June 2021

State Updates

 

West Virginia adopts new independent contractor test

05/06/21

Author: ADP Admin/Friday, April 30, 2021/Categories: Compliance Corner , State Compliance Update, West Virginia

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.

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