Wednesday, September 9, 2015

Workers’ Compensation: Independent Contractor or Covered Employee?

More and more frequently we are seeing companies use outside contractors to complete certain aspects of their work.  We have certainly seen this in the construction industry for years; however, the move is permeating other business areas, like delivery.  The subjective belief of the parties is not a determinative factor in the Maryland Workers’ Compensation Commission (“WCC”) decision as to whether the injured person is a covered employee and eligible for workers’ compensation (“WC”) benefits.  In other words, even if the claimant testifies or believes he is an independent contractor, it will have no bearing on the legal decision.

The commission looks to certain criteria, developed from the common law standard for determining the master servant relationship.  They are: (1) the power to hire and fire; (2) the payment of wages; (3) the power to discharge; (4) the power to control the conduct of the worker; and (5) whether the work is part of the regular business of the employer.  The decisive test in determining whether there is an employer/employee relationship versus that of an independent contractor (“IC”) is whether the employer has the right to control and direct the employee in the performance of the work and in the manner in which that work is to be done Mackall v. Zayre Corp., 293 Md. 221, 443 A.2d 98 (1982). 

For the most part, items (1)-(3) are easy enough to determine. The control factor is really what the commission will be focusing on at a hearing.  The worker is considered an IC if he or she performs the work according to his or her own means and methods, free from control of his or her employer in all details connected with the performance of the work except as to its product or result.  Considering (5), whether the work is part of the regular business of the employer, is helpful in determining the control factor.  For instance, if the alleged employer is in the business of delivery, chances are that a commissioner will determine that an alleged IC, who is “contracted” to do delivery, is likely under the control of the alleged employer.  While the company may not direct the driving route of the driver, if the driver is told to deliver the package in a certain manner he is under the company’s control.  For instance, the company requires the driver to where certain clothes, have present certain credentials to the recipient of the delivery, or have a GPS system in the vehicle.  

Alternatively, if a delivery company engages someone to prepare a webpage or set up an e-mail system for them, it is likely that the company is not directing or controlling the work and the claimant will be considered an independent contractor. 

Additionally, consider the implications of a finding of an IC relationship.  The main purpose of WC is to shield an employer from negligence from its employees. Would a finding that the injured party is not an employee open the company up to a negligence action?  If the case is in the proper posture, settlement of the contested case may be a great option.  

Contributed by Alicyn C. Campbell

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