Independent Contractors - A Review of Determinative Factors

Sunday, March 14, 2004 | 0

Who is an independent contractor, and how do you tell? The question is increasingly a critical focus for claims examiners as the "new economy" finds many people working from home, for different employers, performing varied tasks. Add to these changes in the way work is done the fact that the distinction between an employee and an independent contractor has never been black and white, with seemingly innocuous facts dictating court decisions one way or the other. The following is a brief checklist for when the issue arises.

The primary issue is control - does the employer control the time that they have to be present for work? Does the employer control how the work is done or what is produced by the work? This may be a sliding scale. There may be some aspects of control over a worker, and there may be more laxity of control in other aspects. The more control exerted the more it would be argued that they are indeed employees.

What about materials, work tools, and expense items? Do they carry their own materials or are they provided? How much discretion does the worker have in using materials and tools? Are communications from the worker formatted in a certain way to comply with company requirements, or can the worker do his own thing? How do they represent themselves? Do they hold themselves out as an employee of the company to the public?

Can they be fired? If they can be fired, as opposed to terminating a contract for specific services, they are more likely to be employees. If on the other hand the employer could sue them for not delivering goods or services as agreed, they are more likely independent contractors.

Is their line of business substantially different from the employer? If not, most judges would find an employment relationship.

Labor Code 3353 says "'Independent contractor' means any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished. " Let's break this down into easy to digest elements:

a. renders a service for a specified recompense;
b. for a specified result;
c. under the control of his principal as to the result of his work only;
d. is not under the control of his principal "as to the means by which the result is accomplished."

The focus of 3353 is control over how the work is done. If the employer dictates how the work is done, then the worker will likely be considered an employee.

Let's say Homeowner decides to act as his own general contractor to build a room addition. As a part of the building process, Homeowner hires a union journeyman carpenter to build the room framing and cabinetry, on an hourly basis. Though Homeowner told the carpenter how he interpreted the building plans, he never told the carpenter to perform the work differently than he was doing it. Cone day Carpenter slips on an electrical cord and falls off a roof, sustaining serious injuries as a result. This is the Germann vs. WCAB case (123 Cal.App.3d 776, 9/21/81). This case not only discusses all of the elements that need analysis in determining employment status, but warns that there is a sliding scale that applies, and that close cases will be found in favor of employment:

"The factors which may determine whether a relationship is in fact that of an employer-employee or independent contractor generally include: (1) the right of control over the mode and manner in which the work is done; (2) the employer's right to terminate the employee services, and the employee's right to quit when he wishes, without either incurring liability for failure to complete the job; (3) a distinct occupation or business on the part of the person performing service; (4) the nature of the occupation, i.e., the special skills or training necessary to render the service; (5) who supplies the instrumentalities, tools, and place of work; (6) the length of time required to render the service; (7) the method of payment; and (8) the parties' belief as to the arrangement they have created.

"Not all these factors are of equal weight. The decisive test is the right of control, not only as to results, but as to the manner in which the work is done. (Citation.) Generally, however, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.

"In addition, it has been suggested that in determining whether or not an injured person is an employee or independent contractor for purposes of workers' compensation coverage, rather than relying merely on traditional tests for determining that issue a court should also consider: (1) the purpose of this statute and the intention of the Legislature; (2) the persons sought to be protected; (3) whether he or she is not of a class of persons generally intended to be protected; (4) whether there are any other specific statutory exclusions, and (5) what are the relative bargaining positions of the parties mentally, economically, and educationally. (Citation.)"

The lesson is that substantial investigation must be performed before making a determination that an injured worker is not an employee. The presumption is that of employment status (LC 5705), or in other words, "when in doubt, pay it out."

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