Published in the New Hampshire Bar News
By: Beth A. Deragon
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 contractor.
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.