Source: https://pjclegalpublishing.com/state-sections/mississippi/
Timestamp: 2019-04-20 14:20:28+00:00

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The purpose of the law is to promote employment security by increasing opportunities for placement through the maintenance of a system of public employment offices and to provide through the accumulation of reserves for the payment of compensation to individuals with respect to their unemployment. Miss. Code § 71-5-1 (2014).
As a guide to the interpretation and application of the Mississippi Employment Security Law, the public policy of this state is declared to be as follows: Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is therefore a subject of general interest and concern which requires appropriate action by the legislature to prevent its spread and to lighten its burden, which now so often falls with crushing force upon the unemployed worker and his family. The achievement of social security requires protection against this greatest hazard of our economic life. This can be provided by encouraging employers to provide more stable employment and by the systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment, thus maintaining purchasing power and limiting the serious social consequences of poor relief assistance. The legislature, therefore, declares that in its considered judgment the public good and the general welfare of the citizens of this state require the enactment of this measure, under the police powers of the state, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own. Miss. Code § 71-5-3 (2014).
The definition of covered employment for purposes of state unemployment taxes is contained in the Mississippi Employment Security Law, Miss. Code §§ 71-5-1 through 71-5-545.
Employment means and includes any service performed, which was employment as defined in this section [Miss. Code § 71-5-11] and, subject to the other provisions of this subsection [Miss. Code § 71-5-11(I)], including service in interstate commerce, performed for wages or under any contract of hire, written or oral, express or implied. Miss. Code § 71-5-11(I)(1) (2014).
Services performed by an individual for wages shall be deemed to be employment subject to the Mississippi Employment Security Law unless and until it is shown to the satisfaction of the department that such individual has been and will continue to be free from control and direction over the performance of such services both under his contract of service and in fact; and the relationship of employer and employee shall be determined in accordance with the principles of the common law governing the relation of master and servant. Miss. Code § 71-5-11(I)(14) (2014).
If the services performed during one-half (1/2) or more of any pay period by an employee for the employing unit employing him constitute employment, all the services of such employee for such period shall be deemed to be employment; but if the services performed during more than one-half (1/2) of any such pay period by an employee for the employing unit employing him do not constitute employment, then none of the services of such employee for such period shall be deemed to be employment. As used in this subsection [Miss. Code. § 71-5-11(I)], the term pay period means a period (of not more than 31 consecutive days) for which a payment of remuneration is ordinarily made to the employee by the employing unit employing him. Miss. Code § 71-5-11(I)(15)(n) (2014).
Benefit year with respect to any individual means the period beginning with the first day of the first week with respect to which he first files a valid claim for benefits, and ending with the day preceding the same day of the same month in the next calendar year; and, thereafter, the period beginning with the first day of the first week with respect to which he next files his valid claim for benefits, and ending with the day preceding the same day of the same month in the next calendar year. Any claim for benefits made in accordance with Section 71-5-515 [Miss. Code § 71-5-515] shall be deemed to be a valid claim for purposes of this subsection [Miss. Code § 71-5-11(B)] if the individual has been paid the wages for insured work required under Section 71-5-511(e) [Miss. Code § 71-5-511(e)]. Miss. Code § 71-5-11(B) (2014).
Benefits means re-employment assistance. Miss. Code § 71-5-11(O) (2014).
Calendar quarter means the period of three consecutive calendar months ending on March 31, June 30, September 30, or December 31. Miss. Code § 71-5-11(D) (2014).
Commission or department means the Mississippi Department of Employment Security, Office of the Governor. Miss. Code § 71-5-11(E) (2014).
Contributions means the money payments to the State Unemployment Compensation Fund required by the Mississippi Employment Security Law. Miss. Code § 71-5-11(C) (2014).
Department or commission means the Mississippi Department of Employment Security, Office of the Governor. Miss. Code § 71-5-11(E) (2014).
Employee leasing firm means any entity which provides specified duties for a client company such as payment of wages, reporting of wages for unemployment insurance purposes, payment of unemployment insurance contributions and other administrative duties, in connection with the client’s employees, that are directed and controlled by the client and that are providing ongoing services for the client. Miss. Code § 71-5-11(W) (2014).
(10) All entities utilizing the services of any employee leasing firm shall be considered the employer of the individuals leased from the employee leasing firm. Temporary help firms shall be considered the employer of the individuals they provide to perform services for other individuals or organizations. Miss. Code § 71-5-11(H) (2014).
Employing unit means this state or another state or any instrumentalities or any political subdivisions thereof or any of their instrumentalities or any instrumentality of more than one of the foregoing or any instrumentality of any of the foregoing and one or more other states or political subdivisions, any Indian tribe as defined in Section 3306(u) of FUTA [26 U.S.C. § 3306(u)], which includes any subdivision, subsidiary or business enterprise wholly owned by such Indian tribe, any individual or type of organization, including any partnership, association, trust, estate, joint-stock company, insurance company, or corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee or successor thereof, or the legal representative of a deceased person, which has or had in its employ one or more individuals performing services for it within this state. All individuals performing services within this state for any employing unit which maintains two or more separate establishments within this state shall be deemed to be employed by a single employing unit for all the purposes of the Mississippi Employment Security Law. Each individual employed to perform or to assist in performing the work of any agent or employee of an employing unit shall be deemed to be employed by such employing unit for all purposes of the Mississippi Employment Security Law, whether such individual was hired or paid directly by such employing unit or by such agent or employee, provided the employing unit had actual or constructive knowledge of the work. All individuals performing services in the employ of an elected fee-paid county official, other than those related by blood or marriage within the third degree computed by the rule of the civil law to such fee-paid county official, shall be deemed to be employed by such county as the employing unit for all the purposes of the Mississippi Employment Security Law. For purposes of defining an employing unit which shall pay contributions on remuneration paid to individuals, if two or more related corporations concurrently employ the same individual and compensate such individual through a common paymaster which is one of such corporations, then each such corporation shall be considered to have paid as remuneration to such individual only the amounts actually disbursed by it to such individual and shall not be considered to have paid as remuneration to such individual such amounts actually disbursed to such individual by another of such corporations. Miss. Code § 71-5-11(G) (2014).
FUTA means the Federal Unemployment Tax Act, 26 U.S.C. §§ 3301-3311.
Hospital means an institution which has been licensed, certified, or approved by the State Department of Health as a hospital. Miss. Code § 71-5-11(M) (2014).
Includes and including, when used in a definition contained in the Mississippi Employment Security Law, shall not be deemed to exclude other things otherwise within the meaning of the term defined. Miss. Code § 71-5-11(U) (2014).
Insured work means employment for employers. Miss. Code § 71-5-11(T) (2014).
Mississippi Employment Security Law means Miss. Code §§ 71-5-1 through 71-5-545.
Re-employment assistance means money payments payable to an individual as provided in the Mississippi Employment Security Law and in accordance with Section 3304(a)(4) and 3306(h) of FUTA [26 U.S.C. §§ 3304(a)(4) and 3306(h)] and Section 303(a)(5) of the Social Security Act [42 U.S.C. § 503(a)(5)], with respect to his unemployment through no fault of his own. Miss. Code § 71-5-11(O) (2014).
State includes, in addition to the states of the United States of America, the District of Columbia, Commonwealth of Puerto Rico and the Virgin Islands. The provisions of paragraphs (1) and (2) of subsection P [Miss. Code. § 71-5-11(P)(1) and (2)], as including the Virgin Islands, shall become effective on the day after the day on which the United States Secretary of Labor approves for the first time under Section 3304(a) of the Internal Revenue Code of 1954 [26 U.S.C. § 3304(a)] an unemployment compensation law submitted to the secretary by the Virgin Islands for such approval. Miss. Code § 71-5-11(P)(1), (3) (2014).
Temporary help firm means an entity which hires its own employees and provides those employees to other individuals or organizations to perform some service, to support or supplement the existing workforce in special situations such as employee absences, temporary skill shortages, seasonal workloads and special assignments and projects, with the expectation that the worker’s position will be terminated upon the completion of the specified task or function. Miss. Code § 71-5-11(X)(1) (2014).
United States, when used in a geographical sense, includes the states, the District of Columbia, Commonwealth of Puerto Rico and the Virgin Islands. The provisions of paragraphs (1) and (2) of subsection P [Miss. Code. § 71-5-11(P)(1) and (2)], as including the Virgin Islands, shall become effective on the day after the day on which the United States Secretary of Labor approves for the first time under Section 3304(a) of the Internal Revenue Code of 1954 [26 U.S.C. § 3304(a)] an unemployment compensation law submitted to the secretary by the Virgin Islands for such approval. Miss. Code § 71-5-11(P)(2)-(3) (2014).
(iv) Does not include deferred compensation plans. Miss. Code § 71-5-11(R)(1) (2014).
Week means calendar week or such period of 7 consecutive days as the department may by regulation prescribe. The department may by regulation prescribe that a week shall be deemed to be in, within, or during any benefit year which includes any part of such week. Miss. Code § 71-5-11(S) (2014).
Services performed for remuneration for a principal as an agent-driver or commission-driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages (other than milk), or laundry or dry-cleaning services. Miss. Code § 71-5-11(I)(2)(a) (2014).
(iii) The services are not in the nature of a single transaction that is not part of a continuing relationship with the person for whom the services are performed. Miss. Code § 71-5-11(I)(2) (2014).
Services performed for remuneration for a principal as a traveling or city salesman, other than as an agent-driver or commission-driver, engaged upon a full-time basis in the solicitation on behalf of, and the transmission to, a principal (except for sideline sales activities on behalf of some other person) of orders from wholesalers, retailers, contractors, or operator of hotels, restaurants, or other similar establishments for merchandise for resale or supplies for use in their business operations. Miss. Code § 71-5-11(I)(2)(b) (2014).
Service performed in the employ of this state or any of its instrumentalities or any political subdivision thereof or any of its instrumentalities or any instrumentality of more than one of the foregoing or any instrumentality of any of the foregoing and one or more other states or political subdivisions or any Indian tribe as defined in Section 3306(u) of FUTA [26 U.S.C. § 3306(u)], which includes any subdivision, subsidiary or business enterprise wholly owned by such Indian tribe; however, such service is excluded from employment as defined in FUTA by Section 3306(c)(7) of that act [26 U.S.C. § 3306(c)(7)] and is not excluded from employment under subsection I(5) of this section [Miss. Code § 71-5-11(I)(5)]. Miss. Code § 71-5-11(I)(3) (2014).
(b) The organization had four or more individuals in employment for some portion of a day in each of 20 different weeks, whether or not such weeks were consecutive, within the current or preceding calendar year, regardless of whether they were employed at the same moment of time. Miss. Code § 71-5-11(I)(4) (2014).
(ii) For some portion of a day in each of 20 different calendar weeks, whether or not such weeks were consecutive, in either the current or the preceding calendar year, employed in agricultural labor 10 or more individuals, regardless of whether they were employed at the same moment of time. Miss. Code § 71-5-11(I)(6)(a) (2014).
(ii) If such individual is not an employee of such other person within the meaning of subsection I(1) [Miss. Code § 71-5-11(I)(1)]. Miss. Code § 71-5-11(I)(6)(b) (2014).
(ii) Such other person shall be treated as having paid cash remuneration to such individual in an amount equal to the amount of cash remuneration paid to such individual by the crew leader (either on his own behalf or on behalf of such other person) for the service in agricultural labor performed for such other person. Miss. Code § 71-5-11(I)(6)(c) (2014).
(iii) Has not entered into a written agreement with such other person under which such individual is designated as an employee of such other person. Miss. Code § 71-5-11(I)(6)(d) (2014).
Domestic service in a private home performed for an employing unit which paid cash remuneration of $1,000 or more in any calendar quarter in the current or the preceding calendar year to individuals employed in such domestic service. For the purpose of this subsection [Miss. Code § 71-5-11(I)], the term employment does not apply to service performed as a sitter at a hospital in the employ of an individual. Miss. Code § 71-5-11(I)(7) (2014).
Domestic service in a local college club or local chapter of a college fraternity or sorority performed for an employing unit which paid cash remuneration of $1,000 or more in any calendar quarter in the current or the preceding calendar year to individuals employed in such domestic service. For the purpose of this subsection [Miss. Code § 71-5-11(I)], the term employment does not apply to service performed as a sitter at a hospital in the employ of an individual. Miss. Code § 71-5-11(I)(7) (2014).
(ii) The base of operations or place from which such service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in this state. Miss. Code § 71-5-11(I)(8) (2014).
Services not covered under paragraph (8) of this subsection [Miss. Code § 71-5-11(I)(8)] and performed entirely without this state, with respect to no part of which contributions are required and paid under an unemployment compensation law of any other state or of the federal government, shall be deemed to be employment subject to the Mississippi Employment Security Law if the individual performing such services is a resident of this state and the department approves the election of the employing unit for whom such services are performed that the entire service of such individual shall be deemed to be employment subject to the Mississippi Employment Security Law. Miss. Code § 71-5-11(I)(9) (2014).
(b) The service is performed both within and without such state, but the service performed without such state is incidental to the individual’s service within the state; for example, is temporary or transitory in nature or consists of isolated transactions. Miss. Code § 71-5-11(I)(10) (2014).
(c) None of the criteria of subparagraphs (a) and (b) of this paragraph [Miss. Code § 71-5-11(I)(11)(a) and (b)] are met but the employer has elected coverage in this state or, the employer having failed to elect coverage in any state, the individual has filed a claim for benefits, based on such service, under the law of this state. Miss. Code § 71-5-11(I)(11)(a)-(c) (2014).
(iv) A corporation organized under the laws of the United States or of any state. Miss. Code § 71-5-11(I)(11)(d) (2014).
All services performed by an officer or member of the crew of an American vessel on or in connection with such vessel, if the operating office from which the operations of such vessel operating on navigable waters within, or within and without, the United States are ordinarily and regularly supervised, managed, directed and controlled, is within this state, notwithstanding the provisions of subsection I(8) [Miss. Code § 71-5-11(I)(8)]. Miss. Code § 71-5-11(I)(12) (2014).
Service with respect to which a tax is required to be paid under any federal law imposing a tax against which credit may be taken for contributions required to be paid into a state unemployment fund, or which as a condition for full tax credit against the tax imposed by FUTA, 26 USCS Section 3301 et seq. [26 U.S.C. § 3301 et seq.], is required to be covered under the Mississippi Employment Security Law, notwithstanding any other provisions of this subsection [Miss. Code § 71-5-11(I)]. Miss. Code § 71-5-11(I)(13) (2014).
(b) By a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry, or by a member of a religious order in the exercise of duties required by such order. Miss. Code § 71-5-11(I)(5)(a)-(b) (2014).
2. A policy-making or advisory position the performance of the duties of which ordinarily does not require more than eight hours per week. Miss. Code § 71-5-11(I)(5)(c) (2014).
For the purposes of subsection I(3) and (4) of this section [Miss. Code § 71-5-11(I)(3) and (4)], the term employment does not apply to service performed in a facility conducted for the purpose of carrying out a program of rehabilitation for individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, or providing remunerative work for individuals who because of their impaired physical or mental capacity cannot be readily absorbed in the competitive labor market, by an individual receiving such rehabilitation or remunerative work. Miss. Code § 71-5-11(I)(5)(d) (2014).
For the purposes of subsection I(3) and (4) of this section [Miss. Code § 71-5-11(I)(3) and (4)], the term employment does not apply to service performed by an inmate of a custodial or penal institution. Miss. Code § 71-5-11(I)(5)(e) (2014).
For the purposes of subsection I(3) and (4) of this section [Miss. Code § 71-5-11(I)(3) and (4)], the term employment does not apply to service performed as part of an unemployment work-relief or work-training program assisted or financed, in whole or in part, by any federal agency or agency of a state or political subdivision thereof or of an Indian tribe, by an individual receiving such work relief or work training, unless coverage of such service is required by federal law or regulation. Miss. Code § 71-5-11(I)(5)(f) (2014).
Agricultural labor, except as provided in subsection I(6) of this section [Miss. Code § 71-5-11(I)(6)].
(vi) As used in paragraph (15)(a) of this subsection [Miss. Code § 71-5-11(I)(15)(a)], the term farm includes stock, dairy, poultry, fruit, fur-bearing animals, and truck farms, plantations, ranches, nurseries, ranges, greenhouses, or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. Miss. Code § 71-5-11(I)(15)(a) (2014).
Domestic service in a private home, except as provided in subsection I(7) of this section [Miss. Code § 71-5-11(I)(7)]. Miss. Code § 71-5-11(I)(15)(b) (2014).
Domestic service in a local college club, or local chapter of a college fraternity or sorority, except as provided in subsection I(7) of this section [Miss. Code § 71-5-11(I)(7)]. Miss. Code § 71-5-11(I)(15)(b) (2014).
Service performed as a sitter at a hospital in the employ of an individual. Miss. Code § 71-5-11(I)(15)(b) (2014).
Casual labor not in the usual course of the employing unit’s trade or business. Miss. Code § 71-5-11(I)(15)(c) (2014).
Service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a child under the age of 21 in the employ of his father or mother. Miss. Code § 71-5-11(I)(15)(d) (2014).
Service performed in the employ of the United States government or of an instrumentality wholly owned by the United States; except that if the Congress of the United States shall permit states to require any instrumentalities of the United States to make payments into an unemployment fund under a state unemployment compensation act, then to the extent permitted by Congress and from and after the date as of which such permission becomes effective, all of the provisions of the Mississippi Employment Security Law shall be applicable to such instrumentalities and to services performed by employees for such instrumentalities in the same manner, to the same extent, and on the same terms as to all other employers and employing units. If this state should not be certified under FUTA, 26 USCS Section 3304(c) [26 U.S.C. § 3304(c)], for any year, then the payment required by such instrumentality with respect to such year shall be deemed to have been erroneously collected and shall be refunded by the department from the fund in accordance with the provisions of Section 71-5-383 [Miss. Code § 71-5-383]. Miss. Code § 71-5-11(I)(15)(e) (2014).
Service performed in the employ of an employer as defined by the Railroad Unemployment Insurance Act, 45 USCS Section 351(a) [45 U.S.C. § 351(a)], or as an employee representative as defined by the Railroad Unemployment Insurance Act, 45 USCS Section 351(f) [45 U.S.C. § 351(f)], and service with respect to which unemployment compensation is payable under an unemployment compensation system for maritime employees, or under any other unemployment compensation system established by an act of Congress; however, the department is authorized and directed to enter into agreements with the proper agencies under such act or acts of Congress, which agreements shall become effective 10 days after publication thereof in the manner provided in Section 71-5-117 [Miss. Code § 71-5-117] for general rules, to provide reciprocal treatment to individuals who have, after acquiring potential rights to benefits under the Mississippi Employment Security Law, acquired rights to unemployment compensation under such act or acts of Congress or who have, after acquiring potential rights to unemployment compensation under such act or acts of Congress, acquired rights to benefits under the Mississippi Employment Security Law. Miss. Code § 71-5-11(I)(15)(f) (2014).
Service performed in any calendar quarter in the employ of any organization exempt from income tax under the Internal Revenue Code, 26 USCS Section 501(a) [26 U.S.C. § 501(a)] (other than an organization described in 26 USCS Section 401(a) [26 U.S.C. § 401(a)]), or exempt from income tax under 26 USCS Section 521 [26 U.S.C. § 521] if the remuneration for such service is less than $50. Miss. Code § 71-5-11(I)(15)(g) (2014).
(B) Such employment will not be covered by any program of unemployment insurance. Miss. Code § 71-5-11(I)(15)(h) (2014).
Service performed by an individual under the age of 22 who is enrolled at a nonprofit or public educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on, as a student in a full-time program taken for credit at such institution, which combines academic instruction with work experience, if such service is an integral part of such program and such institution has so certified to the employer, except that this subparagraph [Miss. Code § 71-5-11(I)(15)(i)] shall not apply to service performed in a program established for or on behalf of an employer or group of employers. Miss. Code § 71-5-11(I)(15)(i) (2014).
Service performed in the employ of a hospital, if such service is performed by a patient of the hospital, as defined in subsection M of this section [Miss. Code § 71-5-11(M)]. Miss. Code § 71-5-11(I)(15)(j) (2014).
Service performed as a student nurse in the employ of a hospital or a nurses’ training school by an individual who is enrolled and is regularly attending classes in a nurses’ training school chartered or approved pursuant to state law; and services performed as an intern in the employ of a hospital by an individual who has completed a four-year course in a medical school chartered or approved pursuant to state law. Miss. Code § 71-5-11(I)(15)(k) (2014).
Service performed by an individual as an insurance agent or as an insurance solicitor, if all such service performed by such individual is performed for remuneration solely by way of commission. Miss. Code § 71-5-11(I)(15)(l) (2014).
Service performed by an individual in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution, except those employed by political subdivisions, state and local governments, nonprofit organizations and Indian tribes, as defined by the Mississippi Employment Security Law, or any other entities for which coverage is required by federal statute and regulation. Miss. Code § 71-5-11(I)(15)(m) (2014).
Service performed by a barber or beautician whose work station is leased to him or her by the owner of the shop in which he or she works and who is compensated directly by the patrons he or she serves and who is free from direction and control by the lessor. Miss. Code § 71-5-11(I)(15)(o) (2014).
(iii) The services performed by the person are performed pursuant to a written contract between such person and the person for whom the services are performed and such contract provides that the person will not be treated as an employee with respect to such services for federal tax purposes. Miss. Code § 71-5-11(I)(15)(p) (2014).
In Miss. Employment Sec. Com. v. PDN, Inc., 586 So. 2d 838 (Miss. 1991), the Mississippi Supreme Court considered the application of the common law test for employment. While the court confirmed that the burden of proof was upon the party seeking to show the worker was not an employee, it also noted that since employment security contribution assessments are an excise tax, every doubt as to their application must be resolved in favor of the taxpayer and against the taxing power. Ultimately, the court indicated that they were unwilling to set an unyielding formula for all cases.
(7) Whether or not the work is a part of the regular business of the employer.
The court noted that the primary factor is the right to or degree of control. The test as to who is a servant is “whether the service is rendered by one whose physical conduct, time and activities in the performance of his duties are controlled, or are subject to the right of control, by the alleged master under the contract of employment or hire.” 586 So. 2d at 842 (quoting Texas Co. v. Wheeless, 187 So. 880, 886 (Miss. 1939).
The Mississippi Supreme Court also commented on the common law test for employment in Miss. Employment Sec. Com. v. Total Care, Inc., 586 So. 2d 834 (Miss. 1991). In Total Care, the court stated that the fact that a putative employer paid its workers, “does not per se make the workers employees” or the payor an employer. Total Care, 586 So. 2d at 836. The court indicated that they “ordinarily consider the actual practice of the parties which supplements their written contract and [whether] their actual relationship is such as to bring the parties within the scope of the act.” Id. at 837. According to the court, “[t]he statute directs us to the common law principles of master and servant, [which is] a flexible, functional test. Among the most prominent factors we have considered is ‘control,’ that is, to what extent does the putative employer control in substance and in detail the work activities of the person said to be an employee.” Id.
[o]ne may be actually under slight supervision or control but still be an employee where the right of control existed and the service performed was a part of the regular business of the alleged employer. There is no talismanic formula we may mechanically apply. We draw from the general law of master and servant and in a variety of contexts. We have emphasized that the terms of the contract between the parties are only a part of the inquiry and that, even though the contract gives no right of control, the worker will be found a servant if there is substantial control in fact.
An important appeals court decision applying Mississippi’s common-law test upheld the independent-contractor status of product demonstrators. The guidance provided by this decision would be equally applicable to other types of businesses that engage self-employed service providers to perform services for unaffiliated clients.
The product demonstrator at issue in Mississippi Dept. of Employment Security v. Product Connections, LLC, 2007 Miss. App. LEXIS 262 (Ct. App. Miss. Apr. 24, 2007), conducted product demonstrations for a company’s clients during the period of May 22 through June 18, 2004. Shortly thereafter, the individual filed a claim seeking unemployment benefits. The claim triggered an investigation of the company by the Mississippi Department of Employment Security (the “Department”), which concluded that the claimant and all other product demonstrators under contract with the company are employees for purposes of Mississippi unemployment.
The company appealed the decision, but the Department’s hearing officer affirmed. The company appealed again, to the Board of Review, which also affirmed. The company next appealed to a circuit court, which reversed – holding that the product demonstrators qualified as independent contractors. The Department appealed that decision to the Court of Appeals of Mississippi, which affirmed the circuit court.
• The company received a fee from the manufacturer, which was deducted from the amount of compensation before being distributed to the demonstrators. The area coordinator also received a booking fee.
The appeals court noted that the administrative decisions holding the product demonstrators to be employees of the company inappropriately imputed to the company the directions and details that a manufacturer imposed. The court also acknowledged that the product demonstrators performed their services for the manufacturers, not the company.
The Product Connections decision provides helpful guidance for how product-demonstration firms – and other firms that contract with independent contractors to perform services for their unaffiliated clients – should structure their business model.
Several especially important aspects of the company’s business model enhanced its ability to prevail in the case. These included: (i) its detachment from the details and instructions concerning an event, (ii) its characterization of a product demonstrator’s services as being performed for a manufacturer, not the company, and (iii) its characterization of demonstrator payments as being made by the manufacturer, albeit through the company.
Interestingly, the court did not appear to attach much if any weight to the fact that the company maintained workers’-compensation and general-liability insurance covering the product demonstrators. This could be because the court found that the coverage was maintained at the insistence of a client, thereby neutralizing the issue.
Because this decision was based on the common-law test, certain businesses that operate under a similar business model might be able to rely on it as a “reasonable basis” for purposes of Section 530 of the Revenue Act of 1978, a safe-harbor provision for purposes of avoiding federal employment taxes. See Alternate Staffing, Paragraph 4030, for more details.

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