Employee or Independent Contractor? Recent Increase in Employee Misclassification Litigation Requires a Close Look to Ensure Your Workers’ Compensation Coverage Is Sufficient

This year has brought an increase in employee misclassification litigation across the Nation with unfavorable decisions against carriers spanning from California to Maryland. This increased national attention as to whether a driver is an employee, or an independent contractor deserves attention to protect against unexpected workers’ compensation liability.

Transportation employers who hire in, operate out of, or routinely service Maryland may find themselves subject to a Maryland workers’ compensation claim from a driver who they believe to be an independent contractor. The Maryland Workers’ Compensation Commission narrowly defines “independent contractor” in the interest of providing benefits to injured workers. The definition is “one who contracts to perform a certain work for another according to his own means and methods, free from the employer in all details connected with the performance of the work except as to its product or result.” Having a driver sign forms that they are an independent contractor, execute a form opting out of workers’ compensation insurance as an independent contractor, or signing contracts stating they are independent contractors is no bar to a finding the driver is an employee.

An “employee” is determined by evaluating five factors: “(1) whether the employer selected or hired the worker, (2) whether wages were paid to the worker, (3) whether the employer had the ability to discharge the worker, (4) whether the employer has the ability to control the worker’s conduct, and (5) whether the worker’s work is part of the employer’s regular business. These five factors can be boiled down to one – whether the employer has power or control over the driver as to how they perform his/her job.

Unfortunately, each case is a fact specific review of these factors, but noncompete clauses, uniforms, company policies on the manner of carrying out the job, requiring accountability for days not worked, dictating routes used, employer provided training, and providing the means of performing the job tend to tip the scale toward the driver being an employee entitled to workers’ compensation benefits. With more national attention toward employee misclassification, injured drivers may be more likely to contest their own classification and, with liberal Maryland workers’ compensation laws, may be successful. A review of employee classification and an update of your workers’ compensation insurance will help head off unexpected and uninsured liabilities.

For more information about this article, please contact April Kerns at 410.230.2975 or akerns@fandpnet.com.