Robin's Ruminations

Recall that the first test in determining whether a worker is an IC or an employee related to supervision.  The second test asks whether or not the worker is operating a separate business.

2.  Separate Business

This test is broken down into 3 questions which are joined by the logical operator "or".  Frankly, I'm surprised they use "or" instead of "and" because the use of "or" means you only need to answer one of the three questions with "yes" in order to qualify the worker as an IC.

Do they offer services that are different from what you provide?  There are a lot of different ways this could come into play.  For instance, suppose your business doesn't serve process but acts as an aggregator.  You receive service assignments from a variety of clients but none of those assignments are served by you or your employees.  Instead you contract them out to local IC's who are process servers and do the actual serving.  In this arrangement you clearly do something quite different from what is done by your IC's.  On the other hand, suppose you (or your employees) serve some papers now and then.  In this case you are a process server just like the IC's.  Based on this part of the test, you cannot use IC's.

Or, do they maintain and pay for a place of business that is separate from yours?  This one is fairly simple.  Does your IC have his own office which is separate from yours and for which he pays the rent?  If the answer is "yes" then, based on this part of the test, he qualifies as an IC.  

Or, do they perform their service in a location that is separate from your business or job sites?  Answering yes to this one is a common reason for using IC's.  The IC covers an area outside of your normal coverage area.  For example, my office is in Bellingham and I cover Whatcom, Skagit, and Island counties.  But I don't cover Spokane County.  So when we have a paper for the Spokane area we send it to a process server in Spokane.  On the other hand, if the IC I want to use covers Skagit County then he won't qualify as an IC under this part of the test.

In general, this should be one of the easier tests under which you can qualify a worker as an IC instead of an employee.  And you only need to get a correct answer from one of the three questions which make up the test in order to qualify.  Just remember it is only one test out of six and you must qualify under all six.

Sounds simple but the devil is in the details.  For instance, suppose you claim you cover the entire state.  In that case you won't qualify under the third question (separate location).  And if you serve papers and they do too then you won't qualify under the first question (different services).  Which means you had better hope they maintain and pay for a place of business separate from yours.  This last could get a little tricky.  Suppose they work out of their home (or their car), the question may get asked as to whether or not this is indeed a separate place of business!  You may think it is a separate place but an Administrative Law Judge may think otherwise.  And guess whose opinion counts!