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  1. #1
    Join Date
    Dec 2006
    Location
    Washington state
    Posts
    7,675

    Surprise Cat Tennessee Court of Appeals Independent Contractors Ruling on Groomers - No IC's if..

    http://www.lexology.com/library/deta...2-cd34c594b751

    Important Ruling by TN Court of Appeals (remember there is both federal and state IC rules).

    Tennessee Court of Appeals Cleans Up Questions on Dog Groomers' Employment Status

    Executive Summary: Individuals performing the main function of your business cannot be classified as independent contractors in Tennessee. At least, that's what the Tennessee Court of Appeals ruled recently when analyzing whether the Tennessee Department of Workforce Development properly held a pet groomer liable for unpaid unemployment taxes from 2006 through 2011.

    The case involved a business in Knoxville, Tennessee, which, according to its owner's testimony, was "in the business of grooming dogs." In addition to canine cleaning, the company trained students to become pet groomers and sold certain pet products like shampoo. The company allowed pet groomers to determine their prices on a case-by-case basis, and paid the groomers a 50 percent commission on what they brought in at the end of each week. The company also provided the groomers with necessary grooming supplies, and the groomers sometimes participated in selling the company's retail items. All grooming services took place at the company's location in Knoxville, although groomers could work for other companies or themselves at other locations if they wished. Customers called the company to set up appointments rather than calling individual pet groomers, although customers could request to work with a particular groomer. On these facts, the Department of Workforce Development held the pet groomers were covered employees rather than independent contractors.

    The Department's ruling focused on the company's failure to establish each of the three elements of the "ABC" test, which governs whether an individual is an employee or independent contractor for unemployment tax purposes. See Tenn, Code Ann. §50-7-207(e)(1). The test provides that an individual shall be deemed an employee, unless the employer can establish: (A) the individual has been and will continue to be free from control and direction in connection with the performance of the service, both under any contract for the performance of service and in fact; (B) the service performed by the individual is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and (C) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. The Department held that because the company could not satisfy the "B" prong of the test, the individuals were employees. The Court of Appeals agreed, relying on testimony from the company's owner that the company was, at least in large part, a pet grooming business. Therefore, the individual groomers, in performing services which were a part of the usual course of the company's business, and doing so at the company's location, could not be considered independent contractors. As a result, the Court of Appeals affirmed the Department's determination the individuals were independent contractors, making the company liable for unpaid unemployment taxes from 2006 through 2011.

    Employers' Bottom Line: This case highlights the strict approach taken by Tennessee agencies and courts in determining whether an individual qualifies as an independent contractor under state law. It also serves as a reminder of the many tests utilized by various state and federal agencies to determine employee/independent contractor status. Failure to comply with each of these tests may result in liability for unpaid taxes or wages, along with potential administrative or statutory penalties. Employers are encouraged to proceed with caution when making these determinations and to seek the assistance of experienced employment counsel to clarify any uncertainties.
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  2. #2
    Join Date
    Oct 2015
    Location
    All over the USA
    Posts
    4,754

    Default

    So in a nutshell, what is this saying?

    Does it really matter if the IC groomer has their own telephone, insurance, supplies, tools etc? A little but regulators in other states before Tennessee are simplifying all these factors, these "tests." So here is a great example.

    If the business where you are working is primarily selling pet grooming services, and you are providing pet grooming services to the business, YOU ARE NOT AN INDEPENDENT CONTRACTOR.

    Case closed pretty much.

    Remember states do NOT have to honor federal IC guidelines. To the feds you can be perhaps an I.C., but the state where you work can entirely set its own definitions and you are not an IC in that state.
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  3. #3
    Join Date
    Sep 2009
    Posts
    628

    Default

    I chatted with a groomer from TN who was at this weekend's show in Pasadena yesterday. She said there is some word of this going around groomers, but they found out here first. Yes they are worried the state may follow up.

  4. #4
    Join Date
    Jun 2016
    Location
    San Diego
    Posts
    366

    Default

    Today I read an expanded report on this decision to all grooming business owners even outside Tennessee. They are using this decision in TN to warn other trades besides grooming. I never figured we were IC the way most shops run where you show and work for them. If this was legal the superstores would have done long ago and they don't.

  5. #5
    Join Date
    Aug 2015
    Location
    St. Louis, MO
    Posts
    27

    Default

    I am always surprised that groomers are not aware of the IRS rules on "independent contractors". I hope anyone who is being paid this way will take a look at the tax rules.

  6. #6
    Join Date
    Aug 2007
    Posts
    3,073

    Default

    I think nearly all of them know, and never checked it out. It's the everyone else is doing it excuse, or "ignorance is bliss" until you get caught. And it makes it all the harder on groomers doing things correctly.

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