West Virginia has enacted Senate Bill 272, also known as the West Virginia Employment Law Workers Classification Act (the Act). The Act takes effect on June 9, 2021.
Overview:
The Act establishes standards for employers to use when determining whether a worker is an employee or independent contractor for purposes of workers' compensation, unemployment benefits, protections under the state's Human Rights Act, and wage payment and garnishment laws.
Under the Act, a worker may be classified as an independent contractor if the conditions outlined below are met. The Act does not apply to on-demand drivers.
Written Contract:
The worker signs a written contract that acknowledges that they:
- Are providing services as an independent contractor;
- Will not be treated as an employee;
- Will not be provided with workers' compensation or unemployment compensation benefits;
- Are obligated to pay all federal and state incomes taxes; and
- Are responsible for a majority of the supplies and other variable expenses.
Taxes:
The worker has filed, or is required to file, an income tax return for a business or for self-employed earnings, or they provide their services through a business entity.
Control:
The worker controls the manner and means by which the work is to be accomplished.
Additional Criteria:
The worker must satisfy the definition of a direct seller under Section 3508(b)(2) of the Internal Revenue Code or meet three or more of the following criteria:
- Except for an agreement on the final delivery or completion of work, they have control over the amount of time personally spent providing services
- They have control over where the services are performed, except for services that can only be performed at specific locations
- They're not exclusively required to work for one principal
- They're free to solicit other business
- They're free to hire employees or contract with assistants to perform all or some of the work
- They cannot be required to perform additional services without a new or modified contract
- They obtain permission before using any of the principal's workspace to perform their services
- The principal has been subject to an IRS employment audit and the IRS has not reclassified the worker as an employee
- They're responsible for maintaining and bearing the costs of any required business licenses, insurance, certifications, or permits required to perform the service
Compliance Recommendations:
Employers should review this criteria closely and perform all applicable tests before classifying and treating an individual as an independent contractor. Please contact your dedicated service professional with any questions.