January 18, 1990

Mr. Daniel J. Todd
Walworth County State's Attorney
P.O. Box 9
Mobridge, SD 57601

OFFICIAL OPINION NO. 90-07

Election workers - employees for unemployment insurance tax purposes

Dear Mr. Todd:

You have requested an official opinion of this office regarding the following factual situation:

FACTS:

Walworth County has not been treating election workers as employees and thus have not reported them for state unemployment insurance tax (unemployment compensation) purposes. The South Dakota Department of Labor, during a recent audit, stated that the election workers should be reported for unemployment insurance tax purposes. The South Dakota State Auditor, in 1987, apparently stated that election workers are fee based personnel and no longer to be considered employees of a governmental unit.

Based upon the above facts you have asked the following question:

QUESTION:

Are election workers classified as employees to the extent they are reportable for state unemployment insurance tax purposes?

IN RE QUESTION:

South Dakota law provides that unemployment insurance tax, as a percentage of wages, is generally due and owing when an employer-employee relationship exists. See SDCL ch. 61-1.

Election workers are appointed pursuant to SDCL ch. 12-15, Precinct Election Officials. That chapter generally details the procedures for the appointment of election officials, and also sets forth the duties of the election officials. These election officials are not controlled by the county commissioners, but by the statutes which define their duties.

There is little doubt that Walworth County is an employer for purposes of the unemployment insurance tax statutes. SDCL 61-1-4. The pertinent determination is whether the election workers can be characterized as independent contractors, which would exempt the county from the payment of the unemployment insurance tax, or employees and thus subject the county to payment of the tax.

The statute controlling the distinction between an employee and an independent contractor is SDCL 61-1-11, which reads as follows:

Service performed by an individual for wages is employment subject to this title unless and until it is shown to the satisfaction of the department of labor that:

(1) The individual has been and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and
(2) Repealed by SL 1985, ch. 397.
(3) The individual is customarily engaged in an independently established trade, occupation, profession or business.

Section 61-1-11 establishes a two-prong test. The first part of that section addresses the "control or direction of the performance of the service" that can be exercised by the county commissioners. Since the appointment of election workers is statutory, and the duties of the election workers are also statutory, the "control or direction" that can be instituted by the local county commissioners is minimal. On the other hand, an election worker's activities are subject to close judicial direction. Thus the applicability of the first prong of this test is problematic.

The applicability of the second prong of the test set out in SDCL 61-1-11(3) is, however, certain. This prong asks whether the person is "engaged in an independently established trade, occupation, profession or business." The question then becomes whether the monitoring of elections is an independent trade, occupation, profession or business. An election worker clearly does not fall within any of those categories. He or she is not exercising independent judgment or discretion, and is not engaged in an independent business activity. See generally, Miller Liquid Feeds v. South Dakota Dept. of Labor, 340 N.W.2d 185 (S.D. 1983); South Dakota Dept. of Labor v. Tri State Insulation Co., 315 N.W.2d 315 (S.D. 1982). Therefore, I am of the opinion that an election worker in South Dakota is not an independent contractor but an employee under SDCL 61-1-11.

Our next step of analysis then centers on whether there is an exception to the election worker/employee determination under SDCL 61-1-11. The only possible exception can be found in SDCL 61-1-22, which reads in part as follows:

As used in this title, unless the context otherwise plainly requires, the term "employment" does not include:

(1) Service performed during a calendar quarter in the employ of an organization exempt from income tax under section 501(a) (other than an organization described in 401(a)) or under section 521 of the Federal Internal Revenue Code, if the remuneration for such services does not exceed fifty dollars.

This exception, under SDCL 61-1-22(1), establishes a two-part test:

(1) the employer must be tax exempt under Section 501(a) or 521 of the Internal Revenue Code, and
(2) the remuneration paid does not exceed fifty dollars per quarter.

Internal Revenue Code Sections 501(a) and 521 detail certain types of organizations that are exempt from income tax. Counties, however, do not fall within the exemptions of Section 501(a) or 521. Counties are exempt from income tax, however, with the exemption found in Section 115 of the Internal Revenue Code. 26 U.S.C. 115. Since a county does not qualify as a tax exempt organization pursuant to SDCL 61-1-22(1), that particular section cannot serve as an exception to the election worker/employee determination. Whether the remuneration is greater than $50 per quarter to the election workers, therefore, is immaterial.

Thus, the answer to the question presented is that election workers are employees for the purposes of unemployment insurance tax computation.

Respectfully submitted,

ROGER A. TELLINGHUISEN
ATTORNEY GENERAL

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