Assistants are Employees, Court Says

United States Tax Court; Kumpel v. Commissioner, 2003

June 1, 2004

A federal court ruling that administrative assistants working for a solo practitioner lawyer were employees instead of independent contractors may raise a possible tax issue for many real estate practitioners who use assistants.

Over the course of several years, Frederick Kumpel had hired two assistants, who performed tasks such as preparing invoices, typing, and filing. They were paid hourly, sometimes worked from home, maintained flexible work schedules, and were free to work for other people as well. However, Kumpel required the assistants to follow systems he had in place.

Claiming the assistants were employees, the IRS sought penalties against Kumpel for failing to pay FICA tax (for Social Security and Medicare). The court agreed with the IRS that the assistants were employees. It stated that of the factors that determine if a worker is an employee, the most important is the right to control the actions of the person, particularly in telling a worker in detail how to accomplish a desired result. It found that the attorney executed a high level of control over the assistants’ actions, even specifying how they should open his mail. The court also decided that the fact that the attorney supplied all office materials and equipment for the assistants and that the assistants couldn’t profit from the attorney’s business (as sales associates do by receiving a commission from a broker) both indicated that the two assistants were employees.

Visit and search by “employee or independent contractor” for information on this employment taxation issue.

Naming an area OK under fair housing law

U.S. District Court, Central Calif.; Housing Rights Center v. Donald Sterling Corp., 2003

A U.S. District Court has found that using a building name that incorporates the name of an ethnic group violates fair housing law, although mentioning a geographic area that includes an ethnic identifier would not.

A housing group and several individuals brought a suit against a California landlord for attempting to obtain Korean tenants for his apartment buildings. The suit claimed that the landlord had indicated his preference in several ways, including printing a South Korean flag in ads and changing the names of his properties to include the word “Korean,” as in Wilshire Korean Towers.

In its ruling, the court found that including the flag didn’t violate fair housing law because the ad in question announced the purchase of three buildings and didn’t involve the sale or leasing of properties, which are activities covered by the act.

However, the court said changing the names of the properties to include the word Korean did violate the act. The landlord claimed he’d changed the names to indicate their location in an area commonly called “Koreatown.” But, the court said that while using Koreatown as a reference to a particular geographic area would have been permissible in a housing ad or building name, using the word Korean in relation to his buildings indicated that the landlord was seeking Korean tenants.

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