Gale Encyclopedia Of American Law 3Rd Edition Volume 5 P42 pot

required of that profession may be judged incompetent. Such a ruling by a court, a pro- fessional disciplinary board, or an employer may result in professional discipline, including loss of a license to practice, demotion, or termination of employment. FURTHER READINGS Grisso, Thomas. 2003. Evaluating Competencies: Forensic Assessments and Instruments. 2d ed. New York: Plenum. Hubbard, Karen L., Patricia A. Zapf, and Kathleen A. Ronan. 2003. “Competency Restoration: An Examina- tion of the Differences between Defendants Predicted Restorable and Not Restorable to Competency.” Law and Human Behavior 27 (April). Moriarty, Jane Campbell, ed. 2001. The Role of Mental Illness in Criminal Trials: Insanity & Mental Incompetence. New York: Routledge. Scott, Charles L. 2003. “Commentary: A Road Map for Research in Restoration of Competency to Stand Trial.” Journal of the American Academy of Psychiatry and the Law 31 (March). Available online at http://www.jaapl. org/cgi/reprint/31/1/36; website home page: http:// www.jaapl.org (accessed August 1, 2009). Tewksbury, Jane E., et al. 2001. Going to Trial: Criminal Defendants & Mental Illness: Competency and Criminal Responsibility. Boston, MA: Massachusetts Continuing Legal Education. INCOMPETENT EVIDENCE Probative matter that is not admissible in a legal proceeding; evidence that is not admissible under the Federal Rules of Evidence. That which the law does not allow to be presented at all, or in connection with a particular matter, due to lack of originality, a defect in the witness or the document, or due to the nature of the evidence in and of itself. INCONSISTENT Reciprocally contradictory or repugnant. Things are said to be inconsistent when they are contrary to each other to the extent that one implies the negation of the other. For example, a city ordinance might be inconsistent with a state statute; or two defenses to a crime, such as the defenses of alibi and SELF-DEFENSE, are inconsistent. INCONTESTABILITY CLAUSE A provision in a life or health insurance policy that precludes the insurer from alleging that the policy, after it has been in effect for a stated period (typically two or three years), is void because of misrepresentations made by the insured in the application for it. An incontestability clause prevents an in- surer from denying benefits on the ground of MISREPRESENTATION in the application. The clause applies only when the policy has been in effect for a specified period of time. This time period, the contestability period, is usually two or three years. Most states maintain statutes that require an incontestability clause in life and health insur- ance contracts. The incontestability clause strikes a balance between providing predictable coverage and protecting the right of insurers to select the precise risks they seek to insure. Most incontestability clauses are limited by a provision stating that the contestability period must be completed within the lifetime of the insured. With this nuance the insurer is able to contest a claim for benefits after the contest- ability period has lapsed if the insured dies before the end of that period. This protects insurers from providing benefits to someone who was already so ill at the inception of the policy that he or she died less than two years later. It means that the insurer may contest the flow of insurance benefits to the insured’s heirs. Another common caveat to incontestability clauses limits the period of disability. Under this provision any disability that begins prior to the expiration of the contestability period will toll the period. In other words, if an insured becomes physically disabled before the end of the contestability period, the clock stops ticking and the insurer may challenge claims during the illness and beyond. Without such language, an insured could always avoid contestability by waiting until the contestability period has expired before filing a claim. Finally, some incontestability clauses con- tain a FRAUD exception. Such a clause might read, “After two years from the date of issue of this policy, only FRAUDULENT misstatements made by the applicant may be used to void the policy or deny a claim that commences after the expiration of the two-year period.” Gener- ally, fraud is a false representation calculated to deceive another into acting against her or his legal interest. Statements that are inaccurate but made without the intent to deceive are not fraudulent. The difference between fraud and simple misstatement can only be found in the facts of a particular case. In Paul Revere Life Insurance Co. v. Haas, 137 N.J. 190, 644 A.2d 1098 (1994), GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 398 INCOMPETENT EVIDENCE the Paul Revere Company brought an action against Gilbert K. Haas, when it discovered that Haas had made false statements in his insurance application. Haas had received a policy on March 5, 1987, and on December 1, 1990, started a claim for disability payments related to a progressive eye disease. The company sought to rescind the policy or to secure a DECLARATORY JUDGMENT from the court that the policy did not cover Haas’s disease. The New Jersey law on incontestability clauses gave insurers two options: one reserving contestability in case of fraud, the other reserving contestability if the insured became disabled within the contestability period (N.J. Stat. Ann. § 17B:26-5 [West ]). The Paul Revere Company chose to bring action under the disability provision. The facts indicated that Haas had made false statements on his policy application. He had declared that he had not had “any surgical operation, treatment, special diet, or any illness, ailment, abnormality, or injury within the past five years.” Investigations by the insurance company revealed that Haas had been diag- nosed and treated for retinitis pigmentosa as much as four years prior to apply ing for the policy. According to the New Jersey Supreme Court, neither incontestability option mandated in section 17:B-26-5 of the New Jersey Statutes Annotated could be construed to allow coverage for disabilities that an insured knew existed but concealed on the policy application. The court held that Haas’s policy continued in effect because the insurer had not proved its case under the disability provision, but that the incontestability clause did not prevent the insurer from contesting Haas’s clai ms under the fraud provision. FURTHER READINGS Postel, Theodore. 2001. “Insurance Incontestability Clause.” Chicago Daily Law Bulletin 147 (August 28). Schuman, Gary. 1995. “Health and Life Insurance Applica- tions: Their Role in the Claims Review Process.” Defense Counsel Journal 62. Yu, Kay Kyungsun. 1999. “The Incontestability Clause and the Battle against Insurance Fraud.” For the Defense 41 (September). INCORPORATE To formally create a corporation pursuant to the requirements prescribed by state statute; to confer a corporate franchise upon certain individuals. INCORPORATION BY REFERENCE The method of making one document of any kind become a part of another separate document by alluding to the former in the latter and declaring that the former shall be taken and considered as a part of the latter the same as if it were completely set out therein. It is commo n drafting practice to incorpo- rate by reference an existing writing into a pleading, contract, or other legal document in order to save space. The incorporating docu- ment, rather than copying the exact words of the existing document, describes it, and a photocopy is often attached to the incorporating document. This standard practice, however, encounters difficulty with the requirements prescribed by law for a will. If the will is a holograph—a document disposing of property that is written with one’ s own hand and not witnessed—the attachment might not be in the handwriting of the deceased and, therefore, invalid. If the will is formal, an attachment might violate the require- ment that the testator (one who makes a will) or the witnesses subscribe (sign at the end of the will) the attachment. If subscripti on is not required, the incorporated document raises the question whether the testator has declared it to be a part of the will if it was not present at the time the will was signed. The document that is incorporated is usually not treated as a part of the will itself but as an external source from which the meaning of the will can be determined. This maintains the distinction between actual incorporation, an integration achieved by extensive copying of a document into the pages that constitute the will, and INCORPORATION BY REFERENCE, which is a figurative rather than literal integration. Incorpo- ration by reference is treated as if it were actually integrated. Fear of FRAUDULENT substitutions is probably the basis for the legal insistence upon compli- ance with certain conditions in order to incorporate a document into a will by reference. Certain requirements exist for incorporation by reference into a will. The document to be incorporated must exist at the time the will is executed. The will must manifest the intention of the testator to incorporate the provisions of the incorporated document. The incorporated document must be sufficiently described to permit its identification. Some courts emphasize that the incorporated document comply with GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION INCORPORATION BY REFERENCE 399 the description. Some, but not all, statutes require that the incorporating document refer to the incorporated document as being in existence in addition to the requirement men- tioned earlier that it actually be in existence. Most states currently allow incorporation by reference into wills upon compliance with the foregoing conditions. In the states that permit holographic wills, most allow the incorporation by reference of nonholographic material, even if actual incorporation would otherwise invali- date the will because it is not entirely in the handwriting of the deceased. INCORPORATION DOCTRINE A constitutional doctrine whereby selected provi- sions of the Bill of Rights are made applicable to the states through the Due Process Clause of the Fourteenth Amendment. The doctrine of selective incorporation, or simply the INCORPORATION DOCTRINE, makes the first ten amendments to the Constitution— known as the Bill of Rights—binding on the states. Through incorporation, state govern- ments largely are held to the same standards as the federal government with regard to many constitutional rights, including the FIRST AMEND- MENT freedoms of speech, RELIGION, and assem- bly, and the separation of church and state; the FOURTH AMENDMENT freedoms from unwarranted arrest and unreasonable searches and seizures; the FIFTH AMENDMENT PRIVILEGE AGAINS T SELF- INCRIMINATION; and the SIXTH AMENDMENT right to a speedy, fair, and public trial. Some provisions of the Bill of Rights—including the requirement of indictment by a GRAND JURY (Sixth Amend- ment) and the right to a jury trial in civil cases (Seventh Amendment)—have not been applied to the states through the incorporation doctrine. Until the early twentieth century, the BILL OF RIGHTS was interpreted as applying only to the federal government. In the 1833 case Barron ex rel. Tiernon v. Mayor of Baltimore, 32 U.S. (7 Pet.) 243, 8 L. Ed. 672, the Supreme Court expressly limited application of the Bill of Rights to the federal government. By the mid-nineteenth century, this view was being challenged. For example, Republicans who were opposed to southern state laws that made it a crime to speak and publish against SLAVERY alleged that such laws violated First Amendment rights regarding FREE- DOM OF SPEECH and FREEDOM OF THE PRESS. For a brief time following the ratification of the FOURTEENTH AMENDMENT in 1868, it appeared that the Supreme Court might use the PRIVILEGES AND IMMUNITIES Clause of the Fourteenth Amendment to apply the Bill of Rights to the states. However, in the SLAUGHTER-HOUSE CASES, 83 U.S. (16 Wall.) 36, 21 L. Ed. 394 (1873), the first significant Supreme Court ruling on the Fourteenth Amendment, the Court handed down an extremely limiting interpretation of that clause. The Court held that the clause created a distinction between rights associated with state citizenship and rights associated with U.S., or federal, citizenship. It concluded that the Fourteenth Amendment prohibited states from passing laws abridging the rights of U.S. citizen- ship (which, it implied, were few in number) but had no authority over laws abridging the rights of state citizenship. The effect of this ruling was to put much state legislation beyond the review of the Supreme Court. Instead of applying the Bill of Rights as a whole to the states, as it might have done through the Privileges and Immunities Clause, the Supreme Court has gradually applied selected elements of the first ten amendments to the states through the Due Process Clause of the Fourteenth Amendment. This process, known as selective incorporation, began in earnest in the 1920s. In GITLOW V. NEW YORK, 268 U.S. 652, 45 S. Ct. 625, 69 L. Ed. 1138 (1925), one of the earliest examples of the use of the incorporation doctrine, the Court held that the First Amendment protection of freedom of speech applied to the states through the Due Process Clause. By the late 1940s, many civil freedoms, including freedom of the press ( NEAR V . MINNESOTA, 283 U.S. 697, 51 S. Ct. 625, 75 L. Ed. 1357 [1931]), had been incorporated into the Fourteenth Amendment, as had many of the rights that applied to defendants in criminal cases, including the right to representation by counsel in capital cases ( POWELL V. ALABAMA, 287 U.S. 45, 53 S. Ct. 55, 77 L. Ed. 158 [1931]). In 1937, the Court dec ided that some of the privileges and immunities of the Bill of Rights were so fundamental that states were required to abide by them through the Due Process Clause (Palko v. Connecticut, 302 U.S. 319, 58 S. Ct. 149, 82 L. Ed. 288). In 1947 the Court rejected an argument that the Fifth Amendment’s right against SELF- INCRIMINATION applied to the states through the GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 400 INCORPORATION DOCTRINE Fourteenth Amendment (Adamson v. People of the State of California, 332 U.S. 46, 67 S. Ct. 1672, 91 L. Ed. 2d 1903 [1947]). However, in one of the most famous dissents in history, Justice HUGO L. BLACK argued that the Fourteenth Amendment incorporated all aspects of the Bill of Rights and applied them to the states. Justice FELIX FRANKFURTER, who wrote a concurrence in Adamson, disagreed forcefully with Black, argu- ing that some rights guaranteed by the Four- teenth Amendment may overlap with the guarantees of the Bill of Rights, but are not based directly upon such rights. The Court was hesitant to apply the incorporation doctrine until 1962, when FRANKFURTER retired from the Court. Following his retirement, most provi- sions of the Bill of Rights were eventually incorporated to apply to the states. FURTHER READINGS Amar, Akhil Reed. 2002. “2000 Daniel J. Meador Lecture: Hugo Black and the Hall of Fame.” Alabama Law Review 1221. Available online at http://www.law.yale. edu/documents/pdf/2002Hugo.pdf; website home page: http://www.law.yale.edu (accessed August 1, 2009). Epstein, L., and T. Walker. 2006. Constitutional Law for a Changing America. Washington, D.C.: CQ Press. Lindern, Doug. 2009. “The Incorporation Debate.” Explor- ing Constitutional Conflicts. Available online at http:// www.law.umkc.edu/faculty/projects/ftrials/conlaw/ incorp.htm; website home page: http://www.law.umkc. edu (accessed September 5, 2009). CROSS REFERENCE Due Process of Law. INCORPOREAL Lacking a physical or material nature but relating to or affecting a body. Under common law, incorporeal property were rights that affected a tangible item, such as a CHOSE IN ACTION (a right to enforce a debt). Incorporeal is the opposite of corporeal, a description of the existence of a tangible item. INCREMENTAL Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. When applied to the price of gas, the incremental cost includes the actual cost of gas to the distributors plus the expenses incurred in its transportation as well as any taxes imposed upon it. INCRIMINATE To charge with a crime; to expose to an accusation or a charge of crime; to involve oneself or another in a criminal prosecution or the danger thereof; as in the rule that a witness is not bound to give testimony that would tend to incriminate him or her. INCULPATE To accuse; to involve in blame or guilt. When an individual who has committed a crime imputes guilt upon another individual, he or she is thereby inculpating such individual. INCUMBENT An individual who is in current possession of a particular office and who is legally authorized to discharge the duties of that office. INCUR To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. INDEFEASIBLE That which cannot be defeated, revoked, or made void. This term is usually applied to an estate or right that cannot be defeated. INDEFINITE TERM A prison sentence for a specifically designated length of time up to a certain prescribed maximum, such as one to ten years or 25 years to life. INDEMNIFY To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their pol- icyholders against damage caused by such things as fire, theft, and flooding, which are specified GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION INDEMNIFY 401 by the terms of the contract betw een the company and the insured. INDEMNITY Recompense for loss, damage, or injuries; restitu- tion or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. The right to indemnity and the duty to indemnify ordinarily stem from a contractual agreement, which generally protects against liability, loss, or damage. CROSS REFE RENCE Damages. INDENTURE An agreement declaring the benefits and obliga- tions of two or more parties, often applicable in the context of bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. At its simplest, an indenture is an agreement that declares benefits and obligations between two or more parties. In BANKRUPTCY law, for example, it is a MORTGAGE or DEED OF TRUST that constitutes a claim against a debtor. The most common usage of indenture appears in the bond market. Before a bond is issued, the issuer executes a legally binding indenture governing all of the bond’s terms. Finally, the concept of indenture has an ignominious place in the history of U.S. labor. Indentured servants of the seventeenth and eighteenth centuries were commonly European workers who contracted to provide labor for a number of years and in return received passage to the American colonies as well as room and board. As an investment product that is used to raise capital, a bond is simply a written docu- ment by which a government, corporation, or individual promises to pay a definite sum of money on a certain date. The issuer of a bond, in cooperation with an underwriter (i.e., a financial organization that sells the bond to the public), prepares in advance an indenture outlining the terms of the bond. The issuer and the underwriter negotiate provisions such as the interest rate, the maturity date, and any restrictions on the issuer’s actions. The last detail is especially important to corporate bonds because corporations accrue liability upon becoming bond issuers and therefore seek to have the fewest possible restrictions placed on their business behavior by the terms of the indenture. As a consequence, potential buyers of corporate bonds should know what the indenture specifies before buying them. Federal law governs these indentures. For 50 years, the Trust Indenture Act of 1939 (TIA) (15 U.S.C.A. § 77aaa) was the relevant law. Signifi- cant changes in financial markets prompted Congress to amend the TIA through the SECURITIES Act Amendments of 1990 (Pub. L. No. 101-550, 1990; 104 Stat. 2713), which included the Trust Indenture Reform Act (Pub. L. No. 101-550, 104 Stat. 2713). The reforms simplified the writing of indentures, recognized the increasing internationalization of corpora- tions by creating opportunities for foreign institutions to serve as trustees, and revised standards for conflicts of interest. The reforms also broadened the authority of the SECURITIES AND EXCHANGE COMMISSION . In early American history, indenture was a form of labor contract. Beginning during the colonial period, employers in the largely agricultural economy faced a labor shortage. A 1794 indenture contract from Philadelphia for the apprenticeship of a 16-year-old freed male slave. HULTON ARCHIVE/GETTY IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 402 INDEMNITY They addressed it in two ways: by buying slaves and by hiring indentured servants. The former were Africans who were brought to the colonies against their will to serve for life; the latter were generally Europeans from England and Ger- many who had entered multiyear employment contracts. From the late sixteenth century to the late eighteenth century, approximately half of the 350,000 European immigrants to the colonies were indentured servants. During the seventeenth century, thes e servants outnum- bered slaves. An indentured servant agreed to a four- to seven-year contract, and in return received passage from Europe and guarantees of work, food, and lodging. Colonial courts enforced the contracts of indentured servants, which were often harsh. Employers were seen as masters, and the servants had not only to work for them but also to obey their orders in all matters. For some, indentured servitude was not a VOLUNTARY ACT. Impoverished women and children were pressed into servitude, as were convicts. Nevertheless, this servitude was not equivalent to SLAVERY. Slaves remained slaves for life, whereas indentured servants were released at the end of their con- tracts. Moreover, as parties to a contract, inden- tured servants had rights that slaves never enjoyed. The practice of indentured servitude persisted into the early nineteenth century. FURTHER READINGS Ballam, Deborah A. 1996. “Exploding the Original Myth Regarding Employment-at-Will: The True Origins of the Doctrine.” Berkeley Journal of Employment and Labor Law 17, no. 1. ———. 1995. “The Traditional View on the Origins of the Employment-at-Will Doctrine: Myth or Reality?” American Business Law Journal 33 (fall). Riger, Martin. 1990. “The Trust Indenture as Bargained Contract: The Persistence of Myth.” Journal of Corporation Law 16 (winter). INDEPENDENCE One of the essential attributes of a state under INTERNATIONAL LAW is external sovereignty—that is, the right to exercise freely the full range of power a state possesses under international law. Recognition of a state as independent necessar- ily implies that the recognizing states have no legal authority over the independent state. The status of a fully independent state should be contrasted with that of dependent or vassal states, where a superior state has the legal authority to impose its will over the subject, or inferior, state. INDEPENDENT AUDIT A systematic review of the accuracy and truthful- ness of the accounting records of a particular individual, business, or organization by a person or firm skilled in the necessary accounting methods and not related in any way to the person or firm undergoing the audit. INDEPENDENT CONTRACTOR A person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another ’s control except for what is specified in a mutually binding agreement for a specific job. An independent contractor contracts with an employer to do a particular piece of work. This working relationship is a flexible one that provides benefits to both the worker and the employer. However, there are drawbacks to the relationship as well. The decision to hire or work as an independent contractor should be weighed carefully. Properly distinguishing be- tween employees and independent contractors has important consequences, and the failure to maintain the distinction can be costly. Taxes The status of independent contractor carries with it many tax ramifications. For example, an employee shares the costs of SOCIAL SECURITY and MEDICARE taxes with his or her employer; whereas an independent contractor is responsi- ble for the entire amounts. Yet independent contractors generally qualify for more business deductions on their federal income taxes than do employees. Also, independent contractors must pay estimated taxes each quarter, whereas employees generally have taxes withheld from their paychecks by their employer. One important disadvantage of working as an independent contractor is that standard employment benefits—such as health, life, dental, and disability insurance; funded retire- ment plans ; paid vacation time; and paid maternity or paternity leave—are not available. Independent contractors may fund their own benefits, but not on a tax-free basis—whereas many benefits provided by employers to employees are, by law, tax free. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION INDEPENDENT CONTRACTOR 403 Labor Relations Congress and the states have enacted numerous laws geared toward protecting employees. The National Labor Relations Act (29 U.S.C.A. § 152(3)) protects employees and union mem- bers from unfair bargaining practices; Title VII of the CIVIL RIGHTS Act of 1964 (42 U.S.C.A. § 2000 et seq.) protects employees from discrimination on the basis of race, sex, RELIGION, and national origin; the AGE DISCRIMINATION in Employment Act (20 U.S.C.A. § 623) protects employees from age discrimination; the FAIR LABOR STANDARDS ACT (29 U.S.C.A. § 203) establishes MINIMUM WAGE and overtime standards; the EMPLOYEE RETIREMENT INCOME SECURITY ACT of 1974 (29 U.S.C.A. § 1002) ensures the security of employee retirement funds; and the Occupational Safety and Health Act (29 U.S.C.A. § 652) protects employees from environmental work hazards. Most states also have unemployment and workers’ compensation laws, which obligate employers to pay, directly or indirectly, for medical treatment or lost wages, or both, for employees who are injured while at work or who lose their job. None of these laws protect independent contractors. And because compliance often comes at great expense, employers can significantly reduce their liability and increase their profit margin by hiring independent contractors rather than employees. Economics and Social Policy Although not protected by law to the extent of an employee, an indepen dent contractor has far greater control over elements such as work hours and work methods. Unlike most employ- ees, an independent contractor may opt to work at night or on weekends, leaving weekdays free. An independent contractor may choose to wear blue jeans or a business suit, take one week of vacation or 30 weeks, or interrupt work to attend a child’s school play or to go to the beach. Moreover, although the other contract- ing part y retains control over the finished work product, an independent contractor has exclu- sive control over the actual work process. Decisions such as whether to work for one person or several, whether to work a little or a lot, whether to accept or reject an undesirable work project, and how much money to charge are made by the independent contractor. The other party, in turn, enjoys mainly profit-related advantages by hiring an indepen- dent contractor instead of an employee. For one thing, an employer need not provide an independent contractor with vacation time , pension, insurance, or other costly benefits. Management costs that ordinarily go toward training and overseeing large numbers of employees decrease when independent contrac- tors do the work. Some say that because independent contractors benefit directly from their hard work, the quality of their work may be higher than it is for full-time employees who might be less motivated. And by hiring indepen- dent contractors, an employer enjoys the greater ease and flexibility to expand and contract the workforce as demand rises and falls. Tort Liability The common-law doctrine of RESPONDEAT SUPER- IOR holds an employer liable for the negligent acts of its employee. Generally, under COMMON LAW , the hiring party is not responsible for the NEGLIGENCE of an independent contractor. The Restatement (Second) of Torts identifies a few exceptions to this rule. The hiring party may be liable when, owing to its failure to exercise reasonable care to retain a competent and careful contractor, a THIRD PARTY is physically harmed. Also, when an independent contractor acts pursuant to orders or directions negligently given by the hiring party, the latter may be held liable. Notwithstanding the exceptions, the hiring party’s risk of liability is greatly reduced by hiring independent contractors rather than employees. Defining the Independent Contractor No consistent, uniform definition distinguishes an employee from an independent contractor. Some statutes contain their own definitions. The U.S. Supreme Court has held that when a statute contains the term employee but fails to define it adequately, there is a presumption that traditional agency-law criteria for identifying master-servant relationships apply (National Mutual Insurance Co. v. Darden, 503 U.S. 318, 112 S. Ct. 1344, 111 L. Ed. 2d 581 [1992]). One comprehensive test that takes into account agency-law criteria and numerous other factors courts have created to define independent contractor status was developed by the INTERNAL REVENUE SERVICE (IRS). Known collectively as the 20-factor test, the enumerated criteria generally fall within three categories: control (whether the employer or the worker has control over the work performed), organi- zation (whether the worker is integrated into GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 404 INDEPENDENT CONTRACTOR the business), and economic realities (whether the worker directly benefits from his or her labor). The 20 factors serve only as a guideline. Each factor’s degree of importance varies depending on the occupation and the facts involved in a particular case. Twenty-factor Test 1. A worker who is required to comply with instructions about when, where, and how he or she must work is usually an employee. 2. If an employer trains aworker—requires an experienced employee to work with the worker, educates the worker through correspondence, requires the worker to attend meetings, or uses other methods— this normally indicates that the worker is an employee. 3. If a worker’s services are integrated into business operations, this tends to show that the worker is subject to direction and control and is thus an employee. This is the case particularly when a business’s success or continuation depends to a large extent on the performance of certain services. 4. If a worker’s services must be rendered personally, there is a presumption that the employer is interested in the methods by which the servic es are accomplished as well as in the result, making the worker an employee. 5. If an employer hires, supervises, and pays assistants for a worker, this indicates control over the worker on the job, making the worker an employee. 6. A continuing relationship between a worker and an employer, even at irregular inter- vals, tends to show an employer-employee relationship. 7. An employer who sets specific hours of work for a worker exhibits control over the worker, indicating that the worker is an employee. 8. If a worker is working substantially full- time for an employer, the worker is presumably not free to do work for other employers and is therefore an employee. 9. Work performed on an employer’spremises suggests the employer’s co ntrol ov er a worker, making the worker an employee. This is especially true when work could b e done elsewhere. However, the mere fact that work is done off the employer’s premises does not nece ssarily make the worker an independent contractor. 10. If a worker is required to perform services in an orderorsequencesetbyanemployer, the employer has control over the worker that demonstrates an employer-employee relationship. 11. A worker who is required to submit regular oral or written reports to an employer is likely an employee. 12. Payment by the hour, week, or month te nds to indicate that a worker is an employee; payment made by the job or on a straight commission points to an independent contractor. 13. A worker is ordinarily an employee if an employer pays for the worker’s business or travel expen ses . 14. An employer who furnishes a worker with significant tools, materials, or other equip- ment tends to show that the worker is an employee. 15. A worker who significantly invests in facilities used to perform services and not typically maintained by employees (such as office space) is generally an independent contractor. 16. A worker who can realize a profit or loss resulting from his or her services is generally an independent contractor. 17. A worker who performs for more than one firm at a time is generally an indepen dent contractor. 18. If a worker makes his or her services available to the general public on a regular and consistent basis, that worker is generally an independent contractor. 19. A n employer’s right to discha rge aworker tends to show that the worker is an employee. An employee must obey an employer’s instructions in order to stay employed; an independent contractor can be fired only if the work result fails to meet the agreed-upon specifications. 20. If a worker has the right to terminate his or her relationship with an employer at any time without incurring liability, such as breach of contract, that worker is like ly an employee. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION INDEPENDENT CONTRACTOR 405 FURTHER READINGS Fishman, Stephen. 2008. Working for Yourself: Law and Taxes for Independent Contractors, Freelancers, and Consultants. 4th ed. Berkeley, CA: Nolo. Fishman, Stephen, and Amy Delpo. 2003. Hiring Indepen- dent Contractors: The Employers’ Legal Guide. 3d ed. Berkeley, CA: Nolo. Nunnallee, Walter H. 1992. “Why Congress Needs to Fix the Employee/Independent Contractor Tax Rules.” North Carolina Central Law Journal 20. Pacynski, Rick A. 1993. “Legal Challenges in Using Indepen- dent Contractors.” Michigan Bar Journal 72 (July). Payton, Janet G. 2001. “Checklist for Determining Indepen- dent Contractor Status.” Corporate Counsel’s Quarterly 17 (October). Ringquist, Neil A. 1997. Independent Contractor or Employ- ee?: A Practitioner’s Guide. Chicago: CCH. Sheppard, Lee A. 1999. “Resolving the Independent Contractor Dispute for the Future.” Tax Notes 83 (May). Treasury Department. Internal Revenue Service. 1987. Revenue Ruling 87–41: Employment Status Under Section 530(D) of the Revenue Act of 1978. Washington, D.C.: U.S. Government Printing Office. Available online at http://www.medlawplus.com/legalforms/instruct/ revrul87-41.htm; website home page: http://www. medlawplus.com (accessed August 1, 2009). Wood, Robert W. 2005. Legal Guide to Independent Contractor Status. Frederick, MD: Aspen Press. CROSS REFE RENCES Employment Law; Labor Law; Master and Servant. INDEPENDENT COUNSEL An attorney appointed by the federal government to investigate and prosecute federal government officials. Before 1988, independent counsel were referred to as special prosecutors. In 1988 Congress amended the ETHICS IN GOVERNMENT ACT OF 1978 (Ethics Act) (92 Stat. 1824 [2 U.S.C.A. §§ 701 et seq.]) to change the title to independent counsel. This change was made because lawmakers considered the term special prosecutor to be too inflammatory. Independent counsel are attorneys who investigate and prosecute criminal activity in government. They hold people who make and implement laws accountable for their own criminal activity. The need for independent counsel arises from the CONFLICT OF INTEREST posed by having the established criminal justice system investi- gate government misconduct. Prosecutors and law enforcement agencies work under the authority of government leaders. When govern- ment leaders are accused of wrongdoing, these entities face conflicting duties: the duty to uphold the laws on the one hand, versus the duty of loyalty to superiors on the other. Independent counsels do not answer to the government officials they are assigned to investigate, and therefore they avoid much of this conflict of interest. One potential element for bias remains: the political affiliations of the accused government official and the inde- pendent counsel. The people rely on indepen- dent counsel’s duty as members of the bar to uphold the laws and the U.S. CONSTITUTION, to overcome any similarities or differences in political beliefs. Independent counsel who appear to be motivated by political or other bias may be dismissed. President ULYSSES S. GRANT was the first to appoint independent counsel to investigate high- level federal government officials. In 1875, Grant’s personal secretary, Orville E. Babcock, was indicted in federal district court on charges of accepting bribes. Babcock had allegedly arranged favorable tax treatment for a group of moon- shiners who were known as the Whiskey Ring. Grant removed the federal district attorney and replaced him with an independent counsel, who finished the investigation and the trial. In the early 1920s, another bribery scandal, known as Teapot Dome, led to the appointment of an independent counsel. President WARREN G. HARDING appointed independent counsel to investigate the sale of oil-rich federal lands. The independent counsel’s investigation led to the prosecution of Harding’ s secretary of the interior, Albert B. Fall. In its later days, President Harry S. Truman’s administration labored under allegations of corruption. Specifically, officials in the INTERNAL REVENUE SERVICE and the Tax Division of the JUSTICE DEPARTMENT were accused of giving favorable treatment to tax evaders. Attorney General J. Howard McGrath appointed a special assistant attorney to investigate. When the special prosecutor sought to investigate McGrath, McGrath fired him. Truman then fired McGrath and refused to pursue the matter. The WATERGATE scandals of the 1970s gave Congress the incentive to create the first statutory framework for investigating government officials. In 1973, newspaper reports concerning a burglary at the Democratic National Committee head- quarters in the Watergate Hotel in Washington, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 406 INDEPENDENT COUNSEL D.C., implicated officials in the administration of President RICHARD M. NIXON.AttorneyGeneral ELLIOT L. RICHARDSON appointed ARCHIBALD COX,a Harvard law professor, as independent counsel to investigate the situation. Cox endeavored to uncover the facts surrounding Watergate. As it became apparent that White House officials were involved in the episode, Cox was forced to investigate the president himself. When Cox asked Nixon for White House tape recordings, Nixon sought to have Cox fired. One weekend in October 1973, in a turn of events later known as the Saturday Night Massacre, Richardson and Deputy Attor- ney General William D. Ruckelshaus resigned rather than carry out Nixon’s order to fire Cox. That same night, SOLICITOR GENERAL ROBERT H. BORK, who had just become acting head of the DEPARTMENT OF JUSTICE, carried out Nixon’s request and fired Cox. Nixon then appointed LEON JAWORSKI to be the second independent counsel to investigate Watergate. Like Cox, Jaworski sought Nixon’s White House tapes. After a court battle that reached the U.S. Supreme Court in United States v. Nixon, 418 U.S. 683, 94 S. Ct. 3090, 41 L. Ed. 2d 1039 (1974), Jaworski successfully subpoenaed the tapes. Nixo n resigned the office of president shortly thereafter. After the Saturday Night Massacre and the Watergate matter, it became obvious that independent counsel were necessary to check government misconduct. In 1978 Congress passed the Ethics Act to establish, on the federal level, a statutory scheme for policing the EXECUTIVE BRANCH. Ethics in Government Act Under the Ethics Act, the process of appointing independent counsel began when the attorney general received information on criminal activ- ity. The attorney general could investigate all violations of CRIMINAL LAW other than minor misdemeanors and minor violations. This per- mission included special ethics laws that applied to executive branch officials, such as laws that make it illegal for an executive branch official to receive money from a person if the official has arranged for that person to be employed by the federal government. There had to be sufficient credible informa- tion of criminal activity to constitute grounds for an investigation, and the information had to pertain to the president, the vice president, a member of the president’s CABINET, a high-level executive officer, a high-level Justice Depart- ment official, the director or deputy director of the CENTRAL INTELLIGENCE AGENCY, the commis- sioner of the Internal Revenue Service, any person with a personal or financial relationship with the attorney general or any other officer in the Department of Justice, or the president’s campaign chair or treasurer. Once the attorney general received credible inculpatory information, the attorney general had to decide within 30 days whether to investigate the matter. If the attorney general determined that the matter warranted an investigation, he had to begin an investigation. The attorney general could not conduct this initial investigation for more than 150 days. At the close of the investigation, the attorney general submitted a report to the Independent Counsel Division of the U.S. Court of Appeals for the District of Columbia Circuit. The members of this three-judge panel were appointed by the chief justice of the U.S. Supreme Court. In the report, the atto rney general requested or declined the appointment of independent counsel on the matter. A court could not review this decision. If the attorney general requested independent counsel, the panel appointed one and defined the scope of the investigation. Generally, the panel limited the counsel’sinvesti- gation to certain persons or certain issues. The appointment of independent counsel was unusual because the Department of Justice already is required to police the executive branch. In theory, the attorney general is an independent official. In practice, however, he usually is a political ally of the president. Like other executive branch of ficials, the attorney general is appointed by the president and reports to the president. Because the attorney Patrick Fitzgerald has held the position of special counsel since 2003. The U.S. Department of Justice Office of Special Counsel replaced the Office of the Independent Counsel in 1999. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION INDEPENDENT COUNSEL 407 . since 2003. The U.S. Department of Justice Office of Special Counsel replaced the Office of the Independent Counsel in 1999. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION INDEPENDENT. as breach of contract, that worker is like ly an employee. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION INDEPENDENT CONTRACTOR 4 05 FURTHER READINGS Fishman, Stephen. 2008. Working for Yourself: Law. YORK, 268 U.S. 652 , 45 S. Ct. 6 25, 69 L. Ed. 1138 (19 25) , one of the earliest examples of the use of the incorporation doctrine, the Court held that the First Amendment protection of freedom of speech