Matter of Goldstein, 62 N.Y.2d 936 (1984)

When services rendered require professional and ethical responsibilities that limit control over the service provider, the degree of control necessary to establish an employer-employee relationship for unemployment insurance purposes may be inferred from the nature of the work and the overall structure of the business.

Summary

This case addresses whether registered physical therapists engaged by a physical therapy corporation should be classified as employees or independent contractors for unemployment insurance purposes. The court affirmed the decision of the Unemployment Insurance Appeal Board, holding that the therapists were employees. The ruling emphasized the unique nature of professional services, which inherently limits the degree of control an employer can exert. The court found substantial evidence supporting the Board’s decision based on factors such as the corporation providing facilities and equipment, assigning patients, and paying a fixed weekly sum to the therapists, demonstrating sufficient control to establish an employer-employee relationship.

Facts

Myron Goldstein, a physical therapist, formed a professional corporation to handle an overflow of patients. The corporation engaged registered physical therapists who were allowed to treat their own patients in addition to those referred to Goldstein or the corporation. Clerical staff assigned referred patients to the individual therapists and billed all patients. The therapists received fees paid by their own patients. They also received a fixed weekly sum for treating patients referred to Goldstein or the corporation. The corporation provided the physical facilities, fixtures, and equipment, and paid for all maintenance expenses.

Procedural History

The Unemployment Insurance Appeal Board determined that the physical therapists were employees of Myron Goldstein’s corporation for the purposes of the Unemployment Insurance Law. This decision was appealed. The Appellate Division’s order affirmed the Board’s decision, and the case was appealed to the New York Court of Appeals.

Issue(s)

Whether the Unemployment Insurance Appeal Board erred in determining that the registered physical therapists were employees of Myron Goldstein’s corporation, rather than independent contractors, for purposes of unemployment insurance benefits.

Holding

Yes, because given the nature of professional services rendered by physical therapists and the extent of control exerted by the corporation, there was substantial evidence to support the Board’s decision that the therapists were employees.

Court’s Reasoning

The Court of Appeals affirmed the lower court’s decision, emphasizing that the services of professionals, such as physical therapists, are inherently subject to different control mechanisms than other personal services, due to the professional and ethical responsibilities of the individuals. The court found that the corporation exercised sufficient control to establish an employer-employee relationship, even though direct control was limited by the therapists’ professional obligations. Key factors included the corporation providing the facilities, fixtures, and equipment, assigning patients to the therapists, and paying a fixed weekly sum. The court cited Matter of Concourse Ophthalmology Assoc. [Roberts], 60 NY2d 734, recognizing that professional services cannot be controlled in the same manner as other services. The court found the record supported the Appeal Board’s conclusion that the therapists’ status was that of employees for Unemployment Insurance Law purposes. This case highlights that in determining whether an individual is an employee or an independent contractor, courts will look at the totality of the circumstances, focusing on the degree of control the putative employer exerts, either directly or indirectly, particularly in situations involving professional services. The crucial aspect is that the control need not be as overt or direct as in other service contexts, but can be inferred from the operational structure and support provided to the professional.