By Payroll and Entitlements Editorial Staff
The court reversed the decision of the Office of Compensation Tax Services which concluded that a counseling service was the employer of counselors who provided professional services in its building. The employer entered into contracts with psychologist-contractors and provided them with referrals from insurance companies. In return for providing referrals, office space, and other services to the counselors, the employer retained a percentage of fees that it received from the insurers, with the remainder going to the individual counselor providing the service. If the insurer does not pay the fee, the counselor is not paid by the counseling service. Counselors are free to accept counseling clients from other sources and can accept or deny referrals from the employer. The individual counselors set their own hours, as well as the fees to charge clients. While the employer requires counselors to be professionally licensed, it does not provide training and does not evaluate or monitor counselors' performance. The court utilized a two-prong test under the law to determine that the counselors were independent contractors, rather than employees. The first prong of the test was shown by the fact that the employer does not: set the counselors' rates of compensation; withhold taxes from payments to counselors; set counselor's work schedules; provide training; monitor counseling sessions; review counselor's performance; or hold meeting with counselors. The second prong was shown by the fact that the counselors were free to perform their services for anyone who wished to avail themselves of the services, rather than being limited only to referrals provided by the employer. Thus, the counselors practiced in a "free-standing" profession whose arrangement with the referral service was "non-exclusive." Accordingly, the counselors were independent contractors, and the counseling service was not an employer for purposes of unemployment tax (Pathways Counseling Services, LLC v. DLI, Pa. Comwth. Ct., No. 1332 C.D. 2018, July 12, 2019).
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