Employment Law Daily Independent contractor agreement no escape from USERRA obligations
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Thursday, January 21, 2016

Independent contractor agreement no escape from USERRA obligations

By Ronald Miller, J.D. Looking to FLSA case law for guidance in considering whether an individual was an independent contractor or employee for purposes of USERRA, a federal district court in Oregon determined that under the economic realities test, an anesthesiologist and member of the National Guard was an employee of a hospital, and thus entitled to the statute’s protections. The contractual intent of the parties was not dispositive in the independent contractor versus employee analysis, and facts pointing to independent contractor status did not alter the economic realities of his relationship as a hospital employee (Murphy v. Tuality Healthcare, January 15, 2016, Simon, M.). Contractual relationship. The plaintiff signed a Practice Development Agreement (PDA) with the hospital under which he was given financial assistance to develop an anesthesiology practice. In return, he worked full-time at the hospital. Additionally, he was permitted to take up to 50 working days of vacation per year. The parties also entered into an Anesthesia Services Agreement (ASA), which described the plaintiff as an “independent contractor” and stated that the relationship was not that of employer-employee. Either party could terminate the relationship under the ASA upon 90-days’ notice. The plaintiff was on-call at the hospital when he got into a physical altercation with a colleague. He had consumed one or two glasses of wine shortly before the altercation. The Oregon State Medical Board brought a disciplinary action against him because of his use of alcohol while he was on call. A few weeks later, he left to serve on active duty with the National Guard for six weeks. Upon his return, he asked for a schedule change so that he did not work at the same time as his colleague. The next month, the hospital sent him a 90-day notice letter terminating him. The plaintiff brought suit alleging that the hospital violated USERRA by: (1) failing to reemploy him after he completed military service; (2) discharging him without cause within 180 days of his military service; and (3) discriminating against him because of his military service. The hospital moved for summary judgment, arguing that he was not entitled to the protections of USERRA because he was an independent contractor. The plaintiff filed a cross-motion for partial summary judgment to determine his status as an employee. Economic realities test. Congress intended that USERRA would define “employee” in the same expansive manner as under the FLSA, so the issue of independent contractor versus employee should be treated in the same manner under both statutes. Accordingly, a court may look to FLSA caselaw for guidance when considering whether an individual is an independent contractor or employee for purposes of USERRA. Under the “economic realities” test used in the Ninth Circuit, the existence of a contract describing an individual as an independent contractor is not a dispositive or controlling consideration. Whether an individual is an employee under the economic realities inquiry depends upon the circumstances of the whole activity. Right to control. The plaintiff asserted that the hospital would schedule him to a hospital room, that he could not self-refer patients, and that he had to accommodate the surgeon’s preferences when providing anesthesia services. Additionally, under the ASA, he was required to “respond to the directives” of the hospital’s medical director. Because the hospital exercised a great deal of control over his work schedule, the right-to-control factor supported finding an employer-employee relationship. Opportunity for profit or loss. At first glance, the fact that the plaintiff did not receive a salary tended to support a finding that he was an independent contractor. The plaintiff was responsible for billing patients for his anesthesia services and for collecting payment. However, he was not free to charge whatever he chose; the ASA required that his rates generally conform to those of other anesthesiologists in the area. Additionally, the contract required him to join the Tuality Health Alliance, which set fee limits for anesthesiologists. The hospital also dictated which room he would provide services in, regardless of who the patient was or if they had insurance, and that he was not permitted to self-refer patients. Further, the hospital paid him quarterly stipends and provided financial assistance to him under the PDA. This factor weighed slightly in favor of finding that he was an independent contractor, and not an employee. Investment in equipment and special skill. Under the ASA, the hospital provided the plaintiff with the vast majority of the equipment and supplies he used and all of the support staff. This factor weighed in favor of finding that he was an employee. The parties did not dispute that anesthesia requires a special skill. However, the fact that an individual has technical skills does not necessarily indicate that he is an independent contractor. Rather, courts also look to whether technical skills are used in an independent manner. In this instance, the plaintiff worked according to a schedule provided by the hospital. Because he did not use his anesthesia skills in an independent manner, this factor weighed slightly in favor of finding that he was an employee. Permanence of relationship. The fact that the ASA permitted either party to terminate the agreement without cause upon 90-days’ notice tended to support a finding that the plaintiff was an independent contractor. However, the fact that the ASA was subject to automatic renewal weighed in favor of finding he was an employee. Additionally, the purpose of the PDA was to aid the plaintiff in establishing an anesthesiology practice, and he worked full-time for the hospital for more than a year. The intent to enter into a long-term relationship tended to indicate that this was an employer-employee relationship. Thus, this factor also weighed slightly in favor of employee status. Finally, because the provision of anesthesiology services was an integral part of the hospital’s business, this factor weighed in favor of finding an employee relationship. Accordingly, the economic realities of the relationship showed that the anesthesiologist was a hospital employee for USERRA purposes.

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