4-1-1 on Comp: Update on Independent Contractors

Los Angeles, CA (WorkersCompensation.com) - We all know that a worker’s status as an employee or an independent contractor affects their rights to workers’ compensation benefits. Recently, California made it harder for employers to designate their workers as independent contractors. This decision will prove to be quite relevant since the gig economy has caused a steady increase in the number of US workers who are now claiming to be independent contractors.

The court, in a unanimous ruling, stated that in order to classify someone as an independent contractor, the business must show that the employer is not engaging in direction or control of the employer, that the work is done separate from the employer’s core business, and that the employee customarily engages in an independently established trade, occupation or business.

"When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor ...there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification," said the Chief Justice for the California court.

In coming to this ruling, the court looked to customs regarding certain classes of workers who have traditionally been known to be independent contractors such as painters, roofers, or pool technicians. 

In contrast, Florida has a set of criteria for when a worker may be an independent contractor, or, in other words, may be excluded from the definition of employee under 440.02(15). This includes someone who is an independent contractor not engaged in the construction industry. Moreover, the statute gives a list of criteria regarding how much control the employer has over the worker to define which category they fall under.

Whether or not someone is called an independent contractor is not legally controlling. The courts will oftentimes want to use said label so that the employer cannot avoid paying workers’ comp benefits over technicalities.

In Texas, the Workforce Commission (TWC) has a set of 20 criteria it uses to determine whether someone is an independent contractor. Again, the criteria really comes down to how much control the employer exerts over the worker. The more control the employer exerts, the more likely the worker is an employee. Whether someone works for more than one company at a time is also a good factor used by the TWC because true independent contractors will usually work for multiple clients at a time.

The New York Dept. of Labor has a similar set of criteria. Under their list, the worker is more likely an employee if they supervise employees, evaluate job performance, or if they have powers to hire and fire. Interestingly, their criteria includes an inquiry into whether the worker has to create oral or written reports, or has the right to review work product. These are all facts that would need to come out in discovery, such as a deposition. The determination of whether someone is an employee or independent contractor is a question of fact for the judge. A determination of a worker being an employee rather than an independent contractor has implications beyond workers’ comp including payroll, employee rights, employee benefits, and tort liability.

In Illinois, the Employee Classification Act located in IL Comp. Stat. Ch. 820 (Sec. 185/1et seq.) states that under the law, an individual performing services for a contractor is presumed to be an employee unless: 1) The individual is free from control or direction over the performance of the service for the contractor; 2) The service performed is outside the usual course of services performed by the contractor; and 3) The individual is engaged in an independently established trade, occupation, profession, or business.

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