Self-Employment—Newspaper Carriers and Other Independent Contractors

It has come to our attention that a State agency changed its regulations to specifically prohibit newspaper carriers from being considered self-employed. This change appears to have stemmed from the fact that a food stamp client had filed a fair hearing request because the State agency would not treat his income as self-employment, nor allow his self-employment expenses. The results of the fair hearing were that the administrative law judge ruled in the client’s favor.

The State initially determined the client was self-employed and then reversed its decision because the client did not have “full responsibility for success or failure of the business operation,” meaning that the newspaper’s success or failure did not depend on the individual’s one paper route, so therefore the client was not self-employed.

Although we have stated in the past that States may use some discretion in determining whether an individual is self-employed, this does not mean that the State agency can create rules that would be more restrictive than what is allowed under Federal regulations. The reason that self-employment has not been strictly defined is so States may not be limited to the variety of self-employment scenarios that may exist.

First, there is no federal rule barring newspaper carriers from being considered self-employed. There is no authority in the regulations that would allow a State agency to deny the exclusion of the cost of producing self-employment income to households based solely on membership in a designated class. The regulations contemplate that the State agency will make such a decision based on the facts of the case.

Second, there is no federal rule that the self-employed individual must have full responsibility for the success or failure of the business operation. This particular client’s self-employment is similar to that of other independent contractors such as individuals working for Mary Kay or those who sell Avon. It is also comparable to individuals that own a franchise. The self-employed individual need not be responsible for the entire company’s success or failure to be considered self-employed.

We are requesting that the State agency revise its policy of not allowing newspaper carriers to be considered self-employed and restore the household’s benefits from the last certification review, if owed. Other State agencies should review their self-employment policies as well to ensure they are not unlawfully restricting a particular type of employment from being considered self-employment or using language in their State rules that would restrict program access to eligible households with a self-employed household member.

If the client states he or she is an independent contractor and the State agency finds this questionable, then the State agency should check with the parent company to see if it considers the client to be self-employed or an employee. If the business says that it considers the client to be an independent contractor, then the client is self-employed, barring any other evidence to the contrary.

If FNS staff have any questions regarding this memo, they should contact Vicky Robinson of my staff at (703) 305-2476. If State agency officials have questions, they should contact the FNS regional office for their area.

Patrick Waldron
Chief
Certification Policy Branch
Program Development Division

Last modified: 02/16/2012