Question

Case 10.1: Avanti Press v. Employment Dept. Tax Sec., 274 P.3d 190

Facts:

Waiau was an employee of One Coast, a company that represented various businesses, including Avanti. In early 2009, One Coast dissolved. Waiau, who had nearly 30 years of

experience as a product sales representative in the greeting card and gift industries, then entered into a written agreement with Avanti to sell the company’s greeting cards, journals, and

calendars. The Agreement provided, among other things, that: Waiau would be Avanti’s exclusive sales representative for retail outlets in southwestern Oregon and would personally

visit Avanti customers at their retail outlets at least once every 12 weeks for purposes of soliciting orders in accordance with the services Agreement and Avanti’s policies, catalogs,

supplements, and price information. Waiau had no authority to bind Avanti to any sales and had no authority to accept orders or receive payments on Avanti’s behalf. Avanti reserved the right to establish and change prices, products, ways, methods, or terms of payment. Waiau had the authority to hire, fire, and train her own sales associates. Waiau would pay all employee taxes and all her own expenses. The agreement did not prevent her from representing other manufacturers, and after November 12, 2009, she also became a sales representative for two other manufacturers. In exchange for her services, Avanti would pay Waiau a commission based on a percentage of the product invoice price. The Agreement would automatically renew for one-year terms, unless earlier terminated by 30 days’ written notice from either party. During the relevant time, Waiau maintained a home office. She used the office equipment almost exclusively for business and deducted home office expenses on her personal income tax return. She also used her personal vehicle for business travel. Avanti did not reimburse Waiau for postage, travel, meals, or lodging expenses. Waiau set her own work schedule and decided how frequently to visit customers. Her commissions were based entirely on her sales, and not on the number of hours that she worked. However, Waiau did not register a business name, nor did she carry liability insurance or performance bonds, and she did not advertise or market her services as a product sales representative. During that period, she passed out business cards that stated, “Andrea Waiau, Avanti Greeting Cards.” Sometime along the way, Waiau sought unemployment insurance benefits. The Employment Department investigated her claim because she reported no wages from Avanti during 2009. After completing its investigation, the department determined that Waiau was, in fact, an employee of Avanti, thereby making Avanti “an employer subject to the Oregon Employment Department Law.” The department assessed Avanti an employment tax of $540.26 based on wages that Avanti had paid to Waiau

Issue:Is Waiau an independent contractor or an employee of Avanti?

Ruling:The court reasoned that Avanti did not have a sufficient amount of direction and control over Waiau and that she should be classified as an independent contractor.

Case Questions

1. If Waiau had been paid a salary in addition to her commission, how might that impact

the court’s analysis?

2. Although the agreement did not prohibit Waiau from working for another company, as

a practical matter she was working full time for Avanti. Shouldn’t that be a factor in the

court’s analysis?

3.TRUE OR FALSE with explanation

1. Because Waiau was hired to solicit orders for Avanti greeting cards, she is

properly classified as an agent, because she conducts business on behalf of

Avanti.

2. Waiau is properly classified as an independent contractor under the IRS three

part test.

3. Waiau is properly classified as an independent contractor under the ABC test.

4. Avanti will be held liable for injuries sustained by a third party caused by

Waiau’s careless driving to meet with a retail outlet in her territory.

5. If Avanti had completed and filed a Form SS-8 with the Internal Revenue

Service (IRS) confirming Waiau’s status as an independent contractor, and the

IRS agreed with that classification, Oregon is precluded from claiming Waiau is

an employee.

Answer 1

Case Questions

1.

The court ruled that Waiau did not have sufficient amount of direction and control of her activities as follows:

·         She was paid a commission percentage of the product invoice amount

·         She could define her working hours

·         She could work with other organizations at the same time.

If she was paid a salary or a fixed amount monthly irrespective of the sales made, she had defined working hours, the organization had control and direction over her activities and there was an agreement stating the employment terms she would be considered as an employee and is no longer an independent contractor.

2.

The fact she worked as an independent contractor and sometimes full time from Avanti cannot be taken as an important factor because:

1.      “ ORS 670.600 states that an independent contractor must be free from direction and control in the way it provides services, her Waiau had no direction or control from Avanti in performing her sales.”

2.      She had no exclusivity agreement with Avanti and worked exclusively only by choice not as directed by Avanti.

3.      She was free to define her working hours and days

4.      Her daily activity an hour of work were not determining a factor for her remunerations

5.      At some point, she worked with 2 more contractors

6.      She used her own vehicle and personal equipment to conduct her business

7.      Avanti did not give direction or control her day-to-day working.

8.      She was paid the only percentage of product invoice value as a commission on sales.

3.TRUE OR FALSE with an explanation

1. Because Waiau was hired to solicit orders for Avanti greeting cards, she is

properly classified as an agent, because she conducts business on behalf of

Avanti.

True: She is a commission agent and conducts business for Avanti and gets a percentage of the sale as her commission.

2. Waiau is properly classified as an independent contractor under the IRS three-part test.

True: Waiau can be classified as an independent contractor as follows;

1.      A person who provides services to other business

2.      And the company has no control over your behavior or work timings

3.      There is no written contract of employment

4.      The financial payments are linked to the sales.

5.      She paid all her employee taxes and all her own expenses.

*(under guidelines can answer only up to 4 questions.)