Apr 9

Determining Employment Status in Montana

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Employee or Independent contractor?

A recurring issue in Montana employment law disputes, as well as workers compensation, is whether an employee is truly an independent contractor. Many employers prefer workers being an independent contractor instead of an employee. Independent contractors are cheaper, and it is not necessary for the employer to pay for a worker’s benefits. But simply calling a person doing work for a business an “independent contractor” does not mean the person is truly an independent contractor.

When does this issue arise? The answer is in many situations. A person injured on the job may not be covered under workers compensation if the person is an independent contractor. A person who applies for unemployment insurance will be denied unemployment if not an employee. A person cannot bring a Wrongful Discharge from Employment claim if an independent contractor. And filing a wage and hour claim will not be possible if an independent contractor.

How to Determine Employment Status

The state of Montana has a department devoted to determining employment status – the Independent Contractor Central Unit (ICCU). The first thing to determine is whether a person possesses a valid independent contractor exemption certificate. This is a form completed and submitted to the state. If the person has not filed an independent contractor exemption certificate, then administrative agencies and the courts will use a two-part test to determine employment status.

The first step involves an analysis as to whether the “control factors” are met. This is achieved by applying a four-part test: (1) direct evidence of right or exercise of control; (2) method of payment; (3) furnishing of equipment; and (4) right to fire. Second, it must be determined whether the worker is engaged in an independently established trade, occupation, profession, or business. Both parts of the test must be satisfied or the worker is considered to be an employee.

Under the “control factors,” the first one, right of control, it is just that, the right of control, not the amount of control actually exercised that is the critical element. The second factor, method of payment, payment by the hour is a strong indication of an employer-employee relationship, while payment on a completed project basis is an indication of independent contractor status. Turning to the third element, if a person furnishes his or her own equipment, then this weighs in favor an independent contractor relationship. Finally, the fourth factor – right to fire – means that if the purported employer retains the right to fire, then there is an employer-employee relationship.

The second part of the test examines whether the worker is engaged in an independently established trade, occupation, profession, or business. The Montana Supreme Court has stated that the fact that a person did not perform work for other individuals is decisive of whether a person is engaged in an independently established trade, occupation, profession or business.

If you get involved in a dispute like this, you should contact the McGrady Law Firm to discuss your options.

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