Independent Contractor or Employee? Employers Often Misclassify Workers to Avoid the Law
What is a true independent contractor? How is an independent contractor different from a regular employee? In some situations, the answer of whether one is independent versus an employee, is obvious. In other situations, the answer is not always clear.
What is clear is that some employers are misclassifying workers to avoid important laws related to safety, fair wages, taxes and workplace injuries. A recent article addressed this disturbing trend by some employers. A separate study in 2010 which surveyed several states, noted that:
Employers increasingly misclassify their employees as independent contractors, denying them the protection of workplace laws, robbing unemployment insurance and workers compensation funds of billions of much-needed dollars, and reducing federal, state and local tax withholding and revenues.
On a state and national level, this issue is a serious one affecting both workers and businesses that are trying to follow the law. On an individual basis, I frequently receive calls from people who were injured on the job but then denied workers' compensation benefits on the basis of being an "independent contractor." The key question for these injured people is whether or not Alabama's workers compensation laws provide them needed benefits for a serious injury.
How do Alabama's laws providing workers compensation benefits examine this issue? This is how our courts have reviewed this issue:
In determining whether an individual is an independent contractor or whether an employer-employee relationship exists, the court looks to the reserved right of control rather than the actual exercise of control.
If the right of control extends no further than directing what is to be ultimately accomplished, an employer-employee relationship is not established; however, if an individual retains the right to direct the manner in which the task is to be done or if that individual does in fact dictate the manner of operation, then an employer-employee relationship is established.
This is a case-by-case issue. An important point to remember is that - just because the company said you were an "independent contractor" does not make it so. Regardless of how they titled your work, if the company had the right to control the manner in which you did the job, then you may be considered an employee entitled to workers compensation benefits. In a case earlier this year, the Alabama Court of Civil Appeals listed several factors to consider in determining the issue of a retained right of control. They are:
- direct evidence demonstrating a right or an exercise of control
- the method of payment for services
- whether equipment is furnished
- whether the other party has the right to terminate the employment
Again, these are just factors to consider. No single one of them, just by itself, would determine the issue. In today's world where many employers are misclassifying workers to avoid legal requirements, it is important that you don't just accept the company's word for it and fail to get the workers compensation benefits you need for a serious injury or disability.
