IRS spurs case by ruling that agents are common law employees of the NFL
By Lyssa Myska Allen
Ninety-three former drug program agents (DPAs) for the National Football League’s drug testing program have filed a lawsuit against the NFL, claiming that they were employees, not independent contractors as they were hired, and are therefore owed the benefits of employees including welfare and pension plans. The lawsuit stems from two related events: recognition by the IRS of the DPAs’ status as common law employees and the subsequent dismissal of the DPAs after the IRS ruled in their favor.
In March of 2006, some DPAs began to question the legitimacy of the DPAs’ positions as independent contractors, not employees. DPA Thomas Lavin asked the IRS to issue a ruling as to the correct employment status of a DPA. On February 27, 2007, the IRS declared that DPA Thomas Lavin was a common law employee of the National Football League Management Council (NFLMC). The NFLMC requested a review, and in June 2007 the IRS rejected the NFL’s and NFLMC’s de facto appeal by refusing to issue a Technical Advice Memorandum.
In establishing the DPAs as common law employees, the IRS looked to common law rules pursuant to Section 3121(d)(2) of the Internal Revenue Code. According to the IRS website, “To determine whether an individual is an employee or independent contractor under the common law, the relationship of the worker and the organization must be examined. In an employee-independent contractor determination, all information that provides evidence of the degree of control and degree of independence must be considered. Facts to establish the degree of control and independence fall into three categories: Behavioral control, financial control, and the type of relationship between the parties.”
The lawsuit claims that the DPAs, while hired as independent contractors by the NFLMC, did not have autonomy in the means and methods of performing their work, which is an essential component to classification as an independent contractor. However, the lawsuit names examples in which DPAs weren’t allowed to switch jobs (from primary to alternate), and goes on to state, “DPAs could not be hired or fired by other DPAs. Only the NFL and NFLMC had that power.” As independent contractors do not have the right to hire or fire other independent contractors employed by the same company, these examples do little for the DPA case. However, the lawsuit also states “DPAs had no opportunity to incur a profit or loss in the performance of services,” which is a salient argument that they were not treated as independent contractors.
Shortly after the IRS ruled that the DPAs are common law employees, the NFL made the decision to turn over all drug testing to an independent company called Comprehensive Drug Testing of Long Beach, California. According to the suit, “On October 5, 2006, the NFLMC announced in a memo to DPAs that by November 2006, it would no longer use DPAs in the drug testing program … The NFLMC falsely led the DPAs to believe that they would be considered for employment by the new company.” The November 2006 termination date turned into May 1, 2007. While the IRS didn’t submit their final ruling on the DPAs’ status until February of 2007, the DPAs’ argument is that the investigation alone caused the NFL to dismiss all of the DPAs.
The lawsuit also claims the agents were discriminated against because of their age, as all were over 40 years old. It cites as evidence that none of the DPAs have been hired or retained by Comprehensive Drug Testing, although many DPAs applied for positions with CDT and several interviewed but were turned down.
Robert J. Costello of Levy, Tolman & Costello, the New York law firm representing the DPAs, said that the NFL has refused to abide by the IRS ruling, claiming that even if the DPAs were employees, the league retains the right to determine which of its employees receives benefits. “We tried to resolve this many times with the NFL, but they kept changing their position,” Costello said. “If they would have treated these guys decently, it wouldn’t have come to this.”
