Contractors vs. Employees: A Matter of Context

Is the person working for you an independent contractor or an employee? You need to recognize the term “independent contractor” has a different definition in different contexts. Your independent contractor may be an employee depending on whether the question is tort liability, withholding liability, minimum wage liability or workers’ compensation liability. A recent Washington decision illustrates the point that Washington’s workers’ compensation statute casts a wide net over independent contractors.

In a recent unreported decision, Xenith Grp., Inc. v. Dept. of Labor & Indus., Xenith was a home health care referral agency that hired independent contractors to provide home care services under a contract with the Department of Social and Health Services. The independent contractors each had a written contract with Xenith which stated that they were not an employee of Xenith. The independent contractors were required to maintain their own tax and business records and Xenith had no control over their work performance. One of the independent contractors was injured and filed a workers’ compensation claim. As a result of the claim, Labor & Industries audited Xenith and determined that the independent contractors were workers and premiums were owed. Xenith disputed this finding and relied on a well established general principle that a person is not an employee unless they consent to the employment relationship and the employer exercises a requisite level of control over their work.

The Court of Appeals rejected the argument and emphasized that Washington’s workers’ compensation statute controls over general principles of common law. The statute expressly includes all independent contractors who primarily provide personal labor. It is still possible for an independent contractor who provides personal labor to not be a worker if that person meets a six part test laid out in the statute. Because Xenith’s independent contractors did not meet each element of the six part test, they were workers for the purpose of workers’ compensation even though they did not consent to an employee relationship.

This is just one recent example of the complicated questions that arise when analyzing the independent contractor vs. employee relationship. Context matters and your independent contractor could be a true independent contractor in some situations but an employee in others.

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