The distinction between “employee” and “independent contractor” is crucial in workers’ compensation law. Employees are covered by state-mandated, employer-provided workers’ compensation insurance but independent contractors are not.
There has long been tension between employers and workers’ compensation claimants over who is an independent contractor and who is an employee when workers are injured and need medical treatment and compensation for time lost from work.
The IRS has well-established rules for determining who is an independent contractor for tax purposes and, while those rules form a starting point for analyzing workers’ compensation issues regarding independent contractor status, most states’ workers’ compensation laws go further. Workers’ compensation statutes are, of course, remedial in nature and designed to make industry shoulder the burden of caring for injured workers so that taxpayers do not.
Under common law rules of statutory construction of remedial legislation, state boards and appellate courts must liberally construe the term “employee” in order to find coverage for injured workers. In Arizona, case law has focused on the question of whether the injured claimant was doing work that is an integral part of the employer’s business in determining whether the employer has the “right to control” the worker which is the main feature of employee rather than independent contractor status. If a worker is doing such work rather than simply providing a service ancillary to the employer’s business, he/she is most likely an employee, not an independent contractor.
For many years, the trucking industry has been fertile loam for employer abuse of independent contractor status. In order to avoid federal tax liability for FICA contributions as well as workers’ compensation insurance for drivers, the industry has devised all manner of subterfuge to make it appear that truckdrivers, almost all of whom are providing a service integral to the trucking companies’ business, are independent contractors rather than employees.
Recently, a USA Today investigation report blew the lid off a major independent contractor scam in the ports of Los Angeles where truckers haul freight from the ports to warehouses and rail lines for distribution to all of the major retailers around the country. Reporters found that port trucking companies have engaged in the practice of forcing truckers, many of whom are immigrants who don’t speak or read English, to sign contracts to lease their trucks and pay all expenses related to their purchase, maintenance and operation often leaving the driver with no net earnings despite working far more than forty hours a week. Reporters also discovered that grossly overworking the drivers was leading to driving accidents and serious injuries not covered by workers’ compensation.
Drivers complained that if they refused to work continuous shifts without rest, they would be let go, leases terminated and the truck re-leased to a new driver with all their equity in the truck gone. Consequently, they felt they had no choice but to accept the leases and work the long hours.
Fortunately, according to the USA Today report, drivers are winning practically all of these cases that go before the California Department of Industrial Relations. The “labor commission” is ruling consistently that the drivers are employees not independent contractors. Judging from employer responses to the reporters, however, they are not remorseful and it appears that this systemic abuse of independent contractor status might take much longer to stamp out.