CLAIM TIP: INDEPENDENT CONTRACTOR OR EMPLOYEE?

Most workers’ compensation acts set these criteria for compensability:

• There must be an employment relationship.
• The injury must be accidental.
• The injury must occur in the course of the employment.
• the injury must arise out of the employment.

Determining the employer-employee relationship is not as straightforward as you would think.  The two most common misconceptions about independent contractor status are exclusion of the worker from the employer’s payroll and the existence of a written agreement between the parties that states the worker is no an independent contractor.  Neither of these insulates the employer from the responsibility of providing workers’ compensation coverage.

Once the worker has proven that he/she was providing work or services for the employer at the time of the injury, the burden shifts to the employer to prove that the works was an independent contractor and not an employee.  Courts will generally find in favor of the worker, barring any statutory exclusion.

The primary test in most jurisdictions is whether the employer has the right to control the details of the employee’s  work.  Secondary criteria includes evidence the employer exercises that right, how the compensation is paid, whether the employer furnishes equipment or tools for performance of the work, and whether the employer has the right to terminate the employment relationship.

Here are the highlights from the statutory criteria for determining independent contractor status.  Please keep in mind this is not all-inclusive:

IOWA

In determining the employment relationship, the two most important indicators are the degree of control and the degree of independence.  The evidence of the degree of control falls into three categories: 1)  Behavioral control – Employer’s right to direct and control the work, including when, where, tools and equipment used , and where to purchase supplies; 2) Financial control – The extent to which the employee can realize a profit or gain, the extent to which the employee assumes responsibility for expenses, and the extent of the employee’s investment; and 3) Relationship of the parties regarding the permanency of the relationship and any benefits provided, such as pension, sick pay, insurance, etc.

SOURCE:  West Bend, The Trend, January-February 2015