1278 does not expressly identify any specific purpose for which a driver’s deemed independent-contractor status will apply.
Representative Matthew Lehman (R) introduced H.B. 1278 on January 22, 2015, and it was signed into law by Governor Mike Pence (R) on May 5, 2015.
III. Nevada
Nevada established a new statutory presumption that a worker is an independent contractor for purposes of the state’s minimum-wage laws. The new presumption, contained in S.B. 224, became effective on June 2, 2015. The state otherwise uses the “economic realities” test to determine an individual’s status for these purposes, which is the same test that courts use for purposes of the Fair Labor Standards Act.
S.B. 224 provides that an individual is “conclusively presumed” to be an independent contractor if:
(a) Unless the person is a foreign national who is legally present in the United States, the person possesses or has applied for an employer identification number or social security number or has filed an income tax return for a business or earnings from self-employment with the Internal Revenue Service in the previous year;
(b) The person is required by the contract with the principal to hold any necessary state or local business license and to maintain any necessary occupational license, insurance or bonding; and
(c) The person satisfies three or more of the following criteria:
(1) Notwithstanding the exercise of any control necessary to comply with any statutory, regulatory or contractual obligations, the person has control and discretion over the means and manner of the performance of any work and the result of the work, rather than the means or manner by which the work is performed, is the primary element bargained for by the principal in the contract.
(2) Except for an agreement with the principal relating to the completion schedule, range of work hours or, if the work contracted for is entertainment, the time such entertainment is to be presented, the person has control over the time the work is performed.
(3) The person is not required to work exclusively for one principal unless:
(I) A law, regulation or ordinance prohibits the person from providing services to more than one principal; or
(II) The person has entered into a written contract to provide services to only one principal for a limited period.
(4) The person is free to hire employees to assist with the work.
(5) The person contributes a substantial investment of capital in the business of the person, including, without limitation, the:
(I) Purchase or lease of ordinary tools, material and equipment regardless of source;
(II) Obtaining of a license or other permission from the principal to access any work space of the principal to perform the work for which the person was engaged; and
(III) Lease of any work space from the principal required to perform the work for which the person was engaged.
S.B. 224 indicates that “the fact that a person is not conclusively presumed to be an independent contractor for failure to satisfy three or more of the criteria” set forth above, “does not automatically create a presumption that the person is an employee.”
The Senate Committee on Commerce, Labor and Energy introduced S.B. 224 on March 6, 2015. On June 2, 2015, Governor Brian Sandoval (R) signed it into law.
IV. South Dakota
South Dakota enacted a new law, H.B. 1105, that creates a rebuttable presumption that a person is not an employee for workers’ compensation purposes. The new law amends the Workers’ Compensation law by adding a new section permitting “any independent contractor who is not an employer or a general contractor and is not covered under a workers’ compensation insurance policy” to sign an affidavit of exempt status. The affidavit “creates a rebuttable presumption that the affiant is not an employee” for workers’ compensation purposes. Generally, South Dakota follows a common law test to distinguish employees from independent contractors for these purposes.
According to H.B. 1105, a business that obtains an affidavit of exempt status from a worker is not required to make workers’ compensation contributions on behalf of such worker. However, to deter any abuse of this provision, the new law provides “[a]ny person who solicits or provides false information on an affidavit of exempt status . . . with actual knowledge is guilty of a Class 2 misdemeanor.”
Representative Spencer Hawley (D) and Senator Corey Brown (R) introduced H.B. 1105 on January 26, 2015, and on March 11, 2015, Governor Dennis Daugaard (R) signed it into law.
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