Federal Appeals Court Holds That Primary Factor In Determining “Employee” Status of Worker Under Anti-Discrimination Laws Is Extent To Which Company Controls The Manner And Means Of Worker’s Tasks
Most laws prohibiting discrimination in employment protect workers who are “employees” but not those who are “independent contractors.” The U.S. Court of Appeals for the Second Circuit in New York recently ruled that a worker who receives no benefits and is treated as an independent contractor for tax purposes may nevertheless be considered an employee under Federal and New York discrimination laws. In Eisenberg v. Advance Relocation & Storage, Inc., 2000 WL 1915771 (2d Cir., December 26, 2000), the court ruled that in determining whether a worker qualifies as an “employee” under these laws, judges should place special emphasis “on the extent to which the hiring party controls the manner and means” by which the worker completes his/her assigned tasks, rather than on how the worker is treated for tax purposes or whether the worker receives benefits.
The Second Circuit’s decision reversed a lower court’s ruling and reinstated claims of discrimination and retaliation brought by a woman who had complained of a hostile work environment. The plaintiff, Eisenberg, was engaged by Advance Relocation & Storage to work in a “permanent full-time basis” loading and unloading furniture at an Advance warehouse. Advance did not deduct or withhold any income, social security or other taxes from her wages and Eisenberg, who was paid on an hourly basis, did not receive any employment benefits. An Advance representative gave Eisenberg orders on a daily basis and, if he was not going to be at the warehouse on a particular day, gave her orders on the prior day as to where she should go and what she should do.
Advance made a motion for summary judgment arguing that Eisenberg’s claims should be dismissed because she was an independent contractor rather than an employee and that she was therefore not entitled to invoke the protections of Title VII and the New York State Human Rights law. The district court agreed and granted summary judgment for Advance. In its decision, the district court applied a 13 factor test enunciated by the U.S. Supreme Court to determine whether a person is an employee or an independent contractor. The lower court also relied on a Second Circuit decision in a copyright work-for-hire case, Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992), in which the court placed particular emphasis on two of the thirteen factors – the tax treatment of the worker and whether the worker received employment benefits — in determining the independent contractor/employee status of the worker. Noting that Eisenberg was treated as an independent contractor for tax purposes and did not receive any benefits, the district court concluded that she was not an employee and therefore dismissed her discrimination claims.
The Second Circuit reversed the district court and reinstated Eisenberg’s claims. The court reasoned that the district court’s reliance on Aymes was inappropriate because Aymes was a copyright case rather than discrimination case. It stated that if the holding of Aymes –that the benefits and tax treatment factors deserve special weight in determining whether a worker is an employee or an independent contractor — were applied in discrimination cases, it would impermissibly allow workers and firms to opt out of anti-discrimination statutes through the use of individual employment contracts. The court further held that in discrimination cases, judges should not ordinarily place particular weight on the benefits and tax treatment factors, and should instead give greater consideration to the extent to which the hiring party controls the manner and means by which the worker completes her assigned tasks. The court stated that in the case at hand Advance exerted “pervasive, extensive control” over Eisenberg and concluded that Eisenberg qualified as an employee. It therefore reinstated her case and allowed it to proceed on the merits.
In light of the Second Circuit’s decision, employers should be aware that even though a worker receives no benefits and is treated as an independent contractor for tax purposes, the worker may be deemed an employee under federal and state discrimination laws and accorded the protections of those statutes if the employer controls the manner and means of the worker’s tasks.