Iowa Workers’ Compensation Refresher: Independent Contractors
Independent Contractors are not generally entitled to coverage under the Act. Nonetheless, like self-employed persons, independent contractors can make a formal election to come under the provisions of the Act. IOWA CODE §85.61(11).
In order to determine whether or not an employer-employee relationship exists, five important factors must be considered: (1) the right of selection, or to employ at will, (2) responsibility for payment of wages 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 benefit it is performed.
The Iowa Supreme Court has identified eight further factors to consider when determining whether a person is an employee or an independent contractor. Mallinger v. Webster City Oil Co., 211 Iowa 87, 851, 234 N.W. 254 (1931). No one factor is more critical than the next and the cases are all decided on a case-by-case basis. Usgaard v. Silver Crest Golf Club, 256 Iowa 453, 459, 127 N.W.2d 636, 639 (1964). The factors should be understood as part of a scale, balancing whether or not the relationship is more dispositive of an employee, or an independent contractor. For clarification purposes, reference to an individual in the following factors means the person in which it is to be determined whether he is an employee, or an independent contractor. The factors include:
- The existence of a contract for the performance by a person of a certain piece or kind of work at a fixed price.
In other words, what is the effect of the written contract on the employment status? Where a written contract defines and describes the relationship as that of an independent contractor and there is nothing in the performance by the parties which is inconsistent with the relationship described, the balance is tipped strongly in favor of calling the party an independent contractor.
- The independent nature of a person’s business or of a person’s distinct calling.
This factor requires the fact finder to consider whether or not the worker is providing a specialized service, whether such skills are offered for others, whether this service is the individual’s only source of income, and whether the worker holds himself out as an independent business owner (for example, in his or her marketing materials). The more exclusive the relationship, the more likely the person is an employee of that business.
- The employment of assistants with the right to supervise activities.
If the individual is paying for and supervising his own employees, it more dispositive of the person being an independent contractor.
- The obligation to furnish necessary tools, supplies, and materials
If the employer supplies such instrumentalities, it is more likely the person is an employee.
- The right to control the progress of the work, except as to final results
Where the employer has a right to control or determine the manner in which the work is done, it is more like an employer-employee relationship. Do note, however, an employer is allowed to maintain enough control over the person’s work to ensure quality without jeopardizing the individual being called an employee.
- The time for which the workman is employed
A continuous relationship is more instructive of an employee, where a limited employment suggests the worker is an independent contractor.
- The method of payment, whether by time or by job
Most specifically, if income and social security taxes are deducted, an employer-employee relationship is the stronger argument.
- Whether the work is part of the regular business of the employer
If the tasks performed represent an integral part of the business of the employer, it suggests the worker is an employee.
In addition to weighing the aforementioned factors, the intentions of the parties to create a particular relationship are considered. For example, in Funk v. Bekins Van Lines Co., 1 Iowa Indus. Comm’r Rep. 82, 83 (1980), the fact the employer purchased worker’s compensation insurance to cover the employee or believed the employee would be covered under a worker’s compensation policy is strong evidence of the intent to create an employer-employee relationship.
In sum, the determination of whether an injured worker is an independent contractor not covered under Iowa Workers’ Compensation laws or an employee covered under the same requires assessment of a number of factors. If you have a question about any of these factors, or general questions related to Iowa Workers’ Compensation law, please contact Michael Sands (firstname.lastname@example.org) or Paul Barta (email@example.com).