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Both the definition of "independent contractor" and "employee" include the word "and," which means that all of the requirements in each paragraph should apply. If someone did some things that fall under each classification, then a judge would look at the totality of the circumstances to determine what type of worker the person was. In most cases, what it really comes down to is control. If the business owner retains the right to tell the worker what to do, when, where, and how to do it, the person is probably an employee. A person who chooses what work to do, uses his own supplies, often works offsite, and gets to determine on his own how to do the work (within the general parameters provided) is most often considered an independent contractor. Many business owners believe that they can ensure that someone is classified as an independent contractor merely by not taking taxes out of their checks and sending them a 1099 at the end of the year, but that's unfortunately not really how it works. When determining whether a person is a contract employee or independent contractor, how they are paid is less important than the manner in which work is performed.

The company or public agency does need to classify the work as one or the other, because it makes a difference in how he is paid and how his earnings are reported to the IRS. A person can apply to the IRS for a verification of his status, and an employer who misclassifies a worker can get into trouble.

As far as Disability goes, the law provides that a person cannot receive disability while working as either an employee or an independent contractor, so the classification may not make a difference for those purposes.

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The regulation that you posted says that "The retirement board shall terminate the benefit of a disability benefit recipient who is employed by, or who provides services under a contract as an independent contractor for, a public employer."

So, it actually doesn't matter how the person is classified. A person who does work is going to be either an independent contractor or an employee. There's no other option. With that said, control really is the most important factor. If a company has total control over its workers, it cannot force them into independent contractor status by paying them a check, not deducting taxes, giving them a 1099 at the end of the year, and refusing to give vacation pay or making them available to receive disability or worker's compensation. What you've described sounds like an employee/employer relationship. The IRS would likely agree - and it's their decision that matters, not what the state says.

There unfortunately isn't an option for being a contractor that is not independent. The law also does not seem ambiguous - it lays out the requirements for both types of workers, and it's up to the judge to determine which category a person falls under, where there is a question. But a person doesn't have to meet every requirement on the list, because some of them are beyond his control.

The language that you're posting is not ambiguous. Something is ambiguous if it can reasonably read in two different ways. In that case, it would be interpreted against the person (or entity) that wrote it. The rule I'm looking at is very clear, though. State law will override the handbook.

Yes. There are only two options - employee or independent contractor. All workers must be classified as one or the other. Where there's not a perfect fit, the IRS (or a judge, if you're in court), looks at which one is more appropriate. Usually where there's a dispute, it's not a perfect fit. The deciding factor is the amount of control the business has over the worker, but there isn't a third option. A worker is either an employee or an independent contractor.

If the board terminated your Disability Benefits because you were working as an independent contractor, you do have a right to appeal that decision within 30 days. You can submit an Appeal Request form, along with medical documentation showing that you are disabled. But, from what I'm reading and my knowledge of how disability typically works, a person who is working is going to have his benefits reduced. This OPERs disability memo says the same thing.
https://www.opers.org/about/board/pdf/05-04-disabilityoptions.pdf

The Administrative Code cannot directly contract the Ohio Revised Code, but Administrative Codes tend to fill in areas that aren't specifically addressed in the overall statute.

It's hard to establish liability in this type of case, because a person who is not disabled, whether working or not, isn't entitled to disability payments. So, a person can't sue the government saying, "If I'd known that you were going to cut my benefits, I wouldn't have told you that I wasn't disabled." I'm not saying that this is the argument you're making, but I'm trying to illustrate why it's so hard to recover in this type of situation. That's what a judge is going to hear. You would have to show that the handbook establishes an entitlement to benefits, or creates a promise and that you were harmed by relying on that promise, and that you would not have lost any money that you were otherwise entitled to had you not taken the contract position. On top of that, if the money you got from the contract is more than the benefit amount, then you're not legally considered damaged, because you're in a better position than you would have been in otherwise. You can't say, "I should have gotten paid for X + Y", if you're in a situation where a person is only entitled to X or Y. So, I realize that I don't have all of the facts, but it doesn't sound like you would have a legal basis for recovery, based on the information you've provided. I'm sorry.