Restaurant Law Blog

Sunday, January 9, 2011

Is Your Contractor Actually An Employee? If So, You May Not Be Liable.

Independent Contractors are commonplace in the construction industry.  The practice is encouraged by the need for specialized expertise or larger labor forces on particular projects.  For these and other reasons, contractors often seek to engage independent contractors on a temporary basis in place of hiring full-time employees.  The obvious benefit to this is that while hourly compensation rate for an independent contractor can exceed that on a full-time employee, the employer is not faced with the need to provide fridge benefits and can maintain a small workforce during downtime without the trauma that accompanies the discharge of employees no longer needed for a specific contract.  The obvious downside to such an arrangement is that when an independent contractor is injured on the jobsite, he may not fall under a company’s Worker’s Compensation (“WC”) policy enabling that worker to seek recourse against the company through a personal injury lawsuit.  Indeed, an injured worker employed by a temporary manpower agency (or his general employer) often files a claim for WC benefits under his general employer’s policy and then turns around and sues the construction outfit which was using his services on an independent contractor basis.

 What is often unknown to the construction industry is that courts consider many independent contractors to be ‘special employees’ of the construction outfit that is temporarily employing them.  This in turn, permits an independent contractor to seek relief under the temporary employer’s (or ‘special employer’) WC policy and potentially frees the special employer from having to litigate a personal injury claim.

 The law is well established that the sole remedy of an employee against his employer for injuries sustained in the course of employment is benefits under the WC Law.  By applying for and accepting Worker’ Compensation benefits, an employee forfeits any rights he may have had to bring an action against his employer for personal injury.  The purpose for this is to prevent duplicative recoveries against the plaintiff’s employer.  The liability of a ‘special employer’ is precisely the same as a general employer under the WC Law in that a compensation award can be made against either the special employer or general employer or both.  The ‘special employee defense’ is based upon the relinquishment of control of an employee by the general employer to the direction and supervision of the special employer.

 The leading case on this matter is Thompson v. Grumman.  In Thompson, the Court of Appeals held that the plaintiff was a special employee of Grumman, where ATS (a temporary manpower agency) hired plaintiff, specifically to work for Grumman even though the contract between ATS and Grumman specifically stated that “persons employed by ATS remain employee of ATS at all times and not of Grumman.”  The court reasoned that Grumman had a right to interview and make final selection of the employees it brought on to the jobsite, plaintiff’s daily work was in furtherance of Grumman’s business and he was employed solely to meet Grumman’s needs.  Additionally, Grumman assumed and exercised direct control, knowledge and expertise with respect to plaintiff’s labor, Grumman fixed the plaintiff’s hourly wages and benefits, and had the authority to hire or terminate employment at the jobsite.  Additionally, all workers were required to report on a daily basis to a Grumman supervisor.  ATS however, provided plaintiff’s paycheck; WC insurance withheld Social Security but billed Grumman for these services.

 The court has repeatedly upheld the general proposition set forth in Thompson, that a general employee of one employer may also be in the special employ of another, notwithstanding the general employer’s responsibility for payment of wages for maintaining WC and other employee benefits.  The courts have described a special employee as one who is transferred for a limited time of whatever duration to the services of another.  Generally, there is a presumption of general employment that can be overcome only by a clear demonstration of surrender of control by the general employer as there was in Thompson, and assumption of control by the special employer.

 In another case, Shoemaker v. Manpower, the court set forth principle factors in determining whether a special relationship exists such as: right to control, the method of payment, furnishing of equipment, right to discharge and relative nature of work.  The court determined that the key factor is who controls and directs the manner, details and ultimate result of the employee’s work.  In Shoemaker, plaintiff was a general employee of Manpower who provided plaintiff’s services to Westwood, where the injury occurred.  Plaintiff signed into work at Westwood, where she was under Westwood’s exclusive supervision and control; she performed tasked assigned by Westwood staff and worked with other Westwood employees.  While Westwood could not terminate plaintiff, it could remove her from its facilities.  Based on these facts the court overturned the WC Board’s decision and determined that the plaintiff was a special employee of Westwood.  The court further held that the required use of a separate entrance and wearing visitor’s pass did not change the amount of control Westwood exerted over plaintiff.

 In Williams v. GE, plaintiff was employed by Labor Ready who temporarily assigned him to work for Air Structures American Technologies (ASAT) as a general laborer on a GE jobsite.  Plaintiff and his wife filed suit when plaintiff fell from a ladder on the jobsite.  He claimed that ASAT employee’s failed to hold the ladder he was using in place.  Thus when ladder shifted during use, he was caused to fall.  The evidence demonstrated that Labor Ready provided a paycheck, hardhat, work gloves and worker’s compensation benefits to the plaintiff.  However, ASAT provided the ladder and tools for plaintiff to carry out his duties.  Perhaps more important however, Labor Ready had no supervisory role at the GE work site leaving ASAT with exclusive control over plaintiff.  In fact, the court found that, ASAT controlled the “manner, details and ultimate result of plaintiff’s work,” and that Labor Ready surrendered control over plaintiff, which was then assumed by ASAT making plaintiff a special employee of ASAT and entitling him to collect under ASAT’s WC policy.

 In Majewicz v. Malecki, the plaintiff alleged that he was injured when he fell from a roof on a jobsite, prompting him to file suit against the general contractor Black-Rock Inc.  The plaintiff was hired by Black-Rock Inc. when it subcontracted with a temporary manpower agency, Expert Personnel Inc. to provide labor at the site.  The temporary manpower agency, plaintiff’s general employer, paid the plaintiff’s daily wages.  The plaintiff also received workers worker compensation wages from the temporary manpower agency.  The general contractor, however, provided equipment, direction, supervision and control over plaintiff’s work.  The Appellate Division, in reviewing the case, concluded that the WC defense was properly invoked by the general contractor Black-Rock and affirmed the dismissal of the complaint against it.  The Majewicz court observed that “many factors are weighed in deciding whether a special employment relationship exists, and generally no one is decisive…  While not determinative, a significant and weighty feature has emerged that focuses on who controls and directs the manner, details and ultimate result of the employees work.”  Significantly, the court noted that although Expert (plaintiff’s general employer) paid plaintiff’s wages and plaintiff received WC benefits from Expert’s Insurance carries, those facts did not preclude a finding that plaintiff was a special employee as a matter of law.

 So, what does all this mean?  It means that employers seeking to shield themselves from liability by contracting with independent contractors often enact measures that do not always serve their intended purpose.  Therefore, the next time you hire an independent contractor, ask yourself the following: (1) Is the worker subject to your direction?  (2) Do you train the worker?  (3) Who is responsible for hiring/firing of that worker?  (4) Do you have a prior work history with the worker?  (5) Who sets the worker’s hours?  (6) Who provided the worker’s tools?  (7) Does the worker’s product have to be inspected by your prior to completion? And, (8) Who pays the employee’s salary/benefits?  If your answers to these questions suggest that your independent contractor is actually an employee, you may not be liable for his jobsite accident.


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