Pet Sitting in Missouri: Employees or Independent Contractors?
In an October 27, 2020 opinion, the Missouri Court of Appeals for the Western District recently affirmed a decision by the Division of Employment Security that concluded a pet-sitting company in Missouri—417 Pet Sitting, LLC—misclassified its employees as independent contractors. See 417 Pet Sitting, LLC v. Division of Employment Security, -- S.W.3d --, 2020 WL 6276711 (Mo. Ct. App. Oct. 27, 2020). The Court reached this conclusion after conducting a detailed analysis of the factual record that was developed before the Labor and Industrial Relations Commission (“Commission”).
417 Pet Sitting is a residential pet care operation offering services such as feeding, walking, entertainment, medication administration, and general household chores. 417 Pet Sitting advertises pet caretaking services through multiple mediums. It is owned and operated by an individual, Amanda Brown, who also personally performs pet sitting services.
417 Pet Sitting has pet sitters submit applications, interview, and complete background checks. It has pet sitters sign an “Independent Contractor Agreement,” which is reviewed every six months. This agreement requires sitters to “fulfill any other duties reasonably requested by [417 Pet Sitting] and agreed to by the sitter.” It provides that either party can terminate the relationship without penalty. It also prohibits pet sitters from assigning their rights or delegating their duties without prior written consent. 417 Pet Sitting also has clients sign a separate agreement, which prohibits third parties (other than the pet sitters) from entering clients’ premises.
417 Pet Sitting does not provide formal training, although it publicizes that its sitters are trained professionals. 417 Pet Sitting counsels pet sitters on their duties and customer complaints. Pet sitters meet once a month at 417 Pet Sitting’s office. This office space is otherwise available for use by pet sitters, but such use is not required. Uniform shirts are available to pet sitters for purchase, but not required.
417 Pet Sitting controls sitter and client assignments and makes decisions thereabout based upon specific client needs, locations, and schedules. Pet sitters often have multiple clients at one time. Once assigned, pet sitters meet with clients for instructions on how to care for their pet(s). 417 Pet Sitting requires pet sitters to comply with these instructions. Pet sitters, however, are free to decline assignments.
417 Pet Sitting requires pet sitters to use an online time reporting system and note their completed tasks in order to be paid. This system is used to generate invoices for clients. Pet sitters are paid per task on a set rate (i.e., 60% of each invoice) and are paid by 417 Pet Sitting, regardless of whether a client actually pays the invoice. Pet sitters are otherwise responsible for all of their own travel expenses, despite some language in their agreements that they may be reimbursed for reasonable and approved out-of-pocket expenses.
By February 2018, the Missouri Division of Employment Security (“Division”) had conducted an investigation and determined the sitters of 417 Pet Sitting “had performed services in employment, as defined in section 288.034, since January 1, 2015.” 417 Pet Sitting appealed this initial determination to the Division’s Appeal Tribunal (“Tribunal”). The tribunal made credibility determinations about the evidence presented and analyzed the twenty factors identified by the Internal Revenue Service (“IRS”) as guides for determining the employment status of the pet sitters. The Tribunal affirmed the Division’s original determination, finding 16 of the 20 factors indicating an employment relationship.
417 Pet Sitting then appealed to the Commission. Two of the three Commissioners affirmed the determination of the Tribunal and Division, and one dissented. 417 Pet Sitting then filed an appeal with the Missouri Court of Appeals for the Western District.
The Western District began its analysis by noting the applicable standard of review for appeals from a decision of the Commission—that is, determining “whether it is supported by competent and substantial evidence upon the whole record.” It then turned to the argument raised by 417 Pet Sitting on appeal: the Commission’s decision was not supported by sufficient competent evidence.
To address this argument, the Court first described the test for determining whether a worker is an employee or independent contractor under Missouri’s unemployment laws and regulations. The Court noted, under these laws and rules:
Service performed by an individual for remuneration shall be deemed to be employment subject to this law unless it is shown to the satisfaction of the division that such services were performed by an independent contractor. In determining the existence of the independent contractor relationship, the common law of agency right to control shall be applied.
In other words, a presumption of employment is created where an individual performs services for compensation, and the employer bears the burden of proving otherwise. And the Court noted that Missouri regulations require the Court to consider IRS regulations in determining whether the employer can meet its burden.
The Court then turned to the twenty factors contained in the IRS regulations, stressing that the “focus of the inquiry must be the degree to which the employer has the right to control the manner and means of performance.” The Court conducted an extensive review of each of these factors, concluding that “nineteen of twenty factors are relevant to  Pet Sitting’s circumstances, and that thirteen of the relevant factors indicate an employer-employee relationship…,” while five supported independent contractor status, one was neutral, and one was inapplicable:
Factors Indicating Employment
- Instructions: 417 Pet Sitting exercises some control, and has some right to control, the “when, where and how” pet sitting is performed by pet sitters by:
- Controlling work assignments for a time period;
- Retaining authority to remove pet sitters;
- Counseling pet sitters concerning client complaints; and
- Requiring pet sitters to follow client instructions.
- Integration: 417 Pet Sitting primarily exists to provide pet care services to clients, not merely as a “middleman” matching service between pet sitters and client, because:
- Its owner personally provides pet care services herself;
- It holds monthly group meetings with pet sitters;
- It advertises to hire pet sitters who “are looking to become a part of the team,” suggesting a group of unified employees; and
- It could not operate without the pet sitters.
- Services Rendered Personally: 417 Pet Sitting expects pet sitters to personally perform services for clients and has an interest in and right to control these services, because:
- Its contract with pet sitters prohibits assignment of rights or delegation of duties without its prior written consent;
- It subjects pet sitters to an application process and background checks;
- It requires clients to sign contracts prohibiting third parties from their premises; and
- It individually bonds its pet sitters.
- Hiring, Supervising, and Paying Assistants: 417 Pet Sitting desired to control who is hired to perform and assist with its residential pet care services because:
- Although there was some evidence that pet sitters could hire assistants and one had done so, its contracts still prohibited assignment or delegation without its consent;
- It consistently used background checks; and
- It prohibited third parties from entering client premises.
- Continuing Relationship: 417 Pet Sitting had a continuing relationship with pet sitters because:
- It had contracts with pet sitters, reviewable every six months;
- Pet sitters had multiple clients at a time and could be re-assigned by 417 Pet Sitting to new clients upon the end of one assignment; and
- The relationship between it and its pet sitters continued even when a particular client is no longer in need of its services.
- Order of Sequence Set: 417 Pet Sitting exercises and retains the right to control the order and sequence of work performed by pet sitters because:
- It assigns pet sitters to various clients based upon client needs, location, and sitters’ schedules, even though clients set the specific procedures for their pets’ care; and
- It controls pet sitter assignments and removals, and retains a right to terminate pet sitters for failing to comply with duties reasonably requested by it.
- Oral or Written Reports: 417 Pet Sitting exercises or has a degree of control over pet sitters by requiring them to submit regular or written reports because:
- It requires pet sitters to enter client notes into an online database; and
- It requires pet sitters to input completed tasks into a time recording website to generate invoices to bill the clients, before the pet sitters are paid.
- Furnishing of Tools and Materials: 417 Pet Sitting furnishes significant tools, materials, and equipment to pet sitters because:
- It provides an office, office equipment, time-keeping and invoice software, which are “essential to the performance of the sitters’ work,” even though clients supply all physical materials (e.g., food, leashes, medication, and toys); and
- It reserves the right to purchase additional food and supplies if necessary.
- Significant Investment: Pet sitters of 417 Pet Sitting do not make any sort of investment in 417 Pet Sitting.
- Realization of Profit or Loss: Pet sitters cannot realize a profit or suffer a loss in addition to the profit or loss ordinarily realized by employees because:
- 417 Pet Sitting pays pet sitters per completed task, regardless of whether a client has paid it; and
- 417 Pet Sitting bears the risk of loss if a client does not pay an invoice.
- Making Service Available to General Public: Pet sitters of 417 Pet Sitting do not advertise or otherwise hold themselves out to the public as independent pet sitters because:
- They performed work under 417 Pet Sitting’s name;
- Pet Sitting advertises its pet sitting services via multiple mediums;
- Pet sitters do not have individual business cards;
- 417 Pet Sitting uniform shirts are available for purchase, even though not required;
- 417 Pet Sitting states, in its client agreements, that it “agrees to provide loving care for the pets specified.”
- Right to Discharge: 417 Pet Sitting can terminate its pet sitters at any time, without penalty or liability, per its contract with them, and can threaten such termination to obtain a pet sitter’s compliance (e.g., in the context of counseling about a customer complaint).
- Right to Terminate: Pet sitters can terminate their relationship with 417 Pet Sitting at any time, without penalty or liability.
Factors Indicating Independent Contracting
- Payment of Business and/or Traveling Expenses: 417 Pet Sitting did not ordinarily pay business or travel expenses of pet sitters, even though their contract states pet sitters “shall bill” and 417 Pet Sitting “shall reimburse” the sitters “for all reasonable and approved out-of-pocket expenses.”
- Set Hours of Work: While 417 Pet Sitting does not establish a fixed work schedule for its pet sitters, it still exercises some degree of control over their schedules in that it controls to which clients are assigned on certain days.
- Doing Work on Employer’s Premises: This factor is inapplicable to 417 Pet Sitting because the particular nature of its business requires the work to be performed off the employer’s premises.
Recognizing that no one factor or number of factors determines employment status, the Court ultimately found “that the fact that  Pet Sitting retains its right to direct and control sitters by counseling sitters regarding client complaints, the existence of its specific prohibition of delegating work to third parties, the possibility of sitter dismissal for failed compliance, and its extensive dependence on its sitters’ services, are all factors which are particularly demonstrative of an employer-employee relationship.”
This recent opinion from the Western District provides a helpful roadmap on how misclassification questions will be addressed by government agencies and courts in Missouri. It also shows that the ultimate answers to such questions are driven by fact-intensive consideration and analysis of the business, individuals, and services in question.
While there is no bright line rule in this area of law, hiring experienced and knowledgeable counsel can help you understand the benefits and risks involved in such situations. Contact an attorney with our Firm if you have questions or concerns regarding this decision and how it may impact you or your legal rights and obligations.