| New independent contractor law effective January 1, 2006 |
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Oregon's newly revised independent contractor law is effective as of January 1, 2006.
Oregon Revised Statute 670.600, defines independent contractor for Oregon Department of Revenue, Employment Department, and Construction and Landscaping Contractors Boards. The old law, in effect through December 31, 2005, contains multiple requirements to be met in order for a person providing services for pay to be properly classified as an independent contractor.
The 2005 Oregon Legislature, responding to the business community's call for an easier to understand and more broadly applied law, rewrote the portion of the statute that defines whether a service provider is operating an "independently established business." Some parts of the old law remain, but several requirements have been either removed or reduced in their impact.
Independent contractor law has not changed as it relates to the Workers Compensation Division or Bureau of Labor and Industries.
If you have maintained an ongoing business relationship with an independent contractor beginning before January 1, 2006, the provisions of the old law apply to your relationship through December 31, 2005, and the provisions of the new law apply to your business relationship as of January 1, 2006.
The new law considers service providers to be independent contractors if they:
- Are free from direction and control, subject to the right of the service recipient to specify the desired result.
- Are licensed under ORS 671 or 701 (CCB, State Landscape Architect Board or Landscape Contractors Board and State Board of Architect Examiners) if required for the service.
- Are responsible for other licenses or certificates necessary to provide the service.
- Are customarily engaged in an independently established business ( if they meet 3 out of the 5 below):
- Maintain a business location that is:
- Separate from the business or work location of the service recipient; or
- that is in a portion of their own residence that is used primarily for business.
- Bear the risk of loss, shown by factors such as:
- Entering into fixed price contracts;
- Being required to correct defective work;
- Warranting the services provided; or
- Negotiating indemnification agreements or purchasing liability insurance, performance bonds, or errors and omissions insurance.
- Provide contracted services for two or more different persons within a 12-month period, or routinely engage in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.
- Make a significant investment in the business through means such as:
- Purchasing tools or equipment necessary to provide the services;
- Paying for the premises or facilities where the services are provided; or
- Paying for licenses, certificates or specialized training required to provide the services.
- Have the authority to hire and fire other persons to provide assistance in performing the services.
Additional provisions in the new law:
- A person who files tax returns with a Schedule F and also performs agricultural services reportable on a Schedule C isn't required to meet the independently established business requirements
- Establishing a business entity such as a corporation or limited liability company, doesn't, by itself, establish that the individual providing services will be considered an independent contractor.
Requirements in the old law that have been removed:
- The service provider must have filed federal and state tax returns in the name of the business or farm in the previous year if operated as an independent contractor in the previous year.
- Payment for labor or services is based upon completion of a specific portion of the project or on an annual or periodic retainer.
- The service provider uses a telephone listing and service for the business that is separate from the personal residence listing and service.
The actual text of the new statute can be found in Senate Bill 323.
ORS 670.600 applies only to the Oregon Department of Revenue, Employment Department, Construction Contractors Board, and Landscape Contractors Board. These agencies require that the person performing the work must meet all the criteria of that law.
For information about workers' compensation and Oregon labor law, please contact the Workers' Compensation Division and Bureau of Labor and Industries.
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