A major debate rages in workers' compensation today. It is centered on who must be covered by the program, and the practice of hiring "independent contractors" rather than employees. There are a variety of issues intermingled in that debate including taxes, overtime pay, minimum wage, unemployment, and workers' compensation. California is in the midst of striving to implement the "ABC test" legislated by its supreme court (yes, "legislated"), and then adopted by the state legislature in statute. The Governor there has recently reportedly asked for $17.5 million and over 100 new state employees to implement the change. Classification of workers is a challenge.
The Kentucky Court of Appeals recently provided analysis of independent contractors and homeowners who hire them in Dexter v. Hanks, No. 2018-CA-000362-MR. The case was filed in tort for premises liability after the plaintiff fell from the roof of the defendant's home while performing repairs. The trial court dismissed the lawsuit, concluding that the homeowner breached no duty of care and that the plaintiff was an independent contractor. As an independent contractor, the Court concluded, the homeowner had no duty to supervise Plaintiff or to provide him with safety equipment.
The Court described that the homeowner had procured a variety of services for his home over the years. He typically had used Tim McQueary, for whom Mr. Dexter (plaintiff) had sometimes worked. When McQueary became too busy, he recommended Mr. Dexter to Mr. Hanks (defendant property owner). When a roof leak occurred, Mr. Hanks hired the Plaintiff to perform repairs. Plaintiff was to be paid $10 per hour for the work. Mr. Hanks purchased the roof sealer, and plaintiff "used a combination of his own tools and tools supplied by Hanks."
In the process of painting the roof in 2013, Plaintiff slipped and fell, then slid from the roof and "fell twenty feet to the ground, landing on his feet." He was diagnosed with a broken foot and broken ankle, "incurred medical expenses of $70,953.67, missed thirty-seven weeks of work, and lost approximately $27,000 of income."
The lawsuit alleged that Mr. Hanks' property was in a "dangerous condition," which Mr. Hanks's either "created," or of which he at least "knew, or should have known.” Plaintiff "characterized himself as an 'invitee' to Hanks's property." Therefore, he contended that Mr. "Hanks had a duty to discover, warn, and/or protect Dexter from the dangerous condition of his property" (apparently water on the roof, which Plaintiff presumed, but could not prove, Mr. Hanks had sprayed there to "clean" the roof prior to the sealant application).
The Court noted that Kentucky's Supreme Court had previously concluded that “a possessor of land owes a duty to an invitee to discover unreasonably dangerous conditions on the land and either eliminate or warn of them.” However, while the Dexter case was pending this appeal, the Kentucky Supreme Court rendered another decision in which it further described "the nature of the duty owed to" contractors such as Dexter. The Court concluded that a property owner that hires an independent contractor is not responsible for supervision or providing safety equipment, noting an independent contractor should be "aware of the risks associated with" work and should have "provided his own safety equipment."
The Court enunciated legal parameters defining the distinction between an employee and an independent contractor. It was persuaded by the fact that the work performed was "unrelated to the normal operations of the "business that had hired the contractor," which may have been homeowner, but there is suggestion that Mr. Hanks is in the real estate investment business.
The Court explained that "a landowner is not liable to an independent contractor for injuries sustained from defects or dangers that the independent contractor knows or ought to know of." The property owner is liable only if “the defect or danger is hidden and known to the owner, and neither known to the contractor, nor such as he ought to know.” In this, a landowner owes less of a duty to such a contractor than would be owed to a "business invitee" (a customer on the property for the purpose of doing business there).
The Court reminded that Plaintiff admitted the defendant "was not overseeing or directing his work in any way." The property owner "was concerned only with the end result, a sealed roof that did not leak." The Court noted the presence of the homeowner's tools, but concluded "that was more out of convenience than a desire to control how the work was performed." This supported "that Dexter was an independent contractor." This, overall, illustrates the issues of control that are pervasive in various states' analyses of the contractor versus employee dichotomy.
The Court noted, however, that the test it applied in making this decision as regards premises liability "is different than the broader and more lenient multi-factor test used to determine whether an individual is an employee or independent contractor under the Workers' Compensation Act." Despite the test being different, the Court concluded that "most of those (workers' compensation) factors weigh toward Dexter being an independent contractor." As examples, the Court enunciated different factors such as who set work hours, whether particular skills were required for the work, whether Mr. Hanks trained plaintiff or dictated how the work would be performed, and how Plaintiff was paid.
In this instance, a civil liability case, the critical issue of contractor status was subject to varied legal analyses. The Court concluded that the outcome in this case, "independent contractor," would be the same whether the analysis was the concise liability standard or the "broader and more lenient" workers' compensation test was engaged. Though the outcome was the same in this instance, it is worth consideration that outcomes could be different. That danger exists when a jurisdiction has multiple definitions of any term, such as "independent contractor." The confusion that is created by multiple legal tests for such a decision is curious and may lead ordinary citizens to confusion.
In an attempt to legislate consistency, and perhaps simplicity, the California Supreme Court recently made a new independent contractor law. There are those who have been critical of the court there "making law," arguing that courts should instead limit themselves to interpreting law. It is seen as an issue of "separation of powers" a constitutional construct worthy of consideration. But, the California Legislature, others would argue, certainly has the last word in such a scenario. The people's elected representatives could certainly correct such judicial legislation by passing a law to the contrary. California's Legislature did pass a law, but it essentially adopted the court-made law.
That legislation became the law of California on January 1, 2020. WPXI (an others) report that the new law defining independent contractors will simplify such legal analyses. Some also suggest that the change will force businesses to adjust their staffing practices. The seemingly obvious conclusion would be that such effects will only be for California businesses. However, there are also concerns that the law will affect businesses elsewhere, in the event that they require California staffing for any purpose.
There is benefit in simplicity. If clear and simple definitions render the nature of business relationships easier to classify, then there is a probability of less litigation over whether someone is or is not an independent contractor. There is value in simplicity. Similarly, there is benefit in freedom of contract, flexibility, and creativity in the delivery of business services. Thus, there is a conflict between flexibility and predictability. There are advocates on either side. Across the country, many will watch the experiment upon which California has embarked. Time will tell if its ABC test is progress or folly.
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