Opinion ID: 858589
Heading Depth: 2
Heading Rank: 2

Heading: Independent-Contractor Status

Text: Alternatively, if Nagy provided management services for Wells Venture as an independent contractor, then he is personally liable to the Fund as the sole proprietor of an unincorporated trade or business. If, however, he was an employee of Wells Venture, then his work does not supply a basis for personal liability under § 1301(b)(1). Distinguishing between an employee and an independent contractor depends on an analysis of the following factors: (1) the extent of the employer’s control and supervision over the worker, including directions on scheduling and performance of work; (2) the kind of occupation and the nature of the skills required, including whether skills are obtained in the workplace; (3) responsibility for the costs of operation, such as equipment, supplies, fees, licenses, workplace, and maintenance of operations; (4) the method and form of payment and benefits; and (5) the length of job commitment and/or expectations. Mazzei v. Rock-N-Around Trucking, Inc., 246 F.3d 956, 963 (7th Cir. 2001); see also Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24 (1992). The district court weighed these factors and concluded that Nagy was an independent contractor. We see no clear error in this determination. As president of Wells Venture, Nagy was responsible to its 14 No. 11-3055 board of directors, of which he was also a member. No one supervised Nagy’s work on a day-to-day basis. In his management of Wells Venture’s affairs, Nagy had total freedom, subject only to occasional decisions by the board. We agree with the district court that the “control and supervision” exercised by the board was minimal, suggesting Nagy’s independent-contractor status. The “skills” factor in the analysis is inconclusive, as the district court held. Nagy provided management services, which can indicate either employee or independent-contractor status. There is no evidence that Wells Venture gave Nagy any specialized training. Rather, he performed general management tasks, like accounting and processing paperwork. The “expenses” factor is likewise inconclusive. In a typical employeremployee relationship, the employer pays for overhead and other operational expenses, while independent contractors usually bear their own costs. EEOC v. N. Knox Sch. Corp., 154 F.3d 744, 749 (7th Cir. 1998). After the golf course was sold, Wells Venture’s business address shifted to Nagy’s home. He did not take a tax deduction for a home office, but he did take small deductions for office expenses related to his work for Wells Venture. But his management duties did not imply a significant cost, so this factor is at best neutral, as the district court held. Most important to the district court’s conclusion was the method and form by which Nagy was paid. He did not receive a salary through a payroll system, as No. 11-3055 15 one would expect of an employee. Rather, Wells Venture paid Nagy an hourly rate and did not withhold taxes or provide fringe benefits. Presumably at his request, Wells Venture accounted for Nagy’s compensation on the 1099MISC form, which is used to report “miscellaneous income,” often for independent contractors. See Forms and Associated Taxes for Independent Contractors, Internal Revenue Service (Page Last Reviewed or Updated Jan. 14, 2013), http://www.irs.gov/businesses/small/article/0,,id= 179114,00.html. On his personal tax returns, Nagy reported his Wells Venture income on Schedule C, which covers “Profit or Loss from Business (Sole Proprietorship).” See Sole Proprietorships, Internal Revenue Service (Page Last Reviewed or Updated Apr. 5, 2013), http://w w w.irs.gov/Businesses/Sm a ll-Businesses-& - Self-Employed/Sole-Proprietorships. We have held in previous cases that the 1099 tax treatment weighs heavily in favor of independent-contractor status. See N. Knox, 154 F.3d at 750; Neiman, 285 F.3d at 595. It does here as well. Nagy’s other activities confirm that he provided services to Wells Venture as an independent contractor. Nagy had at least three other going concerns during the relevant time period: Nagy Ready Mix, Nagy Trucking, and Nagy Concrete. The record suggests he was a sales agent for another enterprise for some time as well, though the company flopped. Certainly a person can be a part-time employee for more than one enterprise. But on this record it looks more like Nagy was compensated by Wells Venture for purposes of a short-term project: handling the golf-course deal and 16 No. 11-3055 winding down the club’s operations by selling off its assets and closing its accounts. This project took longer than expected because the golf-course purchaser defaulted. But the signs of an employer-employee relationship are missing. Nagy provided management services independently and for a limited, short-term purpose, and he was paid as an independent contractor. All this leads us to agree with the district court that Nagy was an independent contractor for Wells Venture and thus was engaged in an unincorporated trade or business. This is an independent basis for personal liability under § 1301(b)(1).