COVID-19 Resource Center

July 14, 2021

PENNSYLVANIA WORKERS’ COMPENSATION COURT DEFINES “INDEPENDENT CONTRACTOR”

The COVID-19 pandemic undoubtedly changed many things for employers in Pennsylvania including how and where work is completed.  As restrictions on businesses have gradually been lifted, the hybrid workplace has evolved and is gaining more traction as a standard practice.  More and more employers are choosing a workplace model that allows for flexibility and efficiency in the workplace, including the use of remote workers and independent contractors.  More frequently, individuals looking for work are classifying themselves as “independent contractors” to maintain flexibility in their work environment.  This classification as “independent contractors” is also beneficial to employers, as independent contractors are not entitled to workers’ compensation benefits under the PA Workers’ Compensation Act.  However, all employers should be cognizant that the mere classification of an individual as an “independent contractor,” even in the context of a written independent contractor agreement, does not necessarily protect employers from liability under the PA Workers’ Compensation Act if the “independent contractor” sustains an injury on the job.

Although the workplace landscape continues to evolve and the use of “independent contractors” is becoming more common in the wake of the pandemic, the Pennsylvania Commonwealth Court has recently handed down a Decision that reminds employers of the long-standing analysis by which the courts determine whether an individual is an “employee” or “independent contractor” for purposes of determining entitlement to workers’ compensation benefits.  In Berkebile Towing and Recovery v. WCAB (Harr, SWIF and UEGF), 220 CD 220, filed May 10, 2021, the Commonwealth Court found that an employee-employer relationship existed despite a written Independent Contractor agreement that included specific language that:

  • Expressly denied the existence of an employer/employee relationship;
  • Acknowledged the Claimant’s ability to decline jobs; and,
  • Provided for payment of the Claimant by the job rather than by time.

Instead, the Commonwealth Court considered a variety of factors to analyze the Employer’s degree of “control” over the Claimant, including:

  • The Employer’s control over the tow vehicle used by the Claimant;
  • The company’s name emblazoned on the truck; and,
  • The Employer’s control over how the truck could be used.

This recent case is a good reminder to all employers that it is the degree of control over an individual’s work that is the key factor in deciding whether an employment relationship exists for purposes of establishing entitlement to benefits under the PA Workers’ Compensation Act.

 The use of 1099s or a written agreement, while important, will not necessarily protect a business from liability under the Act.  When structuring a business and considering the use of “independent contractors,” employers should remain mindful that the Court will consider all of the following factors to determine whether that “independent contractor” should be classified as an “employee” and thus entitled to benefits under the Act for any work-related injury:

  • Terms of the agreement between the parties;
  • Nature of the work/occupation and skill required for performance;
  • Which party supplied the tools;
  • Whether the payment is by time or by the job;
  • Whether the work is part of the regular business of the “employer”;
  • Right to terminate the working relationship at any time; and,
  • Responsibility for the result only.

While all of these factors are important to the analysis, the Court has held that the most important factor in determining the existence of an employment relationship is the right to control either the work to be done or the manner in which it is performed.  Universal Am-Can, Ltd. v. WCAB (Minteer), 782 A.2d 328 (Pa. 2000).

The attorneys at Cipriani & Werner, P.C, are experienced litigators in both employment law and workers’ compensation law.  This cross-expertise is necessary to ensure that an Employer is adequately protected against all claims by employees or independent contractors.  Please contact the experienced attorneys at C&W to ensure that your business interests are adequately protected when restructuring a business to utilize independent contractors at EmploymentLaw@c-wlaw.com or 1-888-488-2638.