On March 27, the Rhode Island House introduced a bill that defines “independent contractor” by providing a presumption that a worker is an employee unless certain conditions are met, according to the April issue of the Legs and Regs Advisor, which is available to members of Staffing Industry Analysts.
According to the bill (HB 7996), a worker is presumed to be an employee unless he or she is free from control and direction in connection with the performance of services and either:
- the service is performed outside the usual course of the business of the buyer, or
- outside of all the places of the buyer’s business, or
- the worker is engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
The final requirement can be satisfied where the service performed has historically been recognized as an independent trade, occupation, profession or business and persons engaged therein have historically been treated as independent contractors for tax purposes.
The factors used by the Internal Revenue Service may still be used to overcome the presumption of employee status, with the exception of the following: the failure to withhold federal or state income taxes or to pay unemployment compensation contributions or workers’ compensation premiums with respect to a person’s compensation will not be considered in making a determination.
As demonstrated by this and similar legislation at both the state and federal levels, federal and state governments and enforcement agencies are increasingly moving toward a presumption that workers are employees.
Companies in Rhode Island that use independent contractors should review their independent contractor classifications to ensure that those classifications will still be correct should the bill pass.
If passed into law, the bill will become effective immediately .