In an over-regulated complex
business economy such as ours, the use of independent contractors is undeniably
attractive. The contractor is
responsible for his or her own withholdings and taxes, and the employer doesn’t
have to pay workers’ compensation or unemployment compensation premiums.
At least as far as workers’
compensation is concerned, the use of independent contractors can be a mine
field. The moment that contractor is
injured while working on your job, you’ve got a potentially big, expensive
problem. If you haven’t established your
relationship properly with the contractor, your business could be on the hook
for the contractor’s medical expenses and lost time compensation out of pocket,
dollar for dollar. The Ohio Bureau of
Workers’ Compensation is not shy about tagging your business as the “employer
of record” for an independent contractor’s work related injury. And if you had assumed the contractor was not
an employee and you weren’t paying workers’ compensation premiums, the claim
will be considered a “non-compliant” claim that will stick with you as long as
the claim is alive.
A few simple steps might help
in proving to the BWC and Industrial Commission that the business relationship between
your company and an independent contractor was not of an employer/employee
nature.
1.
Before any work begins, obtain
a copy of your contractor’s BWC certificate of premium coverage and make sure
you require him or her to provide you with an updated copy every six months. If your contractor doesn’t have BWC coverage,
tell him or her that there’s no work until they do have it. Direct them here to apply.
2.
Step number one includes
domestic workers employed at your residence. Do you have a nanny or someone who cleans your
house for you? Someone who mows your
lawn, perhaps? Step one applies as long
as you are paying them $160 or more per quarter. Some situations may require that you as the
homeowner pay for their BWC coverage.
Have questions? Call us.
3.
Consider writing up an
agreement with the contractor which outlines your relationship, including who
is responsible for what, payment terms, and separation terms. An attorney could draft an agreement for you
easily in order to offer your business the most protection.
4.
The less control your business
has over the contractor, the better. If
your business dictates the hours of work, the manner or method of work, the
tools to be used, the order of work, etc., then you might easily be considered
an employer to the contractor, and would be responsible for workers’
compensation premiums.
5.
An independent contractor
should be able to make his or her services available to the general public, and
should not necessarily be required to perform the work personally.
6.
Have your contractor keep
track of his or her own hours and invoice you for the time.
7.
If you have any doubts about whether
or not your contractor might be construed as an employee, by all means, call us
to discuss the situation.
The Ohio Revised Code
addresses the issue of independent contractors specifically as they relate to
construction contracts. O.R.C. 4123.01 (A)(1)(c)
lists twenty criteria to be considered in determining whether an independent
contractor is an employee. A person is
an employee, not a contractor, if at least ten of these questions apply to
him/her. While some of these questions
are worded awkwardly, and they technically apply only to construction
contracts, Ohio courts have found these questions instructive in considering
whether injured workers are employees or not regardless of the industry. Read them for yourself, and consider them
before using any independent contractor.
4123.01 (A)(1) “Employee”
means:
(c) Every person who performs labor or provides services
pursuant to a construction contract, as defined in section 4123.79 of the Revised
Code, if at least ten of the following criteria apply:
(i) The person is required to comply with instructions
from the other contracting party regarding the manner or method of performing
services;
(ii) The person is required by the other contracting party
to have particular training;
(iii) The person's services are integrated into the
regular functioning of the other contracting party;
(iv) The person is required to perform the work
personally;
(v) The person is hired, supervised, or paid by the other
contracting party;
(vi) A continuing relationship exists between the person
and the other contracting party that contemplates continuing or recurring work
even if the work is not full time;
(vii) The person's hours of work are established by the other
contracting party;
(viii) The person is required to devote full time to the
business of the other contracting party;
(ix) The person is required to perform the work on the
premises of the other contracting party;
(x) The person is required to follow the order of work set
by the other contracting party;
(xi) The person is required to make oral or written
reports of progress to the other contracting party;
(xii) The person is paid for services on a regular basis
such as hourly, weekly, or monthly;
(xiii) The person's expenses are paid for by the other
contracting party;
(xiv) The person's tools and materials are furnished by
the other contracting party;
(xv) The person is provided with the facilities used to
perform services;
(xvi) The person does not realize a profit or suffer a
loss as a result of the services provided;
(xvii) The person is not performing services for a number
of employers at the same time;
(xviii) The person does not make the same services
available to the general public;
(xix) The other contracting party has a right to discharge
the person;
(xx) The person has the right to end the relationship with
the other contracting party without incurring liability pursuant to an
employment contract or agreement.
Every person in the service of any independent contractor
or subcontractor who has failed to pay into the state insurance fund the amount
of premium determined and fixed by the administrator of workers' compensation
for the person's employment or occupation or if a self-insuring employer has
failed to pay compensation and benefits directly to the employer's injured and
to the dependents of the employer's killed employees as required by section 4123.35 of the
Revised Code, shall be considered as the employee of the person who has entered
into a contract, whether written or verbal, with such independent contractor
unless such employees or their legal representatives or beneficiaries elect,
after injury or death, to regard such independent contractor as the employer.
