Discuss the below:
Analyze a set of hypothetical facts under a set of legal rules and reach a conclusion that you can defend.
Critically analyze these facts and persuade a reasonable observer that you have reached the correct conclusion.
OBJECTIVES:
Identify and define relevant legal concepts and explain their applications in a realistic, hypothetical fact pattern.
Apply critical thinking, analytic, and communication skills through case analysis, research, problem solving,
Develop applicable skills and knowledge in the relevant cross-curricular initiatives, including effective writing and information literacy
The Facts
Wonder Sofas is a furniture manufacturer and distributor with plants in Maryland, Pennsylvania and Delaware. The company's president believed the company could save money by streamlining the manufacturing process and consolidating facilities. To accomplish this, the company advertised through regular want ads for a consultant/industrial engineer to oversee this process.
Matthew Smith applied for the job; his resume indicated that he ran his own consulting firm as a solo practitioner and had consulted on this type of project before.
The president decided that it would be better to hire Matthew as an independent contractor than as an employee, as originally planned, because Matthew was wrapping up some projects for other clients and couldn't begin full-time work right away.
Matthew was told that he would be expected to study the employer business and make recommendations as to how to accomplish the consolidation within one year. He was required to report regularly to the president on his work (every month), but was responsible for scheduling his own meetings and travel. It was agreed that Matthew would budget approximately 20 hours of his time every week to the project and would be paid on an hourly basis, upon submission of an invoice each month.
Matthew's other business dried up and after a few months, he was devoting all his time to Wonder Sofas, though he continued to bill only 20 hours a week. Matthew travelled frequently to the three factories, but was not reimbursed for his travel expenses.
After one year had passed, Mattew had not made any formal recommendations about how to accomplish the consolidation project wanted by the business and was replaced by an outside professional consulting agency.
Matthew filed a claim for unemployment benefits showing Wonder Sofas as the last employer. The company supplied a 1099 form to the unemployment office showing that Matthew had been paid as a contractor, not an employee. The claim was denied, but Matthew appealed and a hearing was held.
The Hearing
At the hearing, the company's new HR director presented the president's written statement along with his handwritten notes (but no contract) regarding the terms of the agreement with Matthew to act as an independent contractor.
Matthew testified that the terms presented in the handwritten notes were not familiar to him and he did not recall this discussion with the company president. Through testimony, it was shown that Matthew was only able to complete work during normal business hours due to needing access to the business computer system and technical manuals.
Matthew testified that he was also expected to notify HR when he would not be in for any reason and if he was going to arrive late or leave early. Matthew had an office at the company, but also worked from home occasionally. While it was true that Matthew submitted monthly bills for services, the bills were sometimes late, but a check was still issued on a normal payroll cycle from the business payroll account.
You explained that Matthew was only allowed to perform services during normal business hours for security reasons and that the three factories were only open certain hours. There was no external way for any person to access the business computer system, so no employee "tele-commuted" and everyone came into the office every day.
You explained that a clerk had set up payments to the claimant in the employer payroll system in error. The payroll system was programmed to issue a check on certain intervals unless overridden. No one at the business had been aware of this until the hearing.
You testified that you didn't think Matthew had been required to notify HR about taking time off and that HR merely thought that Matthew was being courteous by notifying them of time off, but had not expected or required it. You also informed the hearing judge that Matthew did not receive any benefits such as vacation pay, or health or retirement benefits.
Imagine that you are the Unemployment Claims Hearing Office and that you must decide whether Matthew should be characterized as an independent contractor or an employee. Draft a conclusion and reasoning for reaching this conclusion.
Formulating Conclusion
Summary: Provide a summary of the facts of the case.
Analysis: Find IRS Publication 15A on the Internet, review Section Two of that Publication and utilize the IRS 11-factor (common-law) test in conducting the analysis.
Conclusion: State whether Matthew is an independent contractor or an employee and the reasons for this conclusion.
Additional Question
Identify three steps that need to be taken by the Human Resources Director to make sure that this type of situation does not happen again.