A divided Ohio Supreme Court ruled that further proceedings are necessary to determine whether in-home care workers who provided services for persons with developmental disabilities were employees of a home care agency.

Case: State ex rel. Friendship Supported Living Inc. v. Bureau of Workers’ Compensation, No. 2022-0142, 03/28/2023, published.

Facts: Friendship Supported Living Inc. provides in-home, direct-care services to developmentally disabled persons under a program administered by the Ohio Department of Developmental Disabilities. Friendship classified the workers as independent contractors.

In a 2008 premium audit, the Bureau of Workers’ Compensation agreed that the workers were independent contractors. In 2016, the Unemployment Compensation Review Commission also determined that one of the workers was an independent contractor.

When the BWC audited Friendship again in 2017, it determined that the direct-care workers are employees, not independent contractors.

Procedural history: Friendship protested the audit findings and requested an administrative hearing. An adjudicating committee denied Friendship's audit protest, determining that the workers were employees rather than independent contractors.

Friendship then appealed the adjudicating committee's decision to the BWC administrator's designee, but the designee affirmed the committee.

After this, Friendship filed a complaint for a writ of mandamus with the Court of Appeals, seeking an order directing the bureau to classify its in-home, direct-care workers as independent contractors and reimburse Friendship for the premiums it incurred as a result of the classification. 

A magistrate recommended that the court deny the writ, but the court ordered the bureau to vacate its order classifying Friendship's direct-care workers as employees and return any premium payments that Friendship had made based on the order of the administrator's designee.

Analysis: The Ohio Supreme Court said a determination of whether someone is an employee or an independent contractor is ordinarily an issue to be decided by the trier of fact, with the key factual determination being who had the right to control the manner or means of the work.

The right-to-control test is not marked by a bright-line rule but rather a set of non-exhaustive factors, the court continued. Ohio case law has identified multiple factors as indicative, though not dispositive, of the existence of an independent-contractor relationship, including who controls the details and quality of the work; who controls the hours worked; who selects the materials, tools and personnel used; who selects the routes traveled; the length of employment; the type of business; the method of payment; and whether the work is part of the regular business of the employer.

Here, the court noted, the DDD regulated Friendship’s operations, but the pertinent regulations say “nothing about the factors for determining whether a worker providing direct care to consumers should be characterized as an employee or independent contractor.”

Friendship requires its direct-care workers to have their own automobile insurance, but the company "does not exert control over a facet of the work relationship with its direct-care workers by requiring that the workers carry their own automobile insurance, because even if the direct-care workers were not involved with Friendship, they would still be required by law to maintain insurance coverage per state-law requirements.”

Friendship's direct-care workers are paid hourly and are issued 1099 forms rather than W-2 forms. The court said these factors “cancel each other out,” since the former weighs in favor of finding an employment relationship, and the latter does not.

The court also found that the workers provide their personal labor in the normal course of Friendship’s business and that the company is responsible for arranging for another worker to provide services if the assigned worker is unavailable.

“By restricting the direct-care workers from arranging coverage for a consumer when they are unavailable to personally provide the required services, Friendship exerts control over how they do their work,” the court said. However, the fact that workers and consumers mutually decide what they will do while the worker is in the consumer's home “must be understood as a sign of Friendship's lack of control over the workers while they are in the consumers' homes,” the court reasoned.

The court went on to say the bureau's order was “marred by three deficiencies.” The first was that the bureau found it significant that Friendship monitors the direct-care workers for "compliance and quality," but it did not specify what the monitoring activities consist of. The bureau “also glossed over” the consideration of the workers’ freedom to work for others, then ignored the routes-traveled and length-of-employment factors.

The court said the bureau cited the relevant factors of the right-to-control test, though, and although “thin,” the reasoning was discernable. The court concluded that the proper remedy was to reverse the judgment of the Court of Appeals and grant a limited writ of mandamus directing the bureau to issue an amended order that sufficiently accounts for the deficiencies with reasons that are briefly explained and statements that are fact-specific. 

Dissent: Justices Sharon Kennedy, R. Patrick DeWine and Joseph T. Deters argued that the decision of the Court of Appeals should have been affirmed because the bureau’s conclusion was not supported by sufficient evidence.

“In applying the right-to-control test, some of the facts of this case might seem to favor a determination that the in-home care providers are employees, not independent contractors,” the dissenters said, but the fact that Friendship pays its providers an hourly rate and prohibits them from arranging for their own substitutes or from otherwise subcontracting out their assignments were both requirements dictated by the state.

“Although both Friendship and its in-home care providers operate in a related field by providing services to people with developmental disabilities, the work that each performs is separate,” the dissenters added. “And the evidence shows that the in-home care providers operate their own independent businesses, because they are permitted to, and do sometimes, work with Friendship's competitors in the same line of business.”

The dissenters further emphasized that the in-home care providers largely set their own schedules and direct the means and manner in which the services are provided on a day-to-day basis.

“For these reasons, it is manifest that Friendship's in-home care providers are independent contractors, not employees,” the dissenters said.

Disposition: Reversed, and a limited writ is granted.

To read the court’s decision, click here.