Independent Contractor versus Employee Status in Workers Compensation Cases

Posted on Friday, March 24th, 2017 at 2:00 pm    

One of the most complex parts of any workers’ compensation case is determining whether the employee is eligible for workers’ compensation benefits. In both North Carolina and Virginia, one key test is whether the worker was an employee or an independent contractor. Generally, workers who are employees can receive workers’ compensation benefits Generally, independent contractors are not eligible for state workers’ compensation benefits.

Workers should understand that the determination of employee status is not one that the employer makes. The decision is made by the Deputy Commissioner of the Workers Compensation Commission or Industrial Commission.

Many employers try to classify their workers as sub-contractors vs. employees to avoid having to provide work injury insurance for them, paying payroll taxes, and/or to avoid having to purchase health insurance under Obamacare for their employees. This is called “misclassification” by the employer is actually a crime.

If you were injured while working, you should definitely consult with an experienced work injury lawyer like Joe Miller Esq. He will review many different factors which affect your real job status. In the right case, he can persuade the Deputy Commissioner that you were really an employee and should get full workers compensation injury benefits. We have been successful in several of these kinds of cases.

Some employers will also settle these kinds of cases to avoid a hearing in order to avoid their “business model” of misclassifying employees as subcontractors from being exposed in a public forum, which might subject them to IRS scrutiny.

The key work status factors

Some of the important workplace factors the determine if a worker is an employee or an independent contractor are:

  • The type of business involved. Many workers are presumed to be employees based on the type of work they do and who the hiring company is. Municipal workers such as police officers and firefighters are normally presumed to be employees and not independent contractors. Public school teachers who teach full time are also generally presumed to be employees. The terms of the collective bargaining agreement often dictate whether there should be a change from employee to independent contractor if the worker works less than full-time.

 

Because the construction industry contains so many trades that are brought in to complete jobs, we often see the most contentious battles of this employee vs. subcontractor issue take place when there is a work injury on a construction site.

 

Workers can be considered employees even if they are day laborers, borrowed employees, or part-time workers.

 

  • The right of the business or organization to control the worker. This is a major factor. If the hiring company has some ability to control the tasks the worker does, when the worker performs those tasks, and how those tasks are done – that indicates the work status is an employee and not an independent contractor. Other control factors can include whether a work permit or operating permit is required to do the job and who has that permit, whether the business provides the equipment necessary to do the job, whether workers are required to wear uniforms, and the manner in which the worker is paid.

 

  • The type of work being done. If the worker is doing the same type of work that that the hiring business does, that may tend to indicate that the worker is an employee. For example, a trucking company that hires on another trucker for a shipping assignment is likely responsible to pay for that trucker’s injuries during the shipment. A retail store that sells clothes and hires an electrical contractor is probably not going to be liable for workers’ compensation benefits if the electrical worker is injured while doing repairs at the retail store.

 

  • How the worker is paid. While the payment method is not determinative, workers who are paid on a regular basis (bimonthly, weekly, by day, or by hour) are normally presumed to be employees. Workers who are paid by the job—i.e. through an invoice— are normally presumed to be independent contractors. Employees typically get employee benefits such as vacation time, sick leave, and health insurance. If the paystub deducts these items or FICA taxes, or unemployment insurance, then the worker will likely be ruled an employee. Workers who get a W-2 vs a 1099 are also presumed to be employees.

 

Any reverse situation (the worker doesn’t get benefits, and doesn’t have pay deductions) may tend to indicate the worker is an independent contractor. But again, this is certainly not determinative. Some employers pay in cash and the folks who work for them can be employees. The key factor is control over the means and methods of the work.
Many employers try to use the payment method to try and convince workers that they are independent contractors – because the employer then doesn’t have to pay for the benefits, pays less taxes, and has less administrative work.

As mentioned previously, though, many times, the employer position is just self-serving, as a means to operate the business on the cheap.

Some employers will even go so far as to have their employees sign “contracts” where the employee declares an understanding that he or she is an independent contractor and not an employee.

You should know that such agreements are usually not worth the paper they are written on.

 

The Virginia Workers Compensation Commission and the NC Industrial Commission will ignore such documents IF there are “facts on the ground” that indicate that the worker is treated as an employee.

 

For instance, are there rules and procedures that are enforced about how, when and where the job is to be performed? Does the employer demand strict adherence to those rules on pain of the “termination of the contract”? If so, that is indicative of an employer/employee relationship and not a subcontractor relationship.

 

The other listed factors can flip the employer’s decision so that the worker is formally considered an employee.

 

  • Who provides the work tools? If the hiring company provides the equipment, the vehicles, the forklifts, the trucks, the computers, etc. that indicates there is an employee relationship. If the worker uses his/her own tools, that implies the worker is an independent contractor. Who takes any tax deductions for the purchase of the equipment can also be considered. Hiring companies generally reimburse employees for business-related expenses but generally don’t reimburse independent contractors.

 

  • Who can terminate the relationship? In an independent contractor relationship, the worker has just as much right to dictate when the job is done and how it is done as the hiring company. The worker can also decide, in accordance with the contract terms, when to terminate the work relationship. In an employee setting, the hiring company controls the manner of the work, the work performance, and when the work relationship ends.

 

A typical example of an independent contractor is a painter who has all his own ladders, paint and equipment, and is hired by a contractor on a house to come in and paint. The painter comes when he wants and leaves when he wants. The contractor provides zero equipment or supplies. The scope of the painter’s work and the price is determined by a contract drawn up by the painter and signed by the owner or general contractor. The painter controls when he begins the work and is finished when the job is complete.

 

Training. Generally, employers train their employees but they don’t train or educate independent contractors. Just because a worker does his/her job away from the office doesn’t mean the worker is an independent contractor. For example, many employees are allowed to telecommute.

The bottom line for the state workers’ compensation Deputy Commissioner is to look at the entire work relationship, not one specific factor.

Contact a skilled North Carolina or Virginia workers’ compensation lawyer now

Attorney Joe Miller has been fighting for injured workers for over 25 years. He has helped thousands of workers get strong recoveries. For advice on your work-relation status and all other work injury issues please make an appointment with Joe Miller Esq. by phoning him at (888) 694-1671 or using his contact form.