Independent Contractor Law: Improper Classification Results in Assessment Against Employer

Many employers struggle with the concept of who can be classified as an independent contractor. The Oregon Employment Department has recently stepped up their scrutiny of such relationships, so employers need to be certain they do not run afoul of the law as the assessments for misclassification can be significant.

In Compressed Pattern, LLC v. Employment Department Tax Section, a recent decision from the Oregon Court of Appeals, the court found that the employer, an architectural design company, had improperly classified an individual hired to perform drafting services resulting in the employer being required to pay a tax assessment. The court found the individual not to be an independent contractor because the employer could not establish that the individual maintained an “independently established business” under the requirements of ORS 670.600.

The application of ORS 670.600 can be complicated. Employers should exercise caution when hiring an individual to perform services in the capacity of an independent contractor. Using an appropriate independent contractor agreement can help reduce the risk of misclassification.