Wednesday, June 24, 2015

Employee, independent contractor....not exactly tomato, to-mah-toe

There are many jobs in the equine industry, but not all jobs are created equally when it comes to how they are classified under the law. For example, take this hypothetical: Rocking R Ranch employs several people to do different jobs. Billy cleans the stalls, Margaret keeps the books, and John is the head trainer. Rocking R has employment agreements with each individual and lists Billy as an employee but Margaret and John as independent contractors. Is this correct? The decision will determine responsibilities and liability for Rocking R and its workers.

The distinction can make a world of difference for both the barn and the three workers. First, employees are protected by state and national laws ranging from state workers’ compensation laws to the federal Fair Labor Standards Act. Independent contractors, on the other hand, are not so protected. Additionally, employers of independent contractors do not pay taxes on their workers’ salaries and are not responsible for providing workers’ compensation, unemployment insurance, or other employment benefits. Finally, if an independent contractor commits a wrongful act, the employer will not be liable in the same manner that they might if an employee committed the act.

The IRS considers three overarching factors in determining whether a worker is an employee or an independent contractor for tax purposes. These factors are:

1.     the amount of behavioral control the employer has;
2.     the amount of financial control the employer has; and
3.     the general relationship between the parties.

In analyzing these factors, the IRS considers how the worker performs their assigned tasks and how much instruction the employer gives. The IRS will also consider to what extent materials for the assigned tasks are supplied by the employer or by the worker. Generally speaking, the more input the employer has, the more likely the IRS is to find the worker is an employee rather than an independent contractor.

Federal courts consider other factors in determining, for example, whether an employment relationship exists for purposes of federal employment laws. These factors include:

1.     the degree of the employer’s right to control how the work is performed;
2.     the degree of skill required to perform the work;
3.     the worker’s investment in the business;
4.     the permanence of the working relationship;
5.     the worker’s opportunity for profit or loss; and
6.     the extent to which the work is an integral part of the business.

States sometimes simplify these factors into a “right to control” analysis. Under this test, the relationship between employer and worker is categorized according to the amount of control the employer exercises over the mode, method, and manner of the work performed. This analysis is frequently employed in cases regarding the employer’s liability for the worker’s wrongful act.

Under the doctrine of respondeat superior, an employer is liable for the wrongful acts or torts committed by an employee in the scope of the employee’s work (with some exceptions). An employer is not liable for wrongful acts committed by an independent contractor, with some exceptions. If an employee commits a tort while deviating from the normal course of employment, the employer may be able to escape liability. This ability will depend on whether the deviation was a minor “detour” or a more substantial “frolic.” If it is a frolic, it will be outside the scope of employment and respondeat superior will likely not apply.

Consider this: John (the head trainer at Rocking R) negligently assigns an advanced horse to a beginner rider and the rider is injured. Liability will depend on whether John really was an independent contractor. In a court using a right to control analysis, the court will consider how much influence Rocking R had over John’s work. If John has an exclusive contract with Rocking R, Rocking R states in its employment contract how John is to assign horses to riders, Rocking R pays John a salary rather than an hourly wage, and Rocking R depends on John’s teaching, the court will be more likely to decide John is an employee. Therefore, Rocking R would be vicariously liable for the rider’s injury.

When creating liability release forms, a best practice is to include a clause stating that the signor agrees to release all employees and independent contractors. That way, everyone employed by the barn will be protected regardless of their categorization under the law. But remember – even the most well-drafted liability release form will probably not protect against gross negligence!

Like most legal questions, determining whether a worker is an employee or an independent contractor is a fact-intensive inquiry. Therefore, if you have specific questions, you should consult a licensed attorney.

Wednesday, June 10, 2015

Liability: Nevada is the 47th state to enact an Equine Activity Liability Act

Equine Activity Liability Acts are now in 47 states. Nevada passed SB 129 and the governor signed the bill into law at the end of May. Like all such acts, this new law is designed to limit civil liability or certain people for injuries or death that result from certain equine activities.

Section 1 of the Act provides immunity for certain people. Interestingly, the Act specifically lists veterinarians as protected - many other states merely group veterinarians with other equine professionals. Section 1 also specifically creates a duty for the participant in an equine activity.

Immunity is not available to protected people if they provide defective tack, or they provide an unsuitable horse without making reasonable efforts to determine the participant's ability. Immunity is also not available if an injury is caused by a latent defect.

Under Section 2, an organization - including a nonprofit, corporation, or other association - is not immune from liability for injury or damage that results from a negligent or wrongful act.

The new act is scheduled to take effect on October 1, 2015.

Remember that not all Equine Activity Liability Acts are the same! Make sure you know the law in your state. If you have any questions, contact an equine attorney.

Sunday, June 7, 2015

Horse racing: what is advance deposit wagering?

It finally happened: after 37 years, we have a Triple Crown winner in American Pharoah. There are many numbers that go into this win, all of which are detailed in this report from Forbes. Some of the most important numbers - from the industry's perspective - involve betting. At the 2014 Belmont Stakes, over $7 million was wagered by racegoers. An additional $83 million was wagered by people watching live simulcast of the race.

Advance deposit wagering allows bettors to create an account with an off-track betting facility, and the facility places bets for the bettor once the account is fully funded. ADW can be done over the internet or over the phone. It is not legal in all states. Indiana Governor Mike Pence recently vetoed a bill that would have allowed allowed ADW, stating that such a bill would expand gambling in the state. However, Governor Pence also acknowledged that gaming has become an important part of the economy in many Indiana communities. This is true in many states, and is the reason many legislatures have been addressing the ADW issue.

The takeout from ADW wagers is often split between the track hosting the race that is being bet on, the ADW operator, and the race purse. This means that ADW wagers generate revenue for the tracks, the ADW operators, and the horsemen who have horses running. The California statute authorizing ADW - BPC 19604 - allocates a certain percentage of ADW revenue to supplement pension plans for backstretch personnel and to welfare funds established for horsemen and backstretch personnel. In this way, ADW not only contributes to the state economy, but also to the racing industry.

What do you think about ADW? Let us know in the comments!