Exercising Horse Sense Part I: Avoiding Grey Areas When Hiring Exercise Riders

Exercising Horse Sense    Part I: Avoiding Grey Areas When Hiring Exercise Riders       By Peter Sacopulous       This is the first article in a two-part series on managing your legal and tax liabilities when hiring exercise riders. It examines recent accidents involving riders, how to ensure a rider’s status as an independent contractor, and hiring basics. Part II will focus on available insurance protection for trainers and riders, as well as proper safety regulations, procedures and equipment, and equine liability laws.       A Series Of Tragic Events   Shortly before 6:00 a.m. on November 11, 2018, Odanis Acuna, a long-time exercise rider at Churchill Downs, was taking two-year-old New York Harbor through a routine workout. Acuna was breezing the unraced colt when it suddenly broke down, sending both horse and rider crashing to the ground. The track’s EMTs responded quickly, but Acuna had sustained catastrophic head and neck injuries in the fall. He died shortly after their arrival. Odanis “Cuba” Acuna was admired for his horse skills, work ethic, upbeat personality and devotion to his family. He was 42 years old at the time of his death.     The tragedy was one in a number of recent accidents involving exercise riders. Just 14 months earlier, Darren Fortune was killed when a horse he was exercising bolted after gallop at Woodbine in Toronto. Like Acuna, 43-year-old Darren Fortune was a highly seasoned pro who impressed many with his horse skills, people skills and work ethic. In addition to his morning sessions as an exercise rider, he worked as an outrider at Woodbine. Witnesses have stated that Fortune’s actions during the mishap that took his life very likely prevented other riders from being killed or injured.     Kellie Hedges, another highly experienced exercise rider who had also served an outrider, was severely injured while working at Belterra Park near Cincinnati, Ohio. On the morning of June 26, 2018, the horse Hedges was breezing fell forward, threw Hedges, rolled over her, then rose and sped off down the track. Two outriders eventually intercepted the runaway horse—a filly that, remarkably, was not hurt in the incident. Meanwhile, the severely injured Hedges lay on the track in a daze. The  Paulick Report  and local news coverage reported no outrider attended to Hedges while she was down. According to Hedges, the “clear the track” alert siren sounded only briefly, and Hedges says other riders and horses returned to the track and continued to work while she lay immobile.     Track-based EMTs appeared slow to respond to Hedges accident, and track security staff demanded Hedges exit the ambulance and be taken to track offices in order to verify her license. Eventually loaded onto another ambulance, Hedges was taken to the local hospital. After she arrived, emergency room physicians had her rushed to Cincinnati Medical Center, where she underwent emergency surgery to save a broken leg. Surgeries for other injuries followed. It is unclear if Kellie Hedges will ever ride again. Belterra has drawn sharp criticism for how the incident was handled.,      Questions You Must Ask   As of this writing, none of the incidents mentioned above have resulted in a lawsuit being filed. But others have. All pose a series of questions that you should be asking yourself. As a trainer, do you know what your liability would be if an exercise rider you hired were injured or killed while working one of your horses? If a horse you are training were injured or killed while being exercised? If another horse or rider were injured or killed in an accident involving a horse you are training?     On an even more basic level, do you know how to ensure that a rider who works for you is viewed by the IRS and other government entities as an independent contractor, rather than an employee who adds to your tax and liability burdens? Are you familiar with the requirements for protective gear for riders? Or are you aware of the safety guidelines every exercise rider should be operating under on a daily basis?     The answer to any one of these questions could dramatically impact your ability to earn a living as a trainer, especially if something goes wrong. This article is designed to provide you with broad, general advice about such issues. Remember, regulations vary widely. You should seek professional legal and insurance advice when dealing with the specific needs of your business.      Employee vs. Independent Contractor   Under U.S. labor and tax laws, the IRS and other government entities draw a distinction between employees and independent contractors. State and local laws and tax regulations may also apply. Both an employee and an independent contractor may perform tasks for a company. But legally speaking, each is a distinctly different type of worker.     In North America, an employer is responsible for specific payments toward an employee’s Social Security, unemployment insurance and Medicare funding. Often, employers are also responsible for an employee’s worker compensation insurance funding and certain aspects of offering or providing employee health insurance. The employer is also responsible for payroll reporting to the employee and the IRS. At the end of each calendar year, the employer must provide each employee and the IRS with a completed W-2 form. Employees may work for an employer on a full-time or part-time basis, and the number of hours worked may affect certain aspects of what the government requires the employer to fund or provide on an employee’s behalf.     In short, an employee works for a business or organization. By contrast, an independent contractor performs work for an individual, business or organization but works for himself or herself as an independent business. This means that independent contractors are responsible for their own Social Security and Medicare funding (paid as self-employment taxes) as well as certain other payments. Independent contractors are also responsible for seeking out and paying for their own health insurance, retirement funding, disability insurance, and so forth. Any business that uses an independent contractor must pay the contractor for satisfactory work. The business must also provide a completed Form 1099 to both the independent contractor and the IRS if the business pays the independent contractor more than $600 in a calendar year. (Note: Independent contractors are also commonly referred to as freelancers, contract workers or contract laborers.)     So why doesn’t every business simply declare its employees to be independent contractors and save big on tax payments, perks and paperwork? Because the determination is not strictly up to the employer. Laws, tax regulations and guidelines apply, playing an essential role in determining which workers are employees and which workers are independent contractors. Failing to follow the rules invites major trouble, especially if an employer tries to commit fraud by passing off employees as independent contractors. Doing so can lead to a nightmare of make-up payments and paperwork, as well as severe tax penalties and criminal prosecution.      3 Categories to Consider   The government applies various factors in the following three categories to help determine if an individual is an employee or an independent contractor:     1. Behavioral Factors: Does the company control what the worker does and the specifics of how he or she carries out tasks? For example, if a company specifies a worker must complete assignments in an office at the company’s headquarters, from 9 a.m. to 5 p.m. on weekdays, take a one-hour lunch break at noon, adhere to a strict dress code, and cannot perform similar tasks for other companies, then these behavioral controls indicate the individual is an employee. If the worker is merely required to complete the task by a specified deadline, setting his or her own schedule, at a location of his or her choosing, taking breaks whenever he or she deems appropriate, and is free to perform similar tasks for other businesses, then these behavioral control factors indicate the individual is an independent contractor.     2. Financial Factors: Are the business aspects of the worker’s job controlled by the payor? For example, is the worker involved in setting the price for his or her services? Does the worker complete tasks using his or her own tools and equipment? Is he or she reimbursed for expenses, such as mileage? Is the worker on a business’ regular payroll, or does the worker submit invoices for payment for tasks performed? A worker who works for a set salary, is reimbursed for all or most expenses and is provided most or all necessary tools and/or equipment is likely an employee, especially if the worker is on the company’s regular payroll. A worker who submits invoices and is paid per task, writes off expenses on his or her taxes, and supplies his or her own tools or equipment is most likely an independent contractor.     3. Relationship Factors: Is the worker covered by the payor’s employee compensation plan, retirement plan or health care plan? Does he or she receive paid vacation time, sick leave or other benefits from the payor? If the answers to the questions is yes, the law will likely view the worker as an employee. Workers who set their price of work performed, or are involved in negotiations regarding that price, who set their own working hours and vacation schedules, and take care of their own business insurance, health insurance and retirement planning are most likely to be judged as independent contractors.     Of course, other factors may come into play when determining if an individual is an employee or independent contractor. But using the above IRS Common Law guidelines will go a long way to accurately determine if an exercise rider or other worker is an employee or independent contractor.      Casual Mistakes   Some large Thoroughbred operations do hire exercise riders and backstretch workers as full-time employees with salaries, perks and benefits. While many workers and employers view this as an ideal situation, it is financially impractical for most owners and trainers. That’s why so many in the industry rely on independent contractors to perform tasks like exercise riding.     Hiring an exercise rider is often a remarkably casual transaction. A trainer brings a horse to the track and finds a number of individuals waiting there, looking to find a day’s work exercise riding. A price is quickly negotiated, the rider takes the horse through the routine, and is paid for the work. Payments are sometimes made in cash with no written record of the job or the transaction.     That seems like a straightforward way to fill a basic industry need. If asked why they use this approach, many trainers and riders would simply say that they’ve been doing it this way for years. It works. And the truth is, it does work. Until something goes wrong. Once that happens, the informality of such a transaction can leave you tangled in a web of complex liability issues. Because the casual approach actually means everyone involved has been operating in a grey area. And grey areas can turn into legal nightmares.      Put It in Writing   Working with an attorney to create a simple written Independent Contractor Agreement form that you and an exercise rider both sign before the rider saddles up is a great start. Once filled in by you and the rider, the completed agreement should include what work is to be done, when it is to be completed, and what the worker will be paid. A written agreement protects both you and the rider, since it defines what has been agreed to and the responsibilities of both parties. The agreement can cover a single day’s work or multiple workouts over a given time period. Should you ever run into legal or IRS issues, even a very brief written agreement can go a long way to making your case.     That having been said, remember: a business cannot magically turn an employee into an independent contractor simply by making him or her sign an Independent Contractor Agreement. Employers who attempt to avoid the costs of taxes and benefits using this unethical trick are committing a serious legal offense. Courts and the IRS understandably take an extremely dim view of such shenanigans.      Smart Hiring   Hiring a competent, reliable rider is essential. You are, after all, placing this individual on a powerful, expensive animal, and paying him or her to work in an environment surrounded by other powerful, expensive animals, all of whom are being led or ridden by other human beings. Both horses and human beings can behave in unexpected or unpredictable ways, sometimes with disastrous consequences. A steady temperament is an asset on the track, in horses and humans alike.     Hugh Gallagher, a safety steward with the New York Racing Authority (NYRA), offers the following thoughts on hiring an exercise rider. “Look at how the individual candidates present themselves. Do they appear to take pride in their appearance and what they do? Obviously, you shouldn’t consider anyone who smells of alcohol or shows signs of drug use. Observe their general demeanor—around people and around horses.”     Gallagher stresses the importance of asking questions. “Ask who they’ve worked for. Check it out. Make sure they have a good reputation and a professional manner. Get their point of view on the importance of safety.”     You should also make sure that anyone you hire, whether as an employee or an independent contractor, can present you with proof that they are legally eligible to work in the United States. Not doing so exposes you to potentially severe government penalties. Given the Trump administration’s views on immigration, now is the worst of times to expose yourself to such risks.      An Ounce of Prevention   Given the long and storied history of Thoroughbred racing, it’s no surprise that many industry professionals are traditionalists who tend to resist change. Taking pride in the history and traditions of the sport is a tremendous positive. But sometimes, it can lead to a stubborn insistence on doing things “the way we have always done them,” even when logic tells us otherwise. I have no doubt that some trainers will dismiss the suggestions offered in this article as a time-consuming pain in the neck. But following through on them should prove a great help in avoiding legal issues—and in dealing with them should they ever arise. After all, “an ounce of prevention is worth a pound of cure” is a great American tradition as well.

By Peter J. Sacopulos

This is the first article in a two-part series on managing your legal and tax liabilities when hiring exercise riders. It examines recent accidents involving riders, how to ensure a rider’s status as an independent contractor, and hiring basics. Part II will focus on available insurance protection for trainers and riders, as well as proper safety regulations, procedures and equipment, and equine liability laws.




A Series Of Tragic Events

Shortly before 6:00 a.m. on November 11, 2018, Odanis Acuna, a long-time exercise rider at Churchill Downs, was taking two-year-old New York Harbor through a routine workout. Acuna was breezing the unraced colt when it suddenly broke down, sending both horse and rider crashing to the ground. The track’s EMTs responded quickly, but Acuna had sustained catastrophic head and neck injuries in the fall. He died shortly after their arrival. Odanis “Cuba” Acuna was admired for his horse skills, work ethic, upbeat personality and devotion to his family. He was 42 years old at the time of his death.

An exercise rider

The tragedy was one in a number of recent accidents involving exercise riders. Just 14 months earlier, Darren Fortune was killed when a horse he was exercising bolted after gallop at Woodbine in Toronto. Like Acuna, 43-year-old Darren Fortune was a highly seasoned pro who impressed many with his horse skills, people skills and work ethic. In addition to his morning sessions as an exercise rider, he worked as an outrider at Woodbine. Witnesses have stated that Fortune’s actions during the mishap that took his life very likely prevented other riders from being killed or injured.

Kellie Hedges, another highly experienced exercise rider who had also served an outrider, was severely injured while working at Belterra Park near Cincinnati, Ohio. On the morning of June 26, 2018, the horse Hedges was breezing fell forward, threw Hedges, rolled over her, then rose and sped off down the track. Two outriders eventually intercepted the runaway horse—a filly that, remarkably, was not hurt in the incident. Meanwhile, the severely injured Hedges lay on the track in a daze. The Paulick Report and local news coverage reported no outrider attended to Hedges while she was down. According to Hedges, the “clear the track” alert siren sounded only briefly, and Hedges says other riders and horses returned to the track and continued to work while she lay immobile.

Track-based EMTs appeared slow to respond to Hedges accident, and track security staff demanded Hedges exit the ambulance and be taken to track offices in order to verify her license. Eventually loaded onto another ambulance, Hedges was taken to the local hospital. After she arrived, emergency room physicians had her rushed to Cincinnati Medical Center, where she underwent emergency surgery to save a broken leg. Surgeries for other injuries followed. It is unclear if Kellie Hedges will ever ride again. Belterra has drawn sharp criticism for how the incident was handled.

Questions You Must Ask

As of this writing, none of the incidents mentioned above have resulted in a lawsuit being filed. But others have. All pose a series of questions that you should be asking yourself. As a trainer, do you know what your liability would be if an exercise rider you hired were injured or killed while working one of your horses? If a horse you are training were injured or killed while being exercised? If another horse or rider were injured or killed in an accident involving a horse you are training?

On an even more basic level, do you know how to ensure that a rider who works for you is viewed by the IRS and other government entities as an independent contractor, rather than an employee who adds to your tax and liability burdens? Are you familiar with the requirements for protective gear for riders? Or are you aware of the safety guidelines every exercise rider should be operating under on a daily basis?

The answer to any one of these questions could dramatically impact your ability to earn a living as a trainer, especially if something goes wrong. This article is designed to provide you with broad, general advice about such issues. Remember, regulations vary widely. You should seek professional legal and insurance advice when dealing with the specific needs of your business.

Employee vs. Independent Contractor

Under U.S. labor and tax laws, the IRS and other government entities draw a distinction between employees and independent contractors. State and local laws and tax regulations may also apply. Both an employee and an independent contractor may perform tasks for a company. But legally speaking, each is a distinctly different type of worker.

In North America, an employer is responsible for specific payments toward an employee’s Social Security, unemployment insurance and Medicare funding. Often, employers are also responsible for an employee’s worker compensation insurance funding and certain aspects of offering or providing employee health insurance. The employer is also responsible for payroll reporting to the employee and the IRS. At the end of each calendar year, the employer must provide each employee and the IRS with a completed W-2 form. Employees may work for an employer on a full-time or part-time basis, and the number of hours worked may affect certain aspects of what the government requires the employer to fund or provide on an employee’s behalf.

In short, an employee works for a business or organization. By contrast, an independent contractor performs work for an individual, business or organization but works for himself or herself as an independent business. This means that independent contractors are responsible for their own Social Security and Medicare funding (paid as self-employment taxes) as well as certain other payments. Independent contractors are also responsible for seeking out and paying for their own health insurance, retirement funding, disability insurance, and so forth. Any business that uses an independent contractor must pay the contractor for satisfactory work. The business must also provide a completed Form 1099 to both the independent contractor and the IRS if the business pays the independent contractor more than $600 in a calendar year. (Note: Independent contractors are also commonly referred to as freelancers, contract workers or contract laborers.)

So why doesn’t every business simply declare its employees to be independent contractors and save big on tax payments, perks and paperwork? Because the determination is not strictly up to the employer. Laws, tax regulations and guidelines apply, playing an essential role in determining which workers are employees and which workers are independent contractors. Failing to follow the rules invites major trouble, especially if an employer tries to commit fraud by passing off employees as independent contractors. Doing so can lead to a nightmare of make-up payments and paperwork, as well as severe tax penalties and criminal prosecution.


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