PRODUCT DEMONSTRATORS

The purpose of this information sheet is to provide the RULING REQUEST product demonstrator industry with standards to be used in conjunction with Section 4304-1 of Title 22, California A formal ruling may be requested by submitting a Code of Regulations (CCR), to determine whether a Determination of Employment Work Status for Purposes product demonstrator should be classifed as an employee of State of California Employment Taxes and Personal or independent contractor. Income Tax Withholding (DE 1870). To obtain this form, access the Employment Development Department (EDD) What Is a Product Demonstrator? website at www.edd.ca.gov/pdf_pub_ctr/de1870.pdf or contact the Taxpayer Assistance Center at 888-745-3886. A “product demonstrator” is an individual who distributes For more information on the ruling request process, coupons or demonstrates or gives away samples of products refer to the Information Sheet: Employment Work Status as part of an advertising or sales promotion for the product. Determination (DE 231ES).

What Is a Principal? Additional Information

A “principal” is any principal or their agent, e.g., For further assistance, please contact the Taxpayer manufacturer, wholesaler, broker, marketing frm, Assistance Center at 888-745-3886 or visit the nearest demonstration company, or retail store. Employment Tax Offce listed in the California Employer’s Guide (DE 44) and on the EDD website at Employee or Independent Contractor? www.edd.ca.gov/Offce_Locator/. Additional information is also available through the EDD no-fee payroll tax Section 4304-1 of Title 22, CCR, provides that the most seminars. View the in-person course offerings on the EDD important factor is the right of the principal to control website at www.edd.ca.gov/Payroll_Tax_Seminars/. the manner and means of accomplishing the desired result. If the principal has the right to control the manner The EDD is an equal opportunity employer/program. and means of accomplishing the desired result, whether Auxiliary aids and services are available upon request or not that right is exercised, an employer-employee to individuals with disabilities. Requests for services, relationship exists. Section 4304-7 of Title 22, CCR, aids, and/or alternate formats need to be made by calling states, “The purpose of this Section is to provide the 888-745-3886 (voice), or TTY 800-547-9565. product demonstrator industry with standards to be used in conjunction with Section 4304-1 of Title 22, CCR, (to determine) whether a product demonstrator is performing services as an employee or independent contractor.”

Product Demonstrator Determination Factors

The Table of Determination Factors - Product Demonstrators, which follows, includes examples indicating an employee and an independent contractor as well as an explanation of the weight given to each factor or the elements of a factor as provided in Section 4304-7 of Title 22, CCR. It is not necessary that all factors apply to one classifcation or another in order to make a determination that a particular relationship exists. A determination of whether services are performed as an employee or independent contractor will depend upon a grouping of factors that are signifcant in relation to the services being performed.

This information sheet is provided as a public service and is intended to provide nontechnical assistance. Every attempt has been made to provide information that is consistent with the appropriate statutes, rules, and administrative and court decisions. Any information that is inconsistent with the law, regulations, and administrative and court decisions is not binding on either the Employment Development Department or the taxpayer. Any information provided is not intended to be legal, accounting, tax, investment, or other professional advice.

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EXAMPLES OF: FACTORS EMPLOYEE INDEPENDENT WEIGHT CONTRACTOR

1. EXTENT OF CONTROL (a) Policies or Rules Set by principal or retail Requirement that product The factors of policy setting, procedures, of Conduct establishment and followed by demonstrators follow safety instructions, supervision, and review carry demonstrator. and security rules in store great weight. The right of the principal or does not infer employment. principal’s agent to direct and control the services performed, even as to the details (b) Procedures Established by principal Demonstrator establishes of the work, is the primary test. If that in Product or agent and followed by procedures of work. right exists, whether or not exercised, an Demonstrating or demonstrator. employment relationship exists. Marketing To the extent that the principal, or his or her (c) Instructions Instructions given by principal Demonstrator uses agent, exercises control over the services for Conduct of or agent to demonstrator “professional” judgment to through rules, procedures, supervision, Demonstration regarding site within store, choose site to maximize review of work, etc., it is evidence that customer relationships, dress sales. the principal has the right to control the code, dates, hours, or product. services, and that this right to control is complete and authoritative. This alone will (d) Supervision on the Demonstrator subject Details of work not create an employer-employee relationship. Job to supervision from supervised. store personnel and/or demonstration company personnel (“Coordinators”).

(e) Review of Work Principal or agent reviews No reviews of work processes the performance of the or behavior. demonstrator as to how the demonstrator conducted himself or herself on the job.

(f) Training Training provided by principal. Attendance at training is not Training given by principal that includes Attendance is expected. required. Demonstrators are instructions about how to do the work, Orientation and/or ongoing not paid for time at training. e.g., dress code, product presentation, new product training. Training Demonstrators who do not sales pitch, customer relations, infers that on sales pitch. Demonstrator attend specifc product training principal or agent has the right to control paid for time at training. are allowed equal opportunity services and carries high weight. to promote those products.

(g) Meetings Demonstrator expected to Attendance not mandatory The act of holding informational meetings, attend. Demonstrator’s time and non-attendance is by itself, is not a strong indication of is paid for. Meetings discuss viewed without negative employment. Like training, if the intent products, appearance, and consequence. Time at and conduct of the meeting conveys rules, conduct. meetings is not paid for or procedures, and instructions to do the work, meetings are not held. it infers the demonstrators are not in control of services and not self-employed, and carries high weight.

(h) Reports Reports are required regarding No reports required. Reporting requirements can be viewed as activities, e.g., number of an extension of the factor “review of work” demonstrations, number of and would be given medium to high weight people who came by, amount depending on the purpose and content of the of product demonstrated, reports (verbal or written). Reports that are hours worked, inventories, used to monitor demonstrator’s performance customer reactions. are considered principal controls. Reports related only to end results are not an indication of employment or independence.

(i) Work Schedules Set by principal, principal’s Set by demonstrator. “When and where” the service is performed agent, or store management, is considered an aspect of the “details of e.g., dates, times, total hours, the work.” These factors would be given breaks, and lunch. medium to high weight. It tends to show independence if the demonstrator controls (j) Location of Work Principal, or its agent, Demonstrator chooses store, these aspects, and accomplishes an end product demonstrator makes arrangements for result for the principal by operating his or company, or manufacturer demonstration. her own separate business. makes arrangements, assigns demonstrator to store.

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EXAMPLES OF: FACTORS EMPLOYEE INDEPENDENT WEIGHT CONTRACTOR

1. EXTENT OF CONTROL (cont.) (k) Principal/ Agreement between Agreement forbids principal Terminology used in a written agreement Demonstrator demonstrator and principal and/or agent from directing is not conclusive of the relationship, but is Contract gives principal or principal’s worker as to details. evidence of the relationship intended. agent control over manner and Demonstrator is not subject to means of work. control of principal or agent. Written agreements do not necessarily depict the actual relationship. The actual (l) Written Agreement Principal acknowledges Principal contract with third practices of the parties in a relationship Between Principal employment or right of control parties precludes exercise are more important than the wording of an and Third Party in agreement with client(s) or of control by principal or agreement in making a determination. labor organization. third party. No control of Written Agreement: demonstrator is considered An agreement in which principal expresses • Asserts right of principal to neutral. Written Agreement: only an interest in an end result and direct manner and means • Clearly shows intent abandons the right to control the details of of work. to create independent the work (manner and means) is evidence of • Otherwise shows intent to relationship. independence. create employment. • Reserves the • Provides detailed rules for demonstrator’s right to conduct or performance control how work is done. that principal or principal’s agent shall enforce on Demonstrator must operate in An agreement not followed would have demonstrator. manner described in agreement. little weight in a determination.

2. TERMINATION Both principal and agent By agreement or practice, The right to terminate at will is strong have the right to terminate principal is required to pay evidence of employment. The right to relationship at will without for work not performed, terminate conveys an inherent power of the prior notice, and without any if principal unilaterally principal over the demonstrator. With this further contractual liability terminates relationship other right, the principal can demand many things (except for work already than for cause. of the demonstrator, and the demonstrator, performed or to end of shift or fearing fscal repercussions, would be workday). obliged to follow such demands.

3. ENGAGEMENT IN A Demonstrator does not operate Demonstrator operates an If the demonstrator is in a separate business, DISTINCT BUSINESS own business. independent demonstration distinct from that of the principal, and the • Services performed are business. services in question are performed in the regular part of principal’s • Contracts with distributors furtherance of that business, high weight business. and retail establishments. would be given toward independence. • Demonstrator does not • Has business license Medium weight is given to evidence offer services to distributor where required. showing the demonstrator is in a distinct or retail establishments as a • Has phone directory occupation, which would also point to separate business. listing. independence. • Demonstrator does not • Advertises. promote business venture • Registered with of his or her initiative. government agencies. • Principal or agent may inhibit use of substitutes or require Demonstrator may engage approval of substitutes. substitutes without frm’s • Principal or agent pays approval and pays substitutes. substitutes.

4. CUSTOM IN INDUSTRY Work traditionally done by Recognized experts or This factor, by itself, is not controlling. This AND LOCATION employees of manufacturer, celebrities (guest appearance is because each determination must stand distributor or store employees for special promotion). on its own facts regarding the principal’s as part of sales activity. Work right to direct and control. Industry custom is usually done under direction merely gives an inference or direction to the of principal or principal’s determination. agent. Close supervision is not needed to control work.

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EXAMPLES OF: FACTORS EMPLOYEE INDEPENDENT WEIGHT CONTRACTOR

5. REQUIRED LEVEL Little skill or experience Demonstrator has an Level of skill, by itself, generally does not OF SKILL OF required. No particular expertise about the product weigh heavily. However, a high level of DEMONSTRATOR education needed. Anyone other than demonstration. technical skill will weigh more heavily with sales talent could do the when combined with other factors such as work. separate and distinct business. A low level of technical skill weighs heavily in favor of employment, since as skill level declines the demonstrator has less room to exercise the discretion necessary to independence.

6. DURATION OF Demonstrator services are on a Short durations and not This factor, by itself, is not controlling. It tends SERVICES continuous basis that are: recurring. to refect whether a person is employed or • Recurring in nature. self-employed. Contractors usually perform • At regular intervals at work on a job basis for shorter and for regular times. predesignated periods of time. Employment is • At irregular intervals. usually of open-ended duration.

7. WHETHER Provided or paid by principal, Provided or paid for by The weight given to whether the principal or PRINCIPAL OR e.g., trade name, offce, demonstrator without demonstrator supplies the instrumentalities WORKER SUPPLIES facilities, store space, tables, reimbursement. Demonstrator or tools will vary depending on the INSTRUMENTALITIES, counters, appliances, booths, provides tools or equipment value of such items. As the value of the TOOLS, AND PLACE advertising, merchandise, with signifcant fnancial instrumentalities and tools increases heavier OF WORK inventory, or communication. investment. weight is given to this factor. The place of work is always provided by the principal or Hand tools commonly its agent, so this factor is given little weight used by demonstrator (i.e., in demonstrator determinations. card tables, skillets, mixers, portable ovens, etc.) or an automobile for transportation do not infer employment or independence.

8. METHOD OF Based on time worked. Payment based on end result: This factor, by itself, as with written PAYMENT Payment by shift, hour, or • Commission based on agreements, is not controlling. It is only piece rate. sales volume. an indication of the type of relationship. Payment at regular intervals • Commission based This is because many times it is diffcult and in regular amounts. on volume of product to determine if payment is by the job or Payment by salary. demonstrated. commission versus some method based on Benefts provided. time worked or a salary. Compensation set by principal. No benefts provided. Expenses reimbursed. Demonstrator purchases Billings and collections by product demonstrated and/ principal. or sold, and compensation based on gross sales less cost of merchandise.

9. BELIEF OF PARTIES Both the parties believe the All parties agree that This factor, by itself, is not controlling. The relationship is employment. relationship is one of belief of parties only infers a relationship independence. intended.

10. PART OF REGULAR Services are an integral or Demonstrator assumes This factor is given medium to high weight. BUSINESS OF normal part of the principal entrepreneurial risk and The presumption is that if the service is PRINCIPAL or agent’s regular business investment. Services only an integral part (regular/normal/central) activities. Activities are central supportive of business of the principal’s business, the principal, to producing the products activity/purpose and are not by business necessity, needs to maintain or delivering the services integral part of business. control over the service. provided by the business.

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