“In order to limit exposure under a state workers’ compensation act, employers often seek to make new hires “independent contractors.” In forming this type of work relationships, employers are often under the assumption that the mere formality of having that person sign an independent contractor agreement sheds them of liability for workers’ compensation insurance. While signing such an agreement is essential, companies need to evaluate carefully how they conduct the work relationship after the fact as their actions may make these persons “employees.”
Independent Contractor v. Employee
Each jurisdiction has its own statutes and regulations governing employee and independent contractor relationships and set forth the legal requirements under workers’ compensation laws. These requirements are often found in statute or rule, and given meaning through case law interpretation by the courts. As a result, there are important considerations when seeking to make someone a true independent contractor:
- The right of “control” as to the means and manner of job performance, including the control of assistants;
- Level of instruction;
- Amount of training;
- Degree of business integration;
- Method of payment;
- The furnishing of work tools and other materials;
- Ultimate control over the work environment and where work is completed; and
- The right of discharge.
When establishing an independent contractor agreement, it is important to analyze the agreement under the pertinent regulations.
What Else Should I Consider?
A common element that courts review when determining if someone is truly an independent contractor for purposes of workers’ compensation is “control.” In examining this issue, it is critical to explore a variety of issues that take place during the relationship. While interpretations vary in each jurisdiction, the following matters should be considered and adjusted if necessary:
- Actual authority over how the work is performed and who makes work-related decisions;
- Performance of work duties and who is responsible to complete tasks;
- Tools and materials used in performance of the work;
- Restrictions on the hours when work can be performed; and
- Deadlines for the completion of assignments.
One of the most important factors is the “right to discharge.” This can vary based on the type of work someone is performing. An employer’s ability to discharge a worker likely points toward the establishment of an employer-employee relationship. A discharge based on contractual terms typically signifies no such association….”
The author also provides useful tips for claims handlers.
Read the full story at WorkersCompensation.com CompNewsNetwork – Independent Contractors: Are You an Employee?. [article link no longer works]