Employee or Independent Contractor?

A common scenario many business owners face is hiring an independent contractor, who operates as a sole proprietor, for a task where the possibility for injury exists. Yet, you fail to obtain workers’ compensation coverage for this person because you assume if they were injured on the job, their independent contractor status would prohibit a claim against your insurance.

What you may not realize, however, is that just because someone is a sole proprietor of a business doesn’t automatically make them an independent contractor if they come to work for you. They may very well be considered an employee.

Determining whether someone is an employee or independent contractor is complicated by the fact that three separate agencies, your state Workers’ Compensation Board, your state Department of Labor and the IRS, each make a determination of status based on their own criteria. The IRS requirements can be found online at http://www.irs.gov. You can obtain state requirements by contacting your local Workers’ Compensation Board and Department of Labor office.

In spite of all of this seeming confusion, there are general rules of thumb you can utilize to determine if a worker should be considered an employee. The commonality among these criteria is that the employer directly controls the how, what, and when of the worker’s employment.


-Do you have the right to require compliance with your instructions?

-Will you be training this person through meetings, classes, or apprenticeship with a more experienced worker?

-Will the worker’s services be integrated into your overall business operations?

-Do you set the number of hours this person will work?

-Will the worker devote full time hours to your business?

-Do you determine the order or sequence in which the worker’s tasks are performed?

-Is the worker required to submit regular oral or written reports?

-Do you pay the worker’s business expenses?


-Do you provide this person with hourly, weekly, daily, monthly or other regular periodic payments?


-Is the work being performed on your premises?

-Do you provide the worker with tools, materials, or other equipment?


-Do you have an ongoing relationship with the worker?

-Do you have the right to discharge the worker without liability?

The general criteria for determining whether a worker should be considered an independent contractor or employee are as follows:

-Does the worker perform services for several unrelated persons or firms at the same time?

-Does the worker make their services available to the general public on a regular and consistent basis?

-Does the worker realize profit or suffer a loss as a result of his/her services beyond the profit or loss ordinarily realized by employees?

-Does the worker invest in facilities used in performing services that are not typically maintained by employees?

-Will the sale of business assets provide the worker with a gain or recovery?

-If the worker suddenly stops working, is there contractual liability?

Remember, a worker’s status is subject to the particulars of the specific work to be performed. While someone may qualify as an independent contractor for one assignment, they may become an employee for the next job. Therefore, you must always re-evaluate the worker’s status on regular basis to ensure compliance.

Worker Found Eligible for Compensation from Seizure Related Injury

In an August 2006 ruling, Connecticut’s Supreme Court ruled that the claimant in the case of Michael G. Blakeslee Jr. vs. Platt Brothers & Co, who was injured when co-workers tried to help during a seizure, is entitled to workers’ compensation benefits. Typically, workplace injuries caused by a seizure wouldn’t be eligible for compensation because the injuries arise from the medical condition itself and not from conditions in the work area. In the Blakeslee case, the claimant received two dislocated shoulders on February 13, 2002, when three co-workers tried to restrain him during his seizure. He had fallen near a large steel scale, and then started flailing his arms and legs as he regained consciousness.

The claimant filed a workers’ compensation claim contending that because the actual injury resulted from the restraint, and not the seizure itself, the shoulder injuries should be covered. The claimant argued that an injury received during the course of employment is eligible for compensation even if infirmity due to disease originally set in motion the final cause of the injury. The claimant also asserted that an injury inflicted by a co-employee is eligible for compensation, unless the injured employee engages in unauthorized behavior or the injury is the result of an intentional assault.

Initially, a workers’ compensation commissioner decided that Blakeslee was not entitled to workers’ compensation benefits. The commissioner determined that the claimant’s injuries resulted from a chain of events set off by a grand mal seizure unrelated to his employment. A workers’ compensation review board agreed with the finding. The review board stated that there is a prerequisite requirement for eligibility for compensation, which the claimant overlooked. The cause of the injury must arise out of the employment and work conditions must be the legal cause of the injury. The review board contended that the claimant’s seizure caused the need for first aid, which caused the injury. There was no element of the claimant’s employment involved.

Five out of seven Supreme Court justices reversed the board’s ruling. They were not persuaded by the argument posed by Platt Brothers, and the employer’s insurer, Wausau Insurance Co., that finding for the defendant would be in direct opposition to public policy because it would prevent employees from assisting co-workers in future medical emergencies. The majority noted that the co-workers restrained Blakeslee to keep him from harming other employees as well as himself. Their actions benefited the employer. The action was directly related to the employment and would therefore be eligible for compensation.

The two dissenting justices argued that the Supreme Court should not have accepted review of the case.

Workers’ Comp Employer Costs Rose Faster Than Benefit Payments in 2004

According to a study released in July 2006 by the National Academy of Social Insurance, employer costs for workers’ compensation grew faster than combined cash and medical payments to injured workers in 2004, the most recent year for which data is available. Combined benefit payments for injured workers increased 2.3 percent in 2004 compared to prior year levels, while employer workers’ compensation costs rose by 7.0 percent for the same period.

Combined benefit payments fell by 3 cents for every $100 of covered wages, from $1.16 to $1.13. The chief contributor to this decline was the state of California, where benefits dropped by 10 cents per $100 of covered wages. Nationally, premiums paid for workers’ compensation insurance rose by 3 cents per $100 of covered wages, to $1.76 in 2004. The increase was the smallest annual increase since 2001.

Despite the recent rise in costs, both costs and benefits in 2004 remain far below their peak levels. Total benefits were at their highest in 1992 at $1.68 per $100 of covered wages, 55 cents higher than the 2004 figure. Employer costs were highest in 1990 at $2.18 per $100 of covered wages, 42 cents higher than in 2004.

Since 2000, the rise in benefit payments has resulted from increased spending for medical care. Spending for medical treatment rose from 47 cents in 2000 to 53 cents per $100 of covered wages in 2004. Spending for cash payments to workers remained the same during this period at 60 cents per $100 of wages.

There are specific actions employers can take to curb workers’ compensation costs. The first step is to examine accident records for the past three years. Take each year’s reports and examine as a whole. While reviewing look for specific accident causes and note hazards that should be remedied. You should also be looking for injury repetition and in which department injuries frequently occurred.

The next step is to conduct a physical analysis of the workplace. Utilize your health and safety committee as the catalyst, but be sure workers are also involved. Look for equipment hazards that need replacement or repair. Then search for environmental hazards such as chemical exposures, noise, temperature and ventilation issues.

The third step is to look for task or ergonomic hazards. Request employee input to encourage workers to take ownership of safety in their departments. When workers provide input, make sure actions resulting from their suggestions are documented in health and safety committee minutes and posted on bulletin boards in common areas. If employees do not feel their suggestions matter, they won’t bother to suggest improvements in the future.

More Workers’ Compensation Claims Made As the Result of Work-Related Traffic Accidents

According to the Network of Employers for Traffic Safety, both on- and off-the-job motor vehicle crashes cost employers $60 billion annually from 1998 through 2000. The problem is so widespread, that in a recent study, the National Council on Compensation Insurance Inc (NCCI) noted that traffic accidents are the leading cause of accidental deaths in the United States. The study also said that workers’ compensation claims resulting from motor vehicle accidents are more severe than the average claim. Although they make up approximately 2 percent of all claims, they account for more than 5.5 percent of all losses because they cover a disproportionate share of the most severe claim types.

While workers’ compensation claims from motor vehicle accidents are growing, their frequency is declining but at a slower pace than for workers’ compensation claims in general. There are some other important characteristics about these claims that the NCCI noted in its study:


  • They almost always involve time lost from work.
  • Neck injuries are the most frequent diagnoses in these claims.
  • The average duration for a motor vehicle claim is 70 percent longer than for other types of claims.
  • They are three times as likely to involve a claimant attorney as compared to other types of claims.


The leading cause of these claims is a traffic accident that happened because the driver became distracted. The study revealed that almost 80 percent of the crashes and 65 percent of the near crashes resulted from the driver becoming distracted within three seconds of the event. The chief causes of the distraction were drowsiness and cell phone use.

The researchers had some specific suggestions regarding the steps employers can take to reduce the frequency and severity of these claims:


  • Encourage your employees to use seat belts – Failure to use seat belts cost employers roughly $2.1 billion yearly from work-related crashes between 1998-2000.
  • Be sure your employees never drive under the influence of alcohol – During 1998-2000, work-related crashes that resulted from drivers being intoxicated cost employers $3.1 billion annually.
  • Encourage employees to take defensive driving courses – These courses teach drivers how to react during an emergency so as to lessen the severity of the accident or avoid it all together.
  • Provide internal driver’s education courses – Teach employees good driving practices like pre-planning the trip route, realistically estimating how long the trip will take, being sure the vehicle is in good condition before hitting the road, and informing colleagues about travel plans.