West Virginia Establishes a Uniform Test for Independent Contractor Classification

Effective June 9, 2021, the West Virginia Employment Law Worker Classification Act (“Act”) establishes that a worker may be classified as an independent contractor rather than an employee under the Workers’ Compensation Act, the Unemployment Compensation Law, the West Virginia Human Rights Act (WVHRA) and the Wage Payment and Collection Act. The Act has a specific exception as it does not apply to on-demand drivers. The Act outlines specific standards for determining whether someone is an independent contractor, including, whether there is a written contract between the principal and the individual that states the principal’s intent to engage the services of the person as an independent contractor and contains acknowledgments that the person understands:

1. They are providing services as an independent contractor;
2. They will not be treated as an employee;
3. They will not be provided either workers’ compensation or unemployment benefits;
4. They are obligated to pay all applicable federal and state income taxes and that no tax withholdings from payments will be made by the principal; and
5. They are responsible for the majority of the supplies and other variable expenses incurred in connection with the contracted services unless the expenses are for non-local travel, the contract specifically provides for reimbursement, or they are commonly reimbursed under industry practice.

The Act further requires that to be classified as an independent contractor the person must file or be contractually obligated to file an income tax return in regard to the fees earned from the work; or the person provides their services through a business entity and directly controls the manner and means by which the work is to be accomplished and the person satisfies three or more of the following nine criteria:

1. The person has control over the amount of time personally spent providing services;
2. The person has control over where the services are performed;
3. The person is not required to work exclusively for one principal;
4. The person is free to exercise independent initiative in soliciting others to purchase their services;
5. The person is free to hire employees or to contract with assistants to perform all or some of the work;
6. The person cannot be required to perform additional services without a new or modified contract;
7. The person obtains a license or other permission from the principal to utilize any workspace of the principal in order to perform the work;
8. The principal has been subject to an employment audit by the IRS and the IRS has not reclassified the person to be an employee; or
9. The person is responsible for maintaining and bearing all costs of any required business licenses, insurance, certification, or permits required to perform the work.

Workers also may be classified as independent contractors if they meet the federal criteria for direct sellers.

The classification of all workers who do not satisfy the above test will be determined by the IRS 20-Factor Test.