In Rodriguez v. Commissioner of Internal Revenue, the Tax Court ruled that an attorney was an employee, not an independent contractor, of the two legal staffing agencies where he worked. Rodriguez v. Commissioner of Internal Revenue, 139 T.C. No. 12 (2012).
Isidoro Rodriguez was a solo practitioner in Colombia. After he moved to the U.S., Rodriguez intermittently worked on short-term legal projects through two legal staffing agencies, LegalSource and Update Legal.
To obtain work through either agency, attorneys were required to submit an application and participate in an interview with the staffing agency. The staffing agencies either assigned attorneys to specific client projects or allowed their clients to choose specific attorneys from lists the agencies provided. Both agencies considered their temporary contract attorneys to be at-will employees, dischargeable at the agencies’ discretion.
LegalSource and Update paid Rodriguez on an hourly basis, including overtime pay. The two staffing agencies also determined his rates of pay. Neither agency provided Rodriguez with bonuses, vacation pay, personal leave, health insurance, or any other employee benefits. The staffing agencies also did not reimburse Rodriguez for his expenses of bar admission, legal education, cell phones, law office books or equipment, or any other items. Both staffing agencies issued Rodriguez a Form W-2 each year.
On his 2006 return, Rodriguez claimed his Form W-2 wages on Schedule C, and offset this “Schedule C income” by expenses he incurred in being an attorney. The IRS reclassified Rodriguez’s “Schedule C income” as wages, and his “Schedule C expenses” as Schedule A deductions.
In determining whether a worker was an employee or an independent contractor, relevant factors include: (1) the degree of control the principal exercised over the details of the work; (2) which party invested in work facilities used by the individual; (3) the opportunity of the individual for profit or loss; (4) whether the principal could discharge the individual; (5) whether the work was part of the principal’s regular business; (6) the permanency of the relationship; (7) the relationship the parties believed they were creating; and (8) whether the principal provided employee benefits.
The agencies provided Rodriguez temporary job placements and directed him where to work. Rodriguez turned in time sheets to the agencies, which paid him on the basis of the hours he worked for the agencies’ clients and at a rate that the agencies determined. The agencies directed Rodriguez to perform services required by their clients, in the manner dictated by their clients, who controlled the details of Rodriguez’s work for them. Rodriguez had no investment in his work facilities, or opportunity for profit or risk of loss. The agencies treated Rodriguez as an employee and had the right to discharge him. Rodriguez’ work was also an integral part of their business. That the relationships between Rodriguez and the agencies were not permanent and Rodriguez was not paid employee benefits are not enough to preclude a finding that Rodriguez was an employee.
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