The $500,000 'Mistake'

Tuesday, June 11, 2013 | 0

A couple of weeks ago my partner Jeff Cohen taught an employer a very expensive lesson. A $500,000 lesson. That is the price Groton Construction Co., a small midcoast construction firm, is going to have to pay Skip White in civil damages as a result of likely misclassifying White as an independent contractor rather than as an employee.

I attended part of the first day of trial in the Lincoln County Superior Court. White had fallen 15 feet from a step ladder onto a granite ledge while working on a waterfront residence in East Boothbay. The pictures of the accident were horrific. Even nearly a week later, White’s face looked like he had gone 15 rounds with Muhammad Ali.

Not knowing anything about the case, it took me a while to figure out what was going on. White had worked for Groton everyday for four years. By all accounts, Groton was an excellent place to work, providing steady employment, competitive wages and teaching White the intricacies of becoming a master craftsman.

White clearly believed he was Groton’s employee, and almost certainly was. Groton had controlled the terms and conditions of his employment, dictating where White worked, when he started and finished, etc. Groton paid White by the hour, and Groton furnished all the major pieces of construction equipment. So, naturally, as soon as White was injured, he filed a workers’ compensation claim. But, to White’s amazement, Groton denied the compensation claim, taking the position that White was an “independent contractor” rather than Groton’s employee. Why? So Groton would not have to pay workers’ compensation and unemployment insurance or contribute to Social Security and Medicare on White’s behalf. Not to mention the savings on overtime.

As a result, when White fell, he was not covered by workers’ compensation insurance. So instead, White filed a lawsuit against Groton, claiming that Groton had failed to furnish him a safe place to work. Had Groton purchased workers' compensation, the insurer would have paid White’s medical bills and White would have received about $600 a week while he was out of work. Instead, because Groton misclassified White, and because of the jury’s $500,000 (plus interest) verdict in White’s civil case against Groton, Groton itself wound up being liable for all of White’s hospital and doctor’s bills, and all of his past lost wages, PLUS Groton is paying White far more in future damages than White ever would have received in workers’ comp benefits in his lifetime.

This business of treating employees as independent contractors is pernicious. Several months ago I made a FOIA request to the Maine State Department of Labor to obtain a listing of Maine businesses who had been fined for failing to purchase workers’ compensation insurance. The list ran for pages and pages, and the fines generally were quite small, undoubtedly less than what the companies would have paid had they purchased workers’ compensation insurance. While certainly many of the businesses on the list simply had failed to purchase insurance altogether, some like Groton undoubtedly had classified employees as independent contractors. When I asked about this, the Maine DOL told me they did not keep such statistics.

Jeffrey Neil Young is a claimants' attorney for the McTeague Higbee law firm in Topsham, Maine. This column was reprinted with his permission from the firm's Maine at Work blog.