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An Unconventional Result

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In Indiana, when an employee is laid off from the job, through no fault of his own, or even when he is discharged, he has a right to file a claim for unemployment compensation. Unless the discharge was for what is termed "just cause," examples of which are fighting on the job (and being the aggressor,) using abusive language, making 190 long distance phone calls on the employer's phone, some to a Texas firm which provided odds on the outcome of sporting events or leaving a threatening message on a supervisor's phone at work, the claim is not usually even opposed by the employer.

But, even so, some creative employers have figured out a way to avoid payment of these benefits and that is by not having any employees at all. No employees, no unemployment compensation.

How can this be done? By classifying "employees" as self-employed independent contractors.

And Indiana law says sometimes it works if:
The employer doesn't control the person, the work is outside the usual course of business, if the person is in an independent business or is in sales and paid by commission.

But sometimes it doesn't work.

Here's a true story...only the names have been changed.

Mega Corporation is in the business of pairing drivers with manufacturers who need drivers to transport recreational vehicles to its dealerships. Adam Jones is a professional driver.

Mega required that Adam sign a contract which stated that Mega would not "employ" him or anyone to provide these driveaway services. Adam signed the contract and was then paid as a self-employed independent contractor, rather than as an employee. Mega thought this arrangement would also save them the cost of providing the benefits typically paid to employees. After no longer working for the company, Adam applied for unemployment compensation benefits. Mega denied his claim arguing that since Adam had never become an employee he did not qualify for unemployment benefits which can be paid only to employees, not to independent contractors.

Not so fast, said the courts. Regardless of the presence of a written contract, it was still up to Mega to prove that Adam had been performing work outside the usual course of the company's business. Mega failed to do so. The work Adam was doing was exactly the type of work in which Mega was engaged, so Adam was entitled to full unemployment compensation benefits despite the written contract in which he had agreed that he was not an employee.

The moral of the story: Any written contract, no matter how long, well written, and detailed, is not enforceable if it is contrary to either state or federal law.

If you have questions regarding the contents of this article, or other similar issues, please contact your HWE relationship attorney or visit us at http://www.hwelaw.com.

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