NH Bill Would Redefine ‘Employee’

April 15, 2015

Published in the NH Bar News

The NH Department of
Labor this past year brought interested parties together to craft a new
definition of “employee” that would apply to all matters before the Department
of Labor and NH Employment Security.

House Bill 450, which
is currently before the NH Senate, would codify the new definition, with the
goal of avoiding inconsistent application of current law.

The proposed new
definition of “employee” would be used to determine whether an individual is
eligible for unemployment or worker’s compensation benefits, can make a claim
under the Whistleblower Protection law, and is protected by the state’s wage
and hour law, including overtime.

The current statutory
laws (RSA 275, RSA 279 and RSA 281-A:2) defining “employee” have evolved to a
point where the same factual circumstances involving an independent contractor
can beget different, conflicting results. A business could be complying with
the labor department’s seven-part “employee” test regarding an individual, and,
at the same time, be noncompliant with NH Employment Security’s three-part
“employee” test.

These inconsistent
tests have troubled the clients of many New Hampshire employment lawyers and
bring serious financial consequences for businesses: civil penalties, unpaid
taxes, and daily worker’s compensation non-compliance fines, to name a few.

Here’s the new
definition of “employee” (remember that the presumption is that someone is an
employee, and the burden is on the employer to rebut the presumption):

1. The individual must satisfy all of the following five
requirements: 1) controls the detailed means and manner of the work except as
to final results; 2) has the opportunity for profit and loss as a result of the
services being performed; 3) performs services customarily engaged in as an
independently established trade, occupation, profession or business (the
individual may work for one entity for a six-month period and still be in
compliance); 4) hires and pays his/her own assistant and supervises them to the
extent they are employees; and 5) is paid based on the agreed scope of work
performed; and

2. The individual must satisfy three of the following six
criteria: 1) have substantial investments in facilities, tools, materials,
instruments and knowledge used to complete the work; 2) is responsible for the
satisfactory completion of the work and may be held contractually responsible
for failure to complete the work; 3) the parties have a written contract; 4)
the work is outside the usual course of business of the hiring unit; 5) the
work is performed outside all places of business of the hiring unit; or 6) the
Internal Revenue Service has classified the individual as an independent

HB 450 represents an
effort to level the playing field in a political environment both nationally
and at the state level that supports heightened enforcement of the
misclassification of employees as independent contractors. To those ends, NH
DOL and NH ES cooperate in regard to reporting alleged misclassifications to
each other.

Although NH DOL’s
application of the new “employee” definition will not collaterally estop a
separate finding by NH Employment Security, it would likely be taken into
account, especially if the determination is being made contemporaneously, as
typically happens.

The proposed new definition
incorporates existing statutory language. However, if adopted by the
Legislature, it will undoubtedly take practitioners, businesses, individuals,
and agency personnel time to adjust. Still, the promise of increased
consistency could make it worth all the effort DOL, NH Employment Security and
others have invested.