New York Law Review

Tag: employee

  • 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.

  • Matter of Realty Res. Ctr. Corp. v. Ross, 49 N.Y.2d 895 (1980): Defining Employee vs. Independent Contractor in Unemployment Insurance Cases

    Matter of Realty Res. Ctr. Corp. v. Ross, 49 N.Y.2d 895 (1980)

    For unemployment insurance purposes, whether a real estate salesperson is an employee or an independent contractor depends on whether the real estate company exercises control over the results produced by the salesperson or the means used to achieve those results.

    Summary

    The New York Court of Appeals reversed the Appellate Division’s order, reinstating the Unemployment Insurance Administrative Law Judge’s determination. The court held that real estate salespersons associated with Realty Resources Center Corp. were independent contractors, not employees. Therefore, the company was not liable for additional unemployment insurance contributions. The court found a lack of evidence that the company controlled the results achieved by the salespersons or the methods they used, highlighting the salespersons’ autonomy in setting hours, incurring expenses, and generating leads.

    Facts

    Realty Resources Center Corp. (petitioner) was assessed for additional unemployment insurance contributions based on the assertion that its real estate salespersons were employees. The Unemployment Insurance Appeal Board affirmed this assessment. The company compensated salespersons through commissions on gross sales without tax deductions, and salespersons were not entitled to draw against commissions. Salespersons determined their own work hours, worked from home or the office, and could engage in outside employment. While the company provided limited facilities and supplies, the salespersons bore most of their own expenses. Attendance at sales meetings was not mandatory. Initial training was optional. The salespersons paid their own group insurance premiums, and while the company assigned leads, most leads were self-generated by the salespersons.

    Procedural History

    The Unemployment Insurance Appeal Board determined that the real estate salespersons were employees, leading to an assessment against Realty Resources Center Corp. for unemployment insurance contributions. The Appellate Division affirmed the Board’s determination. Realty Resources Center Corp. appealed to the New York Court of Appeals.

    Issue(s)

    Whether the determination of the Unemployment Insurance Appeal Board that petitioner’s real estate salespersons are “employees,” thus making the respondent liable for additional contributions for unemployment insurance, is supported by substantial evidence.

    Holding

    No, because the evidence does not demonstrate that Realty Resources Center Corp. exercised control over the results produced by its salespersons or the means used to achieve the results, and therefore, the salespersons should be considered independent contractors.

    Court’s Reasoning

    The Court of Appeals determined that the Appeal Board’s decision lacked substantial evidence. The key factor in distinguishing between an employer-employee relationship and an independent contractor relationship is the level of control exercised by the putative employer. The court emphasized that an employer-employee relationship exists only where the employer controls the results produced by the employee or the means used to achieve those results. The court listed characteristics illustrative of the nature of the relationship: commission-based pay without deductions, flexible hours, the freedom to engage in outside employment, salesperson-borne expenses, optional training, and self-generated leads. The court stated, “The only rational conclusion that can be drawn from the record on this appeal is that such control is lacking and that the salespersons are therefore appropriately to be considered independent contractors rather than employees of petitioner.” The court also addressed the argument that the Secretary of State’s regulation (19 NYCRR 175.21) regarding broker supervision necessitates a finding of employment, stating that broker supervision alone is insufficient to establish an employer-employee relationship. The court referenced previous cases such as Matter of Sullivan Co. [Miller], 289 NY 110, in support of its holding, reinforcing the principle that control is the decisive factor.