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.

TRUE OR FALSE with explanation

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

3. True. Under ABC Test, an employee can be considered as an independent contractor if the employer has no control or direction on the employee’s work. Avanti did not have any control on the activities of Waiau. So the given statement is true.

4. False. As a general rule, it is stated by law that an employer will not be liable for any actions of the independent contractor. Waiau was an independent contractor of Avanti, so Avanti is not liable for any actions of Waiau.

5. True. If IRS confirms that Waiau is an independent contractor in response to Form SS 8 filled by Avanti, claims that Waiau is an employee will become null and void.