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Here’s some good news if you use truly independent contractors to perform work. If you have done it right, you don’t have to worry about losing an age discrimination lawsuit.

But there’s a caveat: You must make sure you can easily prove your contractor wasn’t really an employee.

Recent case: Barbara Ernster, who is older than 40, signed on as a sales representative with Luxco, a liquor distributorship. Her job was to promote particular beverages within an exclusive territory. She worked out of her home, paid all her own business expenses and conducted business using her own computer and cell phone.

Ernster did, however, report daily to a district supervisor. She was also required to contact at least 11 customers per day, but set her own schedule. Ernster received a set fee per month, plus a commission on sales. No taxes were withheld, and she received an IRS Form 1099 instead of a W-2 each year.

The company decided it wanted to convert its representatives to employees and invited everyone to apply. Ernster was interviewed, but Luxco didn’t hire her. It then terminated its contract with Ernster.

She sued under the Age Discrimination in Employment Act (ADEA), alleging that her age was the reason Luxco had dropped her. She claimed she had been an employee all along and had been wrongly classified.

A jury determined that Ernster was legitimately a contractor, not an employee. She appealed.

Now the 8th Circuit Court of Appeals has upheld the jury’s decision, concluding that every indication was that she had been a contractor. The ADEA, concluded the court, applies only to employees. (Ernster v. Luxco, No. 09-1200, 8th Cir., 2010)

Final note: While Ernster didn’t have an age discrimination case for events that occurred when she was a contractor, she might have been able to base a failure-to-hire lawsuit on age discrimination.

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