New York Law Review

Tag: Control Test

  • In re Empire State Towing & Recovery Assn., 15 N.Y.3d 433 (2010): Determining Employee Status for Unemployment Insurance

    In re Empire State Towing & Recovery Assn., 15 N.Y.3d 433 (2010)

    To determine whether an individual is an employee or an independent contractor for unemployment insurance purposes, courts primarily examine the degree of control the employer exercises over the means used to achieve the desired results, not merely the results themselves.

    Summary

    Empire State Towing retained Peter O’Connell for lobbying and administrative services. The New York State Commissioner of Labor determined O’Connell was an employee and assessed additional unemployment insurance payments. Empire State Towing argued O’Connell was an independent contractor. The Court of Appeals reversed the lower court’s decision, holding that the evidence did not support a finding that O’Connell was an employee. The Court emphasized that control over the *means* of achieving results is more significant than control over the results themselves, and incidental control, such as requiring approval for large checks and periodic reports, is insufficient to establish an employer-employee relationship. The “overall control” test is reserved for cases involving professionals whose work details are difficult to control.

    Facts

    Peter O’Connell, an attorney, was retained by Empire State Towing for legal, lobbying, and administrative services. A written agreement outlined O’Connell’s responsibilities, including maintaining a database, mailing materials, coordinating publications, attending meetings, and managing a bank account. O’Connell operated from his own law office, set his own schedule, and wasn’t exclusively working for the association. He had check-writing authority up to $500, but larger amounts required the treasurer’s signature and documentation.

    Procedural History

    The Commissioner of Labor determined O’Connell was an employee and assessed Empire State Towing for unemployment insurance. An administrative law judge upheld the determination, citing the association’s control over O’Connell’s duties. The Unemployment Insurance Appeal Board affirmed, finding sufficient supervision, direction, and control to establish an employer-employee relationship. The Appellate Division affirmed based on the association furnishing office space/equipment, reimbursing expenses, and requiring reports/meeting attendance. The Court of Appeals granted leave to appeal and reversed.

    Issue(s)

    Whether substantial evidence exists to support the Unemployment Insurance Appeal Board’s finding that Peter O’Connell was an employee of Empire State Towing, rather than an independent contractor, for the purpose of unemployment insurance contributions.

    Holding

    No, because the record lacks substantial evidence of control exercised by the association over O’Connell’s *means* of performing his duties; the control exerted was merely incidental to the results, which is insufficient to establish an employer-employee relationship.

    Court’s Reasoning

    The Court of Appeals emphasized that while the determination of an employer-employee relationship is a factual question, it must be supported by substantial evidence. The critical factor is the degree of control the employer exercises over the *means* used to achieve the results, not just the results themselves. The Court cited Matter of Ted Is Back Corp., stating that “control over the means is the more important factor to be considered.” Incidental control over results, without evidence of control over the means, is insufficient. The court noted that requiring approval for checks over $500 was a “necessarily wise business decision” and not indicative of employee status. Similarly, requiring reports and meeting attendance are “a condition just as readily required of an independent contractor as of an employee.” The “overall control” test, applicable when the details of the work are difficult to control (e.g., due to professional responsibilities), was deemed inapplicable here. The Court reversed the Appellate Division’s order and remitted the matter for further proceedings consistent with its opinion.

  • In re Claim of Jan Werner, 87 N.Y.2d 693 (1996): Distinguishing Employee from Independent Contractor Status

    In re Claim of Jan Werner, 87 N.Y.2d 693 (1996)

    Incidental control over the results produced by a worker, without further evidence of control over the means employed to achieve those results, does not constitute substantial evidence of an employer-employee relationship for unemployment insurance purposes.

    Summary

    This case addresses the distinction between an employee and an independent contractor in the context of unemployment insurance benefits. Jan Werner, a marketing representative for Hertz Corporation, was denied unemployment benefits by the Unemployment Insurance Appeal Board, which determined she was an employee, not an independent contractor. The Court of Appeals reversed, holding that Hertz’s limited control over Werner’s work (specifying products and presentation style) did not establish sufficient control over the *means* of achieving results to qualify her as an employee. The court emphasized that incidental control over results doesn’t equate to control over the methods used to achieve those results. The matter was remitted for further proceedings consistent with the determination that Werner was an independent contractor.

    Facts

    Jan Werner worked for STARS (Special Travel Agency Representative Service Network), a marketing organization for Hertz Corporation. She visited travel agencies to promote Hertz’s products by distributing materials and making presentations. Werner had autonomy in choosing which agencies to visit and when, within her assigned territory. She was paid per visit and wasn’t required to attend meetings. She also had the freedom to sell non-competing products. Her contract with Hertz identified her as an independent contractor, and Hertz reported her income on a 1099 form.

    Procedural History

    The Unemployment Insurance Appeal Board determined that Werner was a Hertz employee and thus eligible for unemployment insurance benefits. The Appellate Division affirmed. The New York Court of Appeals reversed the Appellate Division’s order, remitting the case with instructions to remand to the respondent for proceedings consistent with its memorandum decision.

    Issue(s)

    Whether substantial evidence exists to support the Unemployment Insurance Appeal Board’s determination that the claimant, Jan Werner, was a Hertz employee for the purposes of receiving unemployment insurance benefits.

    Holding

    No, because Hertz’s control over Werner was incidental and focused on the results, not the means by which she achieved those results, which is insufficient to establish an employer-employee relationship.

    Court’s Reasoning

    The Court of Appeals determined that the key factor in distinguishing an employee from an independent contractor is the level of control exercised by the employer. An employer-employee relationship exists only when the employer controls the results produced *and* the means used to achieve those results. The Court cited Matter of 12 Cornelia St., 56 NY2d 895, 897 (1982). The court found that Hertz’s actions, such as providing instructions on what to wear, which products to promote, and how to make a presentation, were not indicative of control over the *means* of Werner’s work. The Court quoted Matter of Werner, 210 AD2d 526, 528 (3d Dept 1994), stating: “The requirement that the work be done properly is a condition just as readily required of an independent contractor as of an employee and not conclusive as to either.” The court emphasized that incidental control over the results produced, without further evidence of control over the means employed to achieve the results, is insufficient to establish an employer-employee relationship, citing Matter of Ted Is Back Corp., 64 NY2d 725, 726 (1984). The court effectively clarified that specifying desired outcomes does not transform an independent contractor into an employee.

  • Bynog v. Cipriani Group, Inc., 1 N.Y.3d 193 (2003): Determining Employee Status for Labor Law Claims

    Bynog v. Cipriani Group, Inc., 1 N.Y.3d 193 (2003)

    The key principle is that the determination of whether an employment relationship exists for purposes of Labor Law claims depends on the degree of control exercised by the purported employer over the results produced or the means used to achieve those results.

    Summary

    This case addresses whether banquet waiters, sourced from a temporary staffing agency, were employees of Cipriani, a catering company, for the purposes of recovering gratuities under Labor Law § 196-d and other wage-related claims. The court held that the waiters were independent contractors, not employees of Cipriani, because Cipriani did not exercise sufficient control over their work. The waiters worked at their own discretion, worked for other caterers, and were under the direction and control of the staffing agency. This decision highlights the importance of the ‘control’ test in distinguishing between employees and independent contractors under New York Labor Law.

    Facts

    Plaintiffs were banquet waiters who worked at Cipriani’s catering facilities through M.J. Alexander & Co., Inc. (MJA), a temporary personnel agency. Cipriani contracted with MJA for temporary waiters when needed. The waiters were paid an hourly rate by MJA, who also provided training and a handbook. Cipriani customers paid a mandatory 22% service charge as part of their catering contracts. Plaintiffs argued they were entitled to a portion of this charge, in addition to their hourly wage, under Labor Law § 196-d. They also alleged violations of Labor Law § 191 (failure to pay wages within seven days) and § 193 (improper withholding for workers’ compensation).

    Procedural History

    The Supreme Court granted Cipriani’s motion for summary judgment, finding the waiters were independent contractors. The Appellate Division modified this decision, reinstating the Labor Law §§ 191 and 198 claims, concluding the lower court erred in finding that the waiters were not employees of Cipriani. Both plaintiffs and defendants appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the banquet waiters, sourced from a temporary staffing agency, were employees of Cipriani for the purposes of Labor Law § 196-d, § 191, and § 193.

    Holding

    1. No, because Cipriani did not exercise sufficient control over the waiters’ work to establish an employment relationship.

    Court’s Reasoning

    The court focused on the degree of control Cipriani exercised over the waiters. It cited precedent establishing that control is the critical inquiry in determining whether an employment relationship exists. Factors indicating a lack of control included: the waiters worked at their own discretion, were free to work for other caterers (including Cipriani’s competitors), and were under the exclusive direction and control of MJA, the temporary service agency. MJA handled hiring, compensation, and provided training. Cipriani’s only involvement was to discuss the menu and timing of courses. The court noted that plaintiffs received 1099 forms from MJA. The court also rejected the argument that plaintiffs were ‘special employees’ of Cipriani, stating Cipriani did not exert enough control to be considered their special employer.

    The court stated, “The parties agree that the critical inquiry in determining whether an employment relationship exists pertains to the degree of control exercised by the purported employer over the results produced or the means used to achieve the results.” It emphasized that the undisputed facts showed MJA conducted interviews, hired temporary waiters, provided training, and paid them directly.

    The court distinguished this situation from a traditional employment scenario and reinforced the importance of the control test. It explicitly reserved judgment on whether the waiters would have been entitled to a share of Cipriani’s service charge under Labor Law § 196-d if they *were* employees.