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Independent Contractor Misclassification Affects Eligibility for Work Comp Benefits

After being injured on the job, the last thing you want to hear is that you are not covered for workers' compensation benefits. Many workers in Minnesota find themselves in such situations, though, when their employers consider them to be independent contractors rather than employees. At times, employers are inaccurate in their assessments, however, and improperly classify employees as independent contractors. When that is the case, it is critical for the worker to be aware of his or her rights to ensure proper classification and coverage for workers' compensation.

Independent Contractor vs. Employee

Generally, to determine whether a worker is an employee or independent contractor in Minnesota, a five-part test is employed. The test has been determined through case law, as a specific definition of an independent contractor does not exist in the workers' compensation statute.

The first factor, which involves the most analysis and carries the most weight, is whether the employer has the "right to control the means and manner of performance." Making this determination can be difficult, as it involves a consideration of a variety of factors. For instance, it is helpful to consider whether the worker:

  • Must follow instructions regarding the work, including where and when it is performed
  • May hire a substitute to perform the work, without gaining authorization from the employer
  • Works consistently or sporadically for the employer
  • Receives training from the employer
  • May realize a profit or suffer a loss
  • Must make regular reports to the employer regarding the work

While this list is not conclusive, if the employer exerts control over a number of areas, it is more likely that the worker will be considered an employee rather than an independent contractor.

The second factor is the manner in which the worker is paid. For example, if the worker is paid a regular amount on a weekly basis, he or she is more likely to be considered an employee. If, instead, the worker is paid by the job, this factor will point to an independent contractor relationship.

Next, the test focuses on who provides the tools and materials necessary to perform the work. If the tools are provided by the worker, it points to an independent contractor relationship - whereas, if the tools are primarily provided by the employer, an employee-employer relationship is demonstrated.

The fourth factor has to do with which party has control over the location in which the work is performed. If the worker is required to work in the employer's office, an employer-employee relationship is often demonstrated. In certain situations, this factor may not be determinative. For instance, if the work must be performed in a certain area controlled by the employer solely because the materials are too large or difficult to move, the relationship may still be one of an independent contractor, depending on the other factors.

Finally, if the employer has the right to discharge the worker, the last factor shows an employer-employee relationship.

What Are the Consequences of Misclassification as an Independent Contractor?

When a worker is classified as an independent contractor, he or she is not automatically covered by an employer's workers' compensation insurance. In order for an independent contractor to be covered for workers' compensation benefits, either the employer must choose to purchase insurance on his or her behalf or the contractor must purchase his or her own coverage.

If it is determined that a worker has been misclassified as an independent contractor, he or she will be covered by the employer's workers' compensation insurance. At times, even when an employer and worker both believe the worker is providing services for the business as an independent contractor, both parties may have misjudged the appropriate classification. The law does not turn on the label given to the worker by either the worker or the business, but instead is based on the five-part test outlined above.

If you have been performing services for a business and have been told by the employer that you are an independent contractor, it is worth reviewing the classification. Particularly if you have been injured on the job and have been denied workers' compensation benefits, a misclassification can have significant consequences. A skilled workers' compensation attorney will be able to assess your situation and ensure your rights are protected.