Are you an employee or a contractor?

Suppose you get hurt at work and your boss says you are not an employee so they do not have to pay you workers compensation. You may wonder if you are an employee or a contractor. This is a very big issue (and problem) because sometimes employers try to cut corners and save money by labeling their workers as “contractors.” These employers do not pay payroll taxes and at the end of the year they give their “contractor” workers an IRS Form 1099 rather than a Form W-2. Employers do not need to pay taxes or insurance for legitimate contractors, so some employers give in to the temptation to label their employees “contractors.” So how do we know if a worker is an employee or a contractor?

The general rule is that employers have a right to control employees but do not have a right to control contractors. In 1996, in a case called Glover v. Boy Scouts, the Utah Supreme Court explained the factors to be used in applying the “right to control” test. The Court looks at: (i) whatever covenants or agreements exist concerning the right of direction and control over the employee; (ii) the right to hire and fire; (iii) the method of payment (i.e., wages versus payment for a completed job or project); (iv) the furnishing of equipment; (v) the intent of the parties; (vi) the business of the employer; (vii) compensation; (viii) and direction and control.

Hypothetical Situation #1: Employer requires a new worker to sign a document saying she is a volunteer. But the employer then pays the worker an hourly wage, provides training, requires the worker to comply with workplace rules of behavior, and controls the worker’s work schedule. In this situation, the Labor Commission found the worker was an employee.

Hypothetical Situation #2: Employer owns a rental home and kindly allows an unemployed man to live there as a tenant. This tenant performs repair work at the employer’s business on an irregular basis to “pay back” the employer’s kindness. Employer does not provide a uniform to the tenant or put him on the business payroll, while the employer does provide uniforms to other employees who are on the payroll. Also, employer does not control the tenant’s work hours–tenant just shows up when he wants. In this situation, this tenant was a volunteer, not an employer nor a contractor.

This area of the law is very fact-dependent so we recommend that injured workers contact us at (435) 592-1235 for a free initial case review as soon as possible. Depending on a details of the case, we can help file a claim against the workers compensation policy or against the business’s general liability policy.