Employers are often attempting to creatively find ways to avoid paying Workers Compensation insurance premiums and benefits on behalf of their employees. Some employers have required their employees sign documents stating that they are independent contractors. Often times, an employer will stop taking taxes out of an employee’s paycheck and issue 1099 forms rather than W-2 forms. The reason for this is that if the worker is a true independent contractor, he works for himself, and is not an employee; therefore the employers do not have to insure these workers.
If you are injured at work and your employer denies payment of Workers’ Compensation benefits stating that you are an independent contractor and thus not eligible for Workers’ Compensation, your employer may very well be wrong. In New Jersey, employment status is favored over independent contractor status. The courts liberally construe the law in order to cover as many workers as possible under the Workers’ Compensation Act. Issues such as issuance of a 1099 rather than W-2 are not determinative. Courts will look at the real relationship between the parties.
In a recent discussion with a Workers’ Compensation Judge on this issue, the Judge stated, “In New Jersey there is one worker who is an independent contractor, and I’ve yet to find him.” While this is clearly an exaggeration, this statement emphasizes the court’s desire to find employment and therefore, workers’ compensation coverage.
Courts have typically used one of two tests to determine whether a worker is an employee or independent contractor.
In years past, the employer’s “right to control” was the prevalent test. However, over the years this test has fallen off and New Jersey courts have placed greater reliance on the “relative nature of the work” test.
The “control test” is based on the theory that an independent contractor is one who pursues a separate business and contracts to do work according to his own methods, without being subject to the control of an employer except as to the results. On the other hand, when a relationship is that of an employer/employee, the employer retains the right to control what is done and the manner in which the work is completed. The “control test” is satisfied so long as the employer has the right to control, even if there is no exercise of that control.
While no one factor is determinative, it is the totality of the circumstances that ultimately determine the status of the workers. Kertesz v. Korsh 296 N.J. Super. 146 (1996) (At 157)
Some of the factors that have been found determinative that the worker is an employee include:
– employer has the right to exercise actual control over the employee;
– employer has the right to direct the manner of employees work;
– employer may provide necessary equipment;
– employer has a continual or routine relationship with employee;
– employer has the right to terminate employee;
– employer has control over hours that employee works;
– employee does not have the right to delegate; and
– employer incurs principal expenses throughout employment.
Factors in determining independent contractor status include:
– freedom of the worker to work his/her own hours;
– right to offer services to others;
– worker often furnishes own equipment; and
– worker has the right to work according to his own methods.
As stated above, more recently the courts have placed more reliance on the “relative nature of work test.” This test analyzes the nature of the employer’s business and decides whether the work performed by the worker was an integral part of the regular business and whether the worker is economically dependent on the employer. Kertesz v. Korsh, 296 N.J. Super. 146 (1996)
The test is essentially an economic and functional one and the determinative criteria is not the inclusive details of the arrangement between the parties but rather the extent of the economic dependence of the worker upon the business he serves and the nature of his work to the operation of that business. Marcus v. Eastern Agricultural Ass’n, Inc., 58 N.J. Super 584, 603 (App. Div. 1959)
The courts look for economic dependency between the employer and worker. In Marcus, supra, the court found economic dependence because the Petitioner depended on the employer for customer contact. Further, the worker’s services were an integral part of the employer’s business. The employer ran a sheetrocking business and the worker was hired to perform sheetrocking.
In another case, ReMax v. Wausau Ins. Co., 162 N.J. 282 (2000) ReMax argued that all of its real estate agents were independent contractors. In fact, the agents, at employer’s request, had signed agreements stating that they were independent contractors. The court looked beyond the agreement. Some of the factors considered in determining employment status included:
– Agents had to comply with guidelines and quality controls;
– Agents are an integral part of the business activity;
– Agents are economically dependent on ReMax in that the broker provided listings, the office, equipment and support staff; and
– Agents work exclusively for ReMax.
In ReMax, the court found that functional integration of economic dependence was used to invalidate the argument that agents were independent contractors.
When determining whether a worker is an employee or an independent contractor based on the “relative nature of the work” test, the courts ask two questions:
1) Was the work of the Petitioner an integral part of the regular business of the Respondent?
2) Was the worker economically dependent on employer?
If the answer is “Yes” to either of these questions, then the court will find the worker was an employee rather than an independent contractor.
Therefore, if you are injured at work, and the employer tells you were not covered by workers’ compensation insurance, do not rely solely on the employer’s or insurance carrier’s denial of your claim. Seek the advice of a Workers’ Compensation attorney. As the courts favor employment and insurance coverage over lack of insurance coverage, there is an excellent likelihood that with a full investigation of your employment situation, you will be found to be an “employee” entitled to Workers’ Compensation benefits.
Learn more about: Workers’ Compensation Disability Benefits
