A Very Sad Story
Several days ago I was reading a news article on the Internet.
It told of a 19 year old young man who went to work for a Tree
Service Company in North Carolina. On his first day of work he
was given the job of putting tree limbs and other tree debris into
the wood chipper for disposal. He somehow became entangled in the
tree limbs and was sucked into the wood chipper. He died immediately.
Upon hearing of the young man’s death, the owner of the tree
service company had a heart attack. The owner survived and later
told the newspaper in his statement that the young man was classified
as a subcontractor (independent contractor) working for his company
when the incident occurred….. But was he really an
independent contractor, or should he have been classified as an
All States have Worker’s Compensation (W.C.) laws. Each
one varies a little from the others. For this discussion I will
concentrate on North and South Carolina laws. North Carolina requires
employers to carry W.C. insurance coverage if the company has 3
or more employees. South Carolina requires employers to carry W.C.
insurance coverage if the company has 4 or more employees. Both
State laws require that when a worker dies from an injury due to
an accident which occurs within the course of employment, there
is a statutory method and amount for the distribution of that employee’s
W.C. death benefit compensation. Both North and South Carolina
law provides that upon the death of an employee from an accident,
the employer shall (usually through the worker’s compensation
insurance carrier) cause to be paid 500 weeks of compensation,
at the rate of 66 2/3% of the employee’s weekly wage.
North Carolina also stipulates that an additional $10,000 be paid
to cover burial expenses. South Carolina requires an additional
$2,500 for burial expenses. However none of this applies if the
individual was truly an independent contractor……..
But was he really an independent contractor, or should he have
been classified as an employee?
On July 15, 2015, the United States Department of Labor (DOL)
issued a 15-page memorandum, Administrator’s Interpretation
#2015-1, which includes new standards that significantly narrow
the ability for employers to classify individuals as “independent
contractors”. Under this interpretation most workers will
be classified as “employees” under the Fair Labor Standards
Act (FLSA). In the memorandum the DOL details an “Economic
Realities Test” that must be used to determine whether the
worker is economically dependent on the employer (and thus an employee)
or is he really in business for himself (and thus is an independent
contractor). The subjective nature of the DOL’s interpretation
creates substantial challenges for companies who wish to maintain
their independent contractor relationships.
According to the DOL, for each independent contractor relationship,
employers should look at the following six factors.
- The extent to
which the work being performed by the independent contractor
is an integral part of the employer’s business.
If the worker is performing the same work that the company is
in the business of providing, then the worker is probably an
worker’s opportunity for profit or loss depending
on his or her managerial skills. A worker who has the opportunity
to hire others or purchase equipment and materials in order to
increase his own profits is more likely to be considered to be
an independent contractor.
- The extent of the relative investments
of the employer and the worker. Workers should make some "significant"
investments in their business in order to be considered an independent
contractor who is in business for themselves.
- Whether the work to be performed
requires special skills and initiative. A worker’s business
skills, judgment and initiative, not his technical skills, will
aid in determining whether the worker is economically independent.
Independent contractors have the opportunity to make a profit
or to incur a loss.
- The permanency of the relationship. A long term
relationship between the employer and the worker indicates that
the worker is an employee. Typically, an independent contractor
works one project for an employer and then moves on to another
contract for another employer.
- The degree of control exercised by
the employer over the worker. Independent contractors must control
meaningful aspects of the work to be performed such that it is
possible to view the worker as a person who is conducting his
The profile of a typical Independent Contractor would look something
He/she is in business for him/herself and has/does the following:
- Marketing materials.
- Web site/Facebook page.
- City/county business license.
- Membership in business/community
- Liability insurance.
- An established office with needed materials.
- Works for a variety
of businesses and organizations.
- Submits contracts for work to be
- Is paid when the contract is completed.
- Works at his desired time
and location using his own methods and materials.
- Has the very real
possibility of making a profit or incurring a loss.
of this is an EMPLOYEE.
So the question remains. Was this young man an Independent Contractor,
or should he have been classified as an employee and therefore
eligible to receive his worker’s compensation death benefits?
Paul Hilton Human Resources Consulting works with our clients to insure that all required documentation is correct and sufficient to successfully defend against a claim to any unemployment compensation commission.
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