Can You be Held Liable for an Independent Contractor’s On-the-Job Injuries?
Many business owners hire independent contractors because it reduces overhead costs and liability. At least, that is what many business owners believe. While it is true independent contractors are not eligible for workman’s compensation, they are not exempt from liability altogether.
Classification of an Independent ContractorAccording to the IRS, there are three factors that must be considered to determine whether or not an individual is an independent contractor. Those three factors include:
1. Behavior: Do you have control, or the right to control, how the individual performs his or her job?
2. Finances: Who controls the business aspects of the job - the worker or yourself? Business aspects include things like how and when the workers is paid, who provides tools and supplies, and whether or not the worker is to be reimbursed.
3. Relationship: Do you and the worker operate under a business-type contract or an employee/employer-type contract? This is best answered by evaluating whether or not the worker receives benefits such as a pension plan, insurance, vacation, etc. Additionally, it is important to consider the length of the relationship (is it ongoing for the foreseeable future), as well as whether the work being performed is a key aspect of the business.
While no one factor alone makes a determination about your relationship with the worker, it is important to consider each factor and weigh your answers to each. It is important to look at your relationship with the worker in its entirety and to make a reasonable determination based on your assessment (as an aside, the IRS test is not dispositive of the issue because other California rules apply).
Compensating an Independent Contractor for InjuriesWorking with independent contractors poses a new set of legal concerns for business owners, namely, have they wrongly classified an employee as an independent contractor? If they did, they risk having to pay the worker not only for their injuries, but also for unpaid overtime and benefits. Assuming that you correctly classified the worker as an independent contractor, you are still not free of liability for his or her injuries. In fact, you may face more liability than if the individual was eligible for workers' compensation. When an employee is injured, their sole remedy is workers' compensation. Damages are limited to lost wages, medical expenses, and possibly vocational rehabilitation. However, when an independent contractor is injured on the job, and if there is no contract stipulating what you are and are not responsible for, the injured individual may file a third-party claim against you.
Third-party claims, if successful, can be significantly more burdensome for you as the employer than had the injured party been eligible for workers' compensation. If the worker can establish a casual connection between your actions or omissions and their injury and that your actions or omissions amounted to negligence, then you might find yourself embroiled in a lawsuit. If the worker wins his or her case, you may have to pay for much more than just lost wages and medical expenses; you may also have to pay for pain and suffering, mental anguish, loss of earning capacity, future lost income, cost of future medical care, household expenses, and punitive damages.