Alabama House Bill Proposes Adoption of IRS’s Rules for Determining Employment Status

02
Mar
2020

Alabama House Bill Proposes Adoption of IRS’s Rules for Determining Employment Status

Alabama State Representative Wes Kitchens (R-Arab) recently introduced House Bill 77, which would require employers and state agencies to use the guidelines specified by the Internal Revenue Service in order to determine whether a worker is an “employee” or an “independent contractor” for the purposes of employment benefits and tax liabilities. HB-77 would specifically require the use of the IRS’s guidelines when determining eligibility for workers’ compensation benefits.

Under current Alabama law, an employee seeking workers’ compensation benefits must prove the existence of contract for hire (either express or implied). Under current Alabama law, the worker may be considered an employee if the person to whom he provides services has reserved the right to control the manner in which those services are performed. Griffith v. Adams, 674 So.2d 556 (Ala.Civ.App. 1995). The Alabama Courts have recognized that a reserved right of control can be inferred from a test which considers four basic factors: (1) direct evidence which demonstrates a right or exercise of control; (2) the method by which the individual receives payment for his or her services; (3) whether equipment is furnished; and (4) whether the individual has the right to terminate the relationship at any time. See, Wheeler v. Wright, 668 So 2d 779 (Ala.Civ.App. 1995); Martin v. Lawrence County, 628 So.2d 652 (Ala.Civ.App. 1993); Miller v. Mayfield Timber Co., 624 So.2d 185 (Ala.Civ.App. 1993);Lacey v. American Shell Co., Inc., 628 So.2d 684 (Ala.Civ.App. 1993);Ex parte Curry, 607 So.2d 230 (Ala. 1992). However, if HB-77 is passed and signed into law, it would significantly expand the definition of “employee” for purposes of workers’ compensation benefits. Alabama courts would also have to consider many other factors, including: whether the worker must follow instructions; whether training was provided; whether the worker’s services were rendered personally; whether the worker hires, supervises, or pays assistants; the duration of the relationship; whether the work is performed on the premises of the firm paying the worker; the frequency of payment for the work; and whether the worker must provide regular reports.

The full text of HB-77 can be found here. The IRS guidelines can be found here. We will monitor the status of HB-77 as it makes its way through the Legislature, and will provide updates on this blog.

About the Author

This article was written by Charley M. Drummond, Esq. of Fish Nelson & Holden, LLC. Fish Nelson & Holden is a law firm located in Birmingham, Alabama dedicated to representing employers, self-insured employers, and insurance carriers in workers’ compensation cases and related liability matters. Drummond and his firm are members of The National Workers’ Compensation Defense Network (NWCDN). The NWCDN is a national and Canadian network of reputable law firms organized to provide employers and insurers access to the highest quality representation in workers’ compensation and related employer liability fields. If you have questions about this article or Alabama workers’ compensation issues in general, please feel free to contact the author at cdrummond@fishnelson.com or (205) 332-3414.

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