Independent Contractors and Worker’s Compensation in North Carolina and Virginia

Posted on Wednesday, January 31st, 2018 at 11:02 am    

As a general rule, a worker must be an employee in order to qualify for work injury benefits in either North Carolina or Virginia. Workers who are independent contractors are not eligible for either lost pay benefits or for medical bills through worker’s compensation. This means that any worker who wants to receive workers’ compensation must show he/she was employee when the accident occurred. It also means that the insurance company for the employer will want to show that an injured worker was not an employee but worked independently.

Employers are required to have workers’ compensation for all their employees and are required to know the difference between an employee and an independent contractor. Typically, an employer pays an employee payroll taxes and unemployment taxes for the employee – in addition to paying for worker’s compensation insurance and sometimes even healthcare benefits.

Our firm has handled many of these kinds of cases, and prevailed in all of them by proving that the employee was, in fact, an employee as opposed to an independent contractor. We see many employers attempting to get away with this “misclassification” of employees, particularly in industries such as construction, cable installation, or transportation, where it can be costly to maintain workers compensation insurance. Also, as mentioned previously, classifying employees as independent contractors frees the employer from the obligation to pay payroll taxes or health insurance if there are more than 50 such employees. The problem is, when one of these employees gets seriously injured, he or she has no way to pay for the hefty hospital bills.

We have often found that these employers often do have workers compensation insurance. They just refuse to extend that insurance to cover certain workers that they wrongly classify as independent contractors. Once we have proven those workers are, in fact, employees, then the insurance coverage steps in and covers the employee.

Neither the worker nor the employer gets to make the decision as to the employee’s work status. This is true, even if the employer forces a worker to sign a statement saying he/she is an independent contractor before doing any work. Even if the worker receives a federal 1099 form, that is not conclusive to show the worker is an independent contractor. The state workers ‘compensation commissions make the decision which means, for all practical matters, that the Deputy Commissioner makes the call.

The Virginia Workers Compensation Commission and the North Carolina Industrial Commission typically review a variety of factors to determine if you are an employee or independent contractor. Many of these factors are based on the guidelines set forth by the Internal Revenue Service. The key issue tends to be who controls the worker’s hours, labor, and manner of performance. If the employer has control, then the worker is usually an employee. If the worker has control, the worker is usually an independent contractor. Some of these factors are:

  • Control over the worker’s behavior. This includes such factors as:
    • Instructing how the work is to be done, when it’s to be done, and where it should be done. Employee status is indicated if the employer controls which work tools are used and where supplies should be bought.
    • The extent of the instructions. Precise details suggest employee status. Little or no details suggest independent contractor status.
    • How the work is evaluated. If just the final work is evaluated, such as when a worker does home repairs, that suggest independent contractor status. If the employer reviews the work in stages, or via supervision, that suggests employee status
    • Who trains the worker. If an employer has classroom or on-site training, that suggests the worker is an employee. If the employer relies on the worker’s skills without training, that suggests the worker is an independent contractor
  • Control over how the worker is paid.
    • If the employer invests in the equipment used, that suggests employer status;
    • If the employer pays for the work expenses, that suggests independent contractor status
    • If the worker can earn a profit or can lose money depending on how well the job is done and client satisfaction, that suggests independent contractor status. Payment by the hour or by the week suggests employee status;
    • If the worker is paid a flat fee via invoice, that usually indicates the work is an independent contractor
  • The relationship between the worker and the employer.
    • A written contract suggests that both employer and employee signs suggest an employee relationship if the contract says the work is an independent contractor
    • Benefit payments. Generally only employees are offered and paid health benefits, vacation pay, sick pay. Generally, only employees are offers 401ks, pension plans, or other retirement benefits
    • The length of the work relationship. Long-term relationships suggest employee status. Independent contractors usually just work on a job for short time and then leave
    • They type of work provided. Work that is essential to the employer’s business indicates an employee relationship

Some additional questions a judge will review to determine employee vs. independent contractor status are:

  • Can the worker do other jobs for other employers at the same time?
  • Who has the right to fire the worker and on what terms?
  • Can the worker choose who he works with on the job and who controls these workers, and when he shows up for work?

The benefit consequences for each type of status – employee or independent contractor

If an employer doesn’t have workers’ compensation for an injured worker and that worker is judged to be an employee, then the employer can be required to pay all the work injury benefits, including temporary total disability, medical bills, and vocational rehabilitation expenses out if its own pocket.

If the worker is found to be an independent contractor, then the employer has no obligation to the independent contractor. An injured independent contractor will then look to his/her own health care policy to pay any medical bills. The contractor will lose wages unless he/she also had some sort of professional disability insurance policy or his own workers comp policy.

If the employer was negligent and the negligence caused the worker’s injury, then the injured independent contractor may be able to sue the employer for his/her medical bills, lost wages, and also for any pain and suffering. If it is clear the employer failed to follow the local building codes, OSHA standards, or common sense work safety conditions – then the employer will be more likely to agree that the worker is an employee. Injured workers should consult with their work injury lawyer before agreeing to this because they make more money by bringing a personal injury lawsuit.

Employers who intentionally classify a worker as being an independent contractor, when they certainly know that the worker is an employee can be subject to fines and penalties – and for the payment of the worker’s employment taxes.

We have come across a few larger employers who have attempted to get away with this misclassification. Rather than upend their entire business model by being exposed in a formal Judicial proceeding, many have desperately agreed to settle the claim instead, which, of course, has worked to our client’s benefit.

Speak with a strong North Carolina and Virginia work injury attorney now

Understand your rights. In many cases, the employer misclassified your work status. Attorney Joe Miller Esq. understands the difference between employee and independent contractor status. He’ll fight to get you approved for employee status if you were injured on the job. He’s helped thousands of injured workers get justice. To speak with an experienced workers’ compensation lawyer, please phone (888) 694-1671 or fill out the contact form.