Independent Contractors in Iowa: Do they fall under the Workers’ Compensation Act?
It is a continual question as to whether an independent contractor is entitled to coverage under the Iowa Workers’ Compensation Act. In general, independent contractors are not entitled to coverage under the Act. However, independent contractors can make a formal election to come under the provisions of the Act.
The court will contemplate many relevant factors when considering whether an individual is an employee or an independent contractor, including whether there is an employer-employee relationship. Specifically, the court will consider five factors:
(1) The right of selection, or to employ at will;
(2) Responsibility for wage payment by the employer;
(3) The right to discharge or terminate the relationship;
(4) The right to control the work; and
(5) The identity of the employer as the authority in charge of the work or for whose benefits it is performed. Iowa Mut. Ins. Co. v. McCarthy, 572 N.W.2d 537 (Iowa 1997).
Further, the Iowa Supreme Court has identified eight additional factors in considering whether an individual is an employee or independent contractor in Mallinger v. Webster City Oil Co., 211 Iowa 847, 234 N.W. 254 (1931). Despite these factors, no single factor is controlling and the determination is ultimately made on a case-by-case basis. Usgaard v. Silver Crest Golf Club, 256 Iowa 453, 127 N.W2d 636 (1964). The eight factors include:
(1) The existence of a contract for the performance by an individual of a certain piece of kind of work at a fixed price. If a written contract defines the relationship as that of an independent contractor and there is nothing in the performance by the parties inconsistent with the described relationship, then the individual is an independent contractor.
(2) The independent nature of an individual’s business or of an individual’s distinct calling. Evidence that the individual is providing distinct and specialized services is illustrative the individual is an independent contractor. The evidence to consider is whether the individual: performs the same or similar services for others; has other sources of income; and holds himself or herself out as an independent business owner. If there is an exclusive relationship between the individual and the business, it is most likely the individual will be considered a business employee.
(3) The employment of assistants with the right to supervise activities. If the individual is paying wages and supervising his or her employees, it would tend to show an independent contractor relationship.
(4) The obligation to furnish necessary tools, supplies, and materials. The individual may be considered to be an employee if the employer supplies the instrumentalities for the individual to carry out the necessary job duties, the required tools, or the place at which the work is performed.
(5) The right to control the progress of the work, except as to final results. If the employer has a right to control or determine the manner the work is done by the individual, the individual is likely an employee. The court will examine the amount of control an employer has over the methods and means the individual uses to complete the work. However, the employer can maintain enough control over the individual’s work to ensure performance of the contract is done in accordance with the contract’s terms without changing the individual’s status as an independent contractor.
(6) The time for which the individual is employed. A continuous relationship suggests the individual is an employee; but if the project is of a limited length, it suggests the individual is an independent contractor.
(7) The method of payment, whether by time or by job. Payment by the hour and income deduction and social security taxes from remuneration tend to show an employer/employee relationship.
(8) Whether the work is part of the regular business of the employer. If the tasks performed by the individual represent an integral part of the business of the employer, it suggests the individual is an employee.
What are your intentions when you hire an independent contractor? Are you taking these factors into consideration? Concerned your independent contractor might be an “employee” with these factors? If so, please contact Iowa Workers’ Compensation attorneys, Zach Anderson at firstname.lastname@example.org, or Paul Barta at email@example.com, or 402.475.1075.