Worker's Compensation and Employee Status
Whether an individual is eligible to receive workers' compensation benefits turns on the individual's employment status. Only employees are entitled to such benefits; individual contractors are not.
Employee versus Independent Contractor
The employer-employee relationship is akin to the agency relationship of master-servant. However, it is not always an easy task to determine whether an individual is an employee or, instead, an independent contractor. A multitude of factors, which change by jurisdiction, are examined to make this determination. Chief among these factors are: 1) the designation of the individual as an "independent contractor" in a written agreement, 2) control over the individual's work including the time and manner of such work, 3) ownership of the instrumentalities used in performing the work, 4) location of the work, 5) length of the working relationship, and 6) method of payment and retention of fringe benefits. Oftentimes, the workers' compensation statute of the particular state will specifically define who is an "employee" and who is an "independent contractor."
Application of Factors
The fact that an individual has been designated as an independent contractor in a formal agreement is powerful evidence of "independent contractor" status. However, employment status may lean toward "employee" if the employer maintains strict control over the way the work is to be performed despite the existence of the formal pronouncement of status in the agreement. Control is key.
If the employer dictates the time that the work is to be performed and the way the work is to be performed to accomplish the desired result, it is likely that the individual will be classified as an "employee." When such control is left to the individual, "independent contractor" status will likely prevail. Similarly, if the individual is required to use his own tools or equipment in the performance of the work, and does so on his own premises, "independent contractor" status will generally result. Independent contractor status is also buoyed if the working relationship is for a finite time to accomplish a single project, as opposed to an indefinite working relationship. An individual who is paid out of the company payroll, and who enjoys fringe benefits such as paid vacation and sick days, is apt to be termed an employee.
No one factor is dispositive of employment status, and the weight to be given to each factor is made on a case-by-case basis within the particular jurisdiction. In general, it is the cumulative effect of all the factors in a given jurisdiction that will ultimately resolve the issue.
Copyright 2007 LexisNexis, a division of Reed Elsevier Inc.
