Workers’ Compensation for Independent Contractors

Workers’ Compensation and Independent Contractors

Dating back to August 2010, the New York State Construction Industry Fair Play Act was signed into law (Ch. 418). The new law made an amendment to the Labor Law and Workers’ Compensation Law which would establish a presumption of employment in the construction industry. This statute then took effect in October 2010. For the purpose of workers’ compensation, this applies to accidents occurring on or after that date.

At the core of the Labor Law § 861-C, is that any person performing services for a contractor is presumed to be an employee of that contractor. A contractor is defined as any sole proprietor, partnership, firm, corporation, limited liability company, association or other legal entity permitted to do business within the state who engages in or with construction work. Labor Law § 861-C is incorporated by specific reference into Workers’ Compensation Law § 2(4). Because of this, any worker performing services for a contractor who was injured on or after October 26, 2010, is presumed to be the employee of that contractor for workers’ compensation purposes, subject to the independent contractor test contained in the statute.

Fair Play Act

In accordance to the Fair Play Act, a person who works in the construction industry is assumed to be the employee of the person of business he/she is working under.

A.The employer must demonstrate all three of the following criteria for a person to be an independent contractor:

  1. The person is free from control and direction in performing the job, both under contract and in fact,
  2. The person is performing services outside of the usual course of business of the company, and;
  3. The person is engaged in an independently established trade, occupation or business that is similar to the service he/she performs.

The law also advises how to determine when a sole proprietor, partnership, corporation or other entity would be considered a “separate business entity” from the contractor. Should an entity meet each piece of criteria, it will not be considered an employee of the contractor. Rather, it will be a separate business entity that is subject to the new law regarding its own employees.

Identifying When Workers’ Comp Coverage Is Not or Cannot be Required

Businesses cannot require employees working for the business to obtain their own workers’ compensation insurance policy or contribute towards a policy (WCL §31, 32 and 32-a). Independent contractors might be required to obtain and maintain their own workers’ comp insurance policy if they plan to work for other businesses. In turn, businesses may require an independent business working as a subcontractor to obtain their own workers’ comp insurance policy and obtain a certificate of insurance for this policy.

Independent Contractors Outside of Construction Industries

In situations where an independent contractor does not work within the construction industry, a judge will need to consider the following factors to determine whether an individual is an independent contractor and not an employee:

  1. Control the time and manner with which the work is to be completed; and
  2. Obtain a Federal Employer Identification Number from the IRS or have filed business or self-employed income tax returns with the IRS based on the work of service that was performed during the previous calendar year;
  3. Maintain a separate business establishment from the hiring business;
  4. Perform work that is different than the primary work of the hiring business and perform work for other businesses;
  5. Operating under a specific contract, and is responsible for satisfactory performance of work and is subject to profit or loss in performing the specific contract, and be in a position to succeed or fail if the business’ expenses exceeded the income.
  6. Obtain a liability insurance policy under its own legal business name and federal employer identification number (and when appropriate, workers’ comp and disability benefits insurance policy);
  7. Have recurring business liabilities and obligations;
  8. If it has business cards or advertisers, the materials must publicize itself, not another entity;
  9. Provide all equipment and materials necessary to fulfill the contract; and
  10. The individual works under his/her own operating permit, contract or authority.

If you are an injured worker who is in need of assistance filing for workers’ compensation, contact our office today. Our attorneys offer a free initial consultation during which time we assess the facts of your case and give you an idea as to what you can expect during your case.