Employee Versus Independent Contractor in Workers’ Compensation Claims

Posted on Friday, April 19th, 2019 at 8:50 am    

Workers can file for workers’ compensation in both Virginia and North Carolina if they are an employee. They cannot file for workers compensation injury benefits if they are an independent contractor. The main factor in determining whether a worker is an employee or an independent contractor is how much control the employer has over the worker’s performance. More control means an employee status. Less control means an independent contractor status.

Independent contractors, if an accident occurs, can generally only file a personal injury complaint. Unlike workers comp claims, in a personal injury complaint, the plaintiff must prove that the party at fault was careless or negligent. In workers’ compensation cases, the worker does not have to prove any type of fault. The employee is entitled to workers’ compensation if the accident was work-related.

The difference between an employee status and an independent contractor status is often a fine line. Employers often try to assert a worker was an independent contractor so they don’t have to pay the worker his/her wages and medical bills. Fortunately, for workers, the employee does not have the final say on the work-relationship status. The workers’ compensation Commissioners decide the status – and thus the eligibility to file a claim.

Many times, it is easy to determine whether the worker is an employee or independent contractor. If a retail store hires a full-time employee who also gets vacation pay, health insurance, and retirement benefits – and the employee reports to the same store and the same office manager and has set hours – then the worker is most likely an employee. If the retail store hires someone to come into the store and fix a broken tile in one hour – and that’s all the worker does – that suggests an independent contractor status.

The key factors in deciding the work relationship

Again, as noted above, the main factor in determining whether a worker is an employee or an independent contractor is how much control the employer has over the worker’s performance. More control means an employee status. Less control means an independent contractor status. The Internal Revenue Service uses the following key factors to decide the work-relationship question. Workers’ compensation Commissioners look to a very similar set of factors to decide whether the worker is an employee or an independent contractor.

  • Behavior. Behavior refers to the way the employer guides and manages the worker’s performance.
    • Employee behavior. Workers who do their job under the direction of a manager or supervisor and according to a handbook of company rules during set hours are likely to be considered employees. Workers who wear company uniforms, use company tools and company equipment, and who work exclusively at the company site are generally labeled as employees.
    • Independent contractor behavior. Independent contractors generally inform the employer how they are going to do their job. Often the employer hires the independent contractor because he/she has some unique and special expertise. Independent contractors usually use their own equipment. They do their work with minimal guidance from the employer. The employer will have a set of requirements but the work is done using the independent contractor’s methods. Independent contractors are more likely to decide which tasks get done in which order and have no set hours. They come and go from the worksite as they please.
  • Financial. Financial considerations focus on how the worker is paid. It should be noted that these factors are not decisive.
    • Employee finances. Employees are more likely to be paid on a regular basis – such as by hour, by week, biweekly, or bimonthly. They are usually paid with a W-2 form. Pay raises are usually made after a performance review and after a set time has expired – usually a year. Employees are usually reimbursed for company expenses such as the purchase of tools or for paying for computer charges.
    • Independent contractors. These workers are more likely to paid in-full when the job is complete or in installments. Installments are often, ½ when the job is ½ done and the other ½ on full on completion. Independent contractors are usually paid with a 1099 and not a W-2. Independent contractors usually buy their own supplies and tools. They are not reimbursed by the company. Instead, the independent contractor adjusts the initial offer to reflect his/her expenses. Independent contractors generally don’t undergo a performance review. If the employer is satisfied with the job the independent contractor did, then the employer will likely hire the independent contractor again – if the need arises. If the employer wasn’t happy with the job performance, the employer will normally hire a different contractor or vendor.
    • The reason the 1099 form is generally not decisive is that many employers think they can get around the workers compensation laws or not have to pay payroll taxes by simply deciding to call all their employees independent contractors and pay them via a 1099. And then when you examine the actual relationship, you find out that in every other respect, the workers are, in fact, treated as employees and not as independent contractors. So just because someone is paid via 1099 is not determinative of whether or not that person is an employee or independent contractor.
  • The Work relationship. This factor looks at standard long-term benefits
    • Employee work-relationship. Employees are usually offered what other employees are offered based on their skill level and time of service. Workers who are given a pension, matching IRA benefits, vacation pay, sick leave, health insurance, and other yearly or long-term benefits are usually considered to be employees. Employees generally don’t advertise for other work. They generally don’t work for other employers.
    • Independent contractors. These workers generally get little or no benefits. They are self-employed and must pay for their own health insurance, take vacation on their time, and set up their own pension and retirement plans. Independent contractors usually need to establish working relationships with many different employers. They usually have an expense account for advertising and marketing – so they can get new work.

 

The employee versus independent contractor question can often arise when workers are seasonal or temporary workers. Many times, these workers are employees because they work solely at the control and direction of the employer.

If an employer suggests that a worker is an independent contractor, that worker should speak with an experienced workers’ compensation lawyer. The difference between the two types of work relationships can mean the difference between getting workers’ compensation benefits and being denied benefits.

Unfortunately, we come across this issue quite a bit, and we have prevailed in cases where the employer attempts to save money by mischaracterizing the employment relationship to get out of paying payroll taxes, insurance, workers compensation, and other benefits.

Please also see our previous article on Independent Contractors vs. Employees for additional information.

At the North Carolina and Virginia Law office of Joe Miller Esq., we’ve been fighting for injured workers for more than 30 years. We aggressively fight to have workers evaluated as employees instead of independent contractors. We understand and defend against the common arguments that employers try to make to deny you coverage by saying you don’t really work for us an employee. To speak with an experienced workers’ compensation lawyer, call 1-(888) 667-8295 or complete my contact form to schedule a free appointment.