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No Benefits, Vacation Time or Withholdings = Employee

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No Benefits, Vacation Time or Withholdings = Employee

Even though you may not provide your workers with benefits, or withhold any taxes from their paychecks, they may still be considered your employees.

In a recent Minnesota Court of Appeals decision, Anderson v. Holly Littrell, et al., Anderson worked as a truck driver delivering liquid fertilizer for FHR Farms (“FHR”), between April 2008 and May 2009.  After he was terminated in May 2009, he sought unemployment benefits which were contested by FHR.

The truck used by Anderson was provided to FHR by a company called Moeller Trucking, which apparently never charged FHR for its use.  Anderson was always paid by FHR even though he hauled fertilizer for other companies, as well.  When the Unemployment Law Judge (“ULJ”) asked Jeff Littrell, one of FHR’s owners, “So you’re saying that [Anderson] performed work that you were completely unaware of and you just paid it because he presented you the invoice and you didn’t look into it, you didn’t question it, you just paid it?”  Littrell answered, “That’s correct.”  Moreover, Anderson always contacted Jeff Littrell or his business partner to find out if there was work for him.  If so, he would be told where to pick up each load, where to take it and when it needed to be there.

Anderson did not receive any benefits, vacation, or sick time, and no deductions were withheld from his checks.  He received no training from FHR, was not required to attend any FHR meetings.  There was evidence that FHR did reimburse Anderson for some of his expenses, such as road tolls and a motel room.  Anderson also testified that FHR could stop using him at any time without penalty.  The ULJ determined that for purposes of unemployment benefits, Anderson was an FHR employee.  FHR appealed the decision to the Minnesota Court of Appeals, which noted that:

Traditionally, five factors are used to determine whether a worker is an employee or an independent contractor:  (1) The right to control the means and manner of performance; (2) the mode of payment; (3) the furnishing of material or tools; (4) the control of the premises where the work is done; and (5) the right of the employer to discharge.  Of these five factors, the two most important are right or lack of the right to control the means and manner of performance, and the right or lack of the right to discharge the worker without incurring liability.

The court of appeals found that FHR controlled the means and manner of Anderson’s performance.  He picked up and delivered loads to customers based on instructions from Jeff Littrell or others at Jeff Littrell’s direction.  Anderson was told when, where, and for whom to make deliveries.  FHR was also free to terminate Anderson (which it did) without liability.  Based upon these two most important factors governing the independent contractor analysis, the court of appeals found that Anderson was an FHR employee, and not an independent contractor.

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