EMPLOYEE OR INDEPENDENT CONTRACTOR? THE TEST THAT WILL DETERMINE LIABILITY FOR WORKERS’ COMPENSATION

Whether or not a worker is considered an employee or an independent contractor can determine liability for workers’ compensation benefits under the Nebraska Workers’ Compensation Act. The Court of Appeals of Nebraska recently revisited the ten factor test to determine if a worker was an employee or an independent contractor in Wright v. H & S Contracting.

The ten factors used to determine whether a worker is an employee or an independent contractor were originally articulated in Larson v. Hometown Communications, Inc. in 1995. The factors include:

1. The extent of control which, by the agreement, the employer may exercise over the details of the work;
2. Whether the one employed is engaged in a distinct occupation or business;
3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
4. The skill required in the particular occupation;
5. Whether the employer or the one employed supplies the instrumentalities, tools, and the place of work for the person doing the work;
6. The length of time for which the one employed is engaged;
7. The method of payment, whether by the time or by the job;
8. Whether the work is part of the regular business of the employer;
9. Whether the parties believe they are creating an agency relationship; and
10. Whether the employer is or is not in business.

The Court of Appeals of Nebraska affirmed the Compensation Court’s factual findings regarding several of the articulated factors in Larson. For example, when considering the level of supervision, the Compensation Court found that the worker was more likely an independent contractor because he could come and go as he saw fit, and rarely met with H & S supervisors.

Another consideration was the tools the worker used on the job site. The Compensation Court found that not only did the worker in Wright pay for and supply his own tools, he also claimed his tools as a work expense on his taxes. The Compensation Court found this too weighed in favor of finding the worker to be an independent contractor, a finding that was not found to be erroneous by the Court of Appeals of Nebraska.

The Compensation Court also observed that H & S employees were paid per hour, whereas the worker in Wright was paid per job. This fact also weighed in favor of finding the worker to be an independent contractor.

Finally, the Compensation Court found that there was no agreement by either party to create an employer/employee relationship. Oftentimes the intent of the parties plays a minor role in determining if an injured worker is an employee or an independent contractor. However, in Wright, the employer, H & S Contracting, had tried to hire the worker as a full-time employee. The evidence at trial showed that the worker had refused this offer because he liked making his own hours and the ability to “take winters off.” The Compensation Court found that this refused offer to become an employee of H & S weighed in favor of finding the worker to be an independent contractor, another finding that was not found to be erroneous by the Court of Appeals of Nebraska.

The key takeaway from Wright v. H & S Contracting is that determining if a worker is an independent contractor is an extremely case-specific determination. Litigants should be careful to not only consider the typical factors under Larson, but should also be on the lookout for other facts that support their position. If you have additional questions about whether a worker is an employee or an independent contractor, please contact Paul Barta or Micah Hawker-Boehnke at 402-475-1075, for more information.