Workers' Compensation: The Employer and Employee Relationship




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Defining the Employer-Employee Relationship

 

            Workers’ compensation law exists for the purpose of reimbursing injured workers for lost wages and medical expenses associated with workplace injuries. It only applies however, if the injured worker can show that an employer-employee relationship existed when the injury occurred.[i] This means that the worker must be considered an “employee” and the employer must be considered an “employer” as the terms are defined by law.

Who is an “Employee?”

An “employee” is any person performing work under an agreement, express or implied, where the activities are controlled by someone other than the worker himself.[ii] There need not be a written employment contract. Instead, if an employer’s actions led a worker to reasonably believe, in good faith that he was employed, an employment relationship may exist.[iii]

Several types of workers are excluded from the definition of “employee,” including independent contractors. To determine whether a worker is an independent contractor, the courts look to many factors, which may include:

·         Whether the employer controls the details of the work;

·         Whether the worker has specialized knowledge, skill or training;

·         Whether he is engaged in a calling, occupation, or business independent from the employer’s;

·         Whether he is paid in a fixed sum or an hourly rate;

·         Whether he furnishes his own tools;

·         Whether the employer makes deductions for Social Security or unemployment;

·         Whether the employee must work certain hours or days; and

·         Whether the employer can fire the worker at will, or whether the worker has the right to finish the project that he began.[iv]

Other types of workers that may be excluded from “employees” include volunteers and gratuitous workers, federal employees, state elected officials, casual employees, agricultural employees, railroad workers, state and county fair association employees, and certain prisoners.[v] Some excluded workers may instead be covered by trade-specific programs under state or federal law.

Recently, the question of how workers’ compensation applies to illegal immigrant workers has become an issue. In 2011, the United States Supreme Court left it to the states to determine whether their workers’ compensation system will apply to illegal immigrant employees. Though the states remain largely divided, Louisiana, Minnesota, Pennsylvania, and Georgia allow illegal immigrant workers to be covered by workers’ compensation.[vi]

Even if a claimant meets the definition of “employee” in his state, he has only cleared one hurdle to recovery. He still must show that his alleged employer is recognized as an employer under the law.

Who is an “Employer?”

“Employers” are the entity or person having control over an employee’s work.[vii] They include both private and public entities, such as state government and its subdivisions. Some states create a threshold number of employees that an employer must have before it is considered an employer.[viii] For instance, South Carolina requires an employer have four employees to fall under the workers’ compensation scheme.[ix] California requires that employers with only one employee must carry workers’ compensation insurance.[x] Alternatively, in most cases Texas does not mandate that employers carry workers’ compensation coverage at all.[xi]

The purpose of the minimum number of employees requirement is to alleviate small businesses from the administrative burden of the workers’ compensation system.[xii] Some states, such as South Carolina and Kansas, go even further to protect small businesses by requiring employers to have a minimum payroll.[xiii] Traditionally conservative states may be more likely to impose protections that exclude small businesses, whereas traditionally liberal states may not.

As with the term employees, some employers may be statutorily excluded from workers’ compensation. For instance, if state law exempts volunteers from “employees,” then one who only supervises gratuitous workers cannot be an employer. Likewise, if state law exempts agricultural employees, one who only hires agricultural workers cannot be an employer, and so forth.

Some states exclude charitable organizations from the definition of “employers” even as to their paid employees. The rationale is that if the state provides charitable immunity – the charitable organizations cannot be sued under regular tort law - then such organizations should also be exempt from workers’ compensation claims, as such claims are often a replacement for recovery in a regular tort action.[xiv]

The employer-employee relationship can become complicated in situations such as a construction project, where there are multiple parties contributing to the completion of the final project. In these instances, it is not uncommon for a project to have an owner, a general contractor, sub-contractors, and sub-sub-contractors. Furthermore, each party can have employees of their own. In these situations, at least 42 states apply contractor-under statutes.[xv]

Contractor-under statutes impose an employer-employee relationship between parties where a higher-level employer was not the immediate employer of the injured worker. Here, we refer to the employer as the “statutory employer,” and the employee as the “statutory employee.” Even where contractor-under statutes apply however, liability is only imposed if the statutory employee’s work was part of the statutory employer’s business.[xvi]

The purpose of these contractor-under statutes is two-fold: first, to ensure coverage for the workers who are exposed to the risks of the business; and second, to place the burden of paying compensation on the higher level statutory employer who organizes the enterprise. This ensures that workers are covered by workers’ compensation, when they otherwise might not be.[xvii]

 Though workers’ compensation law varies from state to state, many principles are generally applicable. If the claimant can demonstrate that he is an employee and the defendant is an employer, then the employer-employee relationship is established and workers’ compensation law will apply.


Footnotes

[i] Spencer v. Johnson & Johnson, Seafood, Inc., 393 S.E.2d 291 (1990)(citing Ramey v. Sherwin-Williams Co., 374 S.E.2d 472, 473 (1988)).

[ii] Id. (quoting G.S. sec. 97-2(2)); State of California, Department of Industrial Relations. (Jan. 2014). DWC glossary of workers’ compensation terms for injured workers [defining “employee”]. Retrieved from https://www.dir.ca.gov/dwc/WCGlossary.htm

[iii] Beard, G. L., Poteat, S. T., Lamar, M. J., Sumwalt, V. R., Bluestein, M. M., & Sullivan, A.P. (2012). The law of workers’ compensation insurance in South Carolina sixth edition (p. 4 n.21). Columbia, S.C.: South Carolina Bar Continuing Legal Education (citing Alewine v. Tobin Quarries, Inc., 33 S.E.2d at 83. See also Nash v. AT&T Nassau Metals, 363 S.E.2d 695 (1987); Spivey v. D.G. Constr. Co., 467 S.E.2d 117 (Ct. App. 1996))

[iv] Spencer, at 293-294 (citing Hayes v. Elon College, 29 S.E.2d 137, 140 (1944)); Beard, at 9-13; DWC glossary of workers’ compensation terms [defining “independent contractor”].

[v] Beard, at 7-8 nn. 37-39, 43, 46-47; New York State Workers’ Compensation Board (n.d.). Employers/Business, Workers’ Compensation [Who is not covered by the workers compensation law?]. Retrieved from http://www.wcb.ny.gov/content/main/Employers/Coverage_wc/empWhoNotCovered.jsp

[vi] Hosier, F. (2011, March 16). Safety News Alert. U.S. Supreme Court passes on illegal immigrant workers’ comp case. Retrieved from http://www.safetynewsalert.com/u-s-supreme-court-passes-on-illegal-immigrant-workers-comp-case/ ; DWC glossary of workers’ compensation terms [defining “employee”].

[vii] DWC glossary of workers’ compensation terms [defining “employer”].

[viii] Beard, at 32.

[ix] Id. at 34.

[x] State of California, Department of Industrial Relations. (2016, June). Answers to frequently asked questions about workers’ compensation for employers [Q. Who is required to purchase workers’ compensation insurance?]. Retrieved from https://www.dir.ca.gov/dwc/faqs.html

[xi] Texas Department of Insurance. (2017, Feb. 1). Employer Frequently Asked Questions [1. As an employer in Texas, do I have to buy workers’ compensation insurance for my employees?]. Retrieved from http://www.tdi.texas.gov/wc/employer/employerresources.html#q1

[xii] Beard, at 36.

[xiii] Id. at 36 n.219; National Federation of Independent Business. (2015, March 18). Workers’ Compensation Law – State by State Comparison. Retrieved from http://www.nfib.com/content/legal-compliance/legal/workers-compensation-laws-state-by-state-comparison-57181/

[xiv] Beard, at 37.

[xv] Id. at 40-41.

[xvi] Id.

[xvii] Id.