December 4, 2012 By Rebecca Shafer, J.D.
Employers in the construction industry are often perplexed as to who they should cover with their workers’ compensation insurance policy. Full-time employees are covered, but what about part-time employees, day laborers, leased employees, borrowed employees and occasional volunteer work by a family member? In most states all of these types of employees will be covered by the workers’ compensation insurance policy. However, independent contractors are normally excluded from coverage by the workers’ compensation insurance policy.
The issue that arises most often between independent contractors and construction company employers is when the independent contractor does not have workers’ compensation insurance of his/her own and is injured while working for the employer. When the injury is severe and the independent contractor does not have workers’ compensation coverage, often the independent contractor will try to collect workers’ compensation benefits from the employer’s workers’ compensation insurance company.
Employers Coverage Denys Claims From Independent Contractors
The employer’s workers’ compensation insurer will normally deny the claim as the insurer has not collected any premium for the additional exposure of the independent contractor. The independent contractor (and his/her attorney) will often turn to the Workers’ Compensation Board/Industrial Commission and ask the governing authority to rule on whether or not there is coverage for the independent contractor.
The Board or Commission will normally look closely for any reason where they can classify the independent contractor as an employee of the construction company employer. If the employer has not complied with all the requirements of hiring the independent contractor as an independent contractor, the Board or Commission will find the injured worker to be an employee.
Construction Employers Need to Know Law
For the construction company employer to protect itself from workers’ compensation claims of independent contractors claiming workers’ compensation benefits, the employer should know the law pertaining to independent contractors in their state. Many states follow the federal government guidelines outlined in the federal Fair Labor Standards Act (FLSA). On the federal level, the U.S. Supreme Court has ruled several times that there is not a single issue that makes a worker an independent contractor as opposed to an employee, but a preponderance of all the information surrounding the independent contractor-employer relationship.
Federal Fair Labor Standards Act
Per FLSA, the following issues define whether or not the worker is an independent contractor or an employee:
1. The extent to which the services rendered are an integral part of the principal’s business