Tag Archives: IRS

TENNESSEE EMPLOYMENT LAW MEETS THE IRS 20 FACTOR TEST

On May 10, 2019 Governor Bill Lee signed legislation amending the definition of employee in several Tennessee employment laws.  Now consideration of the IRS 20 Factor Test must be made to determine whether a worker is an employee or independent contractor under certain laws.

The amended laws are as follows:

  • Code Ann. § 50-2-111 (wage regulations – leased operator or owner operator of motor vehicle, or common carrier contract).
  • Code Ann. § 50-3-103 (Tennessee Occupational Safety and Health Act).
  • Code Ann. § 50-7-207 and 207(e) (Tennessee Employment Security Law – Unemployment Insurance).
  • Code Ann. § 50-9-103 (Drug-Free Workplace Program).

With this amendment “employee” is now re-defined as an individual who performs services under a covered employer for wages if the services performed by the individual qualify as an employer/employee relationship under the IRS 20 Factor Test, which is set forth in IRS Revenue Ruling 87-41.

The law is effective January 1, 2020.

In light of this change employers should examine their relationships with independent contractors now to determine whether the individual is properly classified as an independent contractor under the amended laws.  Making this analysis and taking any necessary corrective action now could save thousands of dollars in the future, in the event a government agency determines that someone who is classified as an independent contractor is really an employee.

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