The case of Mary and the Little Lamb Company is apparently not unique and many similar cases have surely been deliberated in Federal courts. Mary at first seemed as an independent contractor as she arrived in the company. This is so since the company only needed her services since there was a special project to be handled. However, as the project was nearing in its completion, continued relationship was asked by the company to Mary until time came that the company had established a closer relation with her and eventually requiring her to use company materials and equipment.
Moreover, she was requested to stick with the company’s work schedules. With this kind of arrangement, there seems to be some changes in the type of relationship Mary and the Little Lamb Company are agreeing with. Are these changes enough for Mary and the Little Lamb Company to qualify in an Employer-Employee type of relationship? Did Mary really was an independent contractor as she came in the company? Determining the status of person working for a certain business establishment or company, whether he or she is a common-law employee or an independent contractor is very crucial and important.
Both perform specific and important roles but have different relations with the company or the employer. Recognizing these different relations is nonetheless important in establishing good relations between the company or employer and its constituents by imposing different policies and regulations. But is there any person or an agency qualified in determining such distinction. The answer is yes, in the name of the IRS or the Internal Revenue Services, which is a US government responsible for tax collection and the implementation of tax laws.
According to IRS, the general rule for a person to be classified as an independent contractor if the company to whom the services are rendered have the power to control only the result of a certain work but not on how (means and methods) of accomplishing the resulting work (Muhl, 2002). Otherwise, an individual should be classified as a common-law employee. With this knowledge, we can apparently classify Mary as an independent contractor before she was required by the company to use company materials and equipment making her an employee in effect.
However, the factor considered in this case is only based on the means on how the work is done. How about other factors? The IRS has formulated their very own IRS 20 Factor Test (called the Common-Law Test) to determine such demarcation between an independent contractor and an employee. The following are with regards to instructions and training, continuity, hours of work and time required, work location, sequence of work, skill level, payment, tools and materials, expenses, and discharge and termination not to name all.
But in the case of Mary and the Little Lamb Company, there are some factors that can be now considered that may put her or may qualify her as a common-law employee when she eventually had “closer relationship” with the company. The hours of work and time required can now be a factor since Mary is now required to work in accordance to the schedule of the company. As previously mentioned, the company also required Mary to use the materials and equipments in the company, making the company premises her work location.
On the other hand, it can also be assumed that Mary has not undergone training or receiving instructions on the work to be done thus qualifying her better as an independent contractor. However, not all factors are presented in the case of Mary and the Little Lamb Company that may have a big effect in determining her status as worker such as the payment (if she was paid according to the result of her work done or not), the sequence of work (if the employer requires her to follow a set or sequence of work to do or not) and many others.
It is also important to understand that in IRS terms, not all factors are not necessary considered equally and are dealt with subjectively in a case to case basis. Other tests, aside from the IRS Common Law Test, can also be employed in such determining processes such as the Economic Realities Test and the Hybrid Test which have their factors considered (Muhl, 2002). Eventually after two years, Mary was terminated from her work due to economic reasons according to the company.
This is completely legal if the company did not require Mary to sign a written agreement that indicates the terms of Employment At-Will and is subsequently backed and enforced by Common Law. The Employment At-Will Doctrine, in essence, implies that the employment is assumed to indefinite and voluntary both for the company or the employer and the employee (Niznik, 2002). Thus, both the employee has the right and the option to quit his or her job for any reason and without consequences.
The same applies for the employer. The employer or the company has the right or option to terminate any of its employee/s for any reason without consequences. Since the Little Lamb company did not present Mary document implying terms of Employment At-Will for her to agree and sign (as indicated in the scenario), then the company is free to terminate her for any other reason such as in economic grounds.
However, though also not indicated in the scenario presented, a contract maybe presented by the company to Mary indicating some terms and conditions. These terms and conditions cannot be violated or breached by neither Mary nor the Little Lamb Company. The company is also not able to violate state or Federal laws. They also cannot terminate their workers who decline to do something against public policy and firm morality such as violating laws (Niznik, 2002).