Employee or independent contractor? Workers’ comp hangs in the balance
June 4, 2012 by Fred HosierPosted in: In this week's e-newsletter, Injuries, Latest News & Views, new court decision, Special Report, Workers' comp
PDF An injured worker says he should get workers’ comp because he was an employee, not an independent contractor. But he signed documents saying he was a contractor. Now what?
Walter Theodore worked as a a doorman/bouncer at the Krazy Korner bar on Bourbon Street in New Orleans’ French Quarter. He checked IDs and occasionally had to remove customers from the bar.
Theodore says he was injured when he picked up a patron and removed him from a stage. The patron had jumped on stage while a band was playing. The bouncer applied for workers’ comp. The case went to a workers’ comp judge.
Krazy Korner filed to get the case thrown out because Theodore was an independent contractor and therefore wasn’t entitled to workers’ comp benefits under the law.
The bar’s manager said Theodore wasn’t under his supervision and the bouncer determined how he performed his work. Krazy Korner also produced numerous documents Theodore signed that stated his status as an independent contractor.
One of the documents provided by the bar stated that Theodore would receive a Form 1099 for tax purposes — the form which summarizes payments to independent contractors.
Despite that documentation, Theodore argued that he was really an employee. He said:
- He was paid an hourly wage
- He reported to work at Krazy Korner on a schedule mandated by the bar
- He sometimes was involved in physically restraining and ejecting unruly patrons
- Krazy Korner instructed him in how to perform his job duties, and
- He was head of security for the bar.
The workers’ comp judge granted the bar’s motion to get the case thrown out. Theodore took his case to a state appeals court.
Louisiana’s Workers’ Compensation Act says an independent contractor is “any person who renders service, other than manual labor, for a specified recompense … under the control of his principal as to the results of his work only, and not as to the means by which such result is accomplished.” The law also notes if a worker spends a “substantial” part of his time involved in manual labor, the contractor is covered by workers’ comp.
The appeals court reversed the ruling by the workers’ comp judge. The court said there was enough conflicting evidence about whether Theodore was an employee or an independent contractor to have the case go to trial.
Now Krazy Korner has a choice to try to reach a settlement with Theodore or take its chances in a trial court.
Given the nature of the job, do you think Krazy Korner correctly categorized Theodore as an independent contractor? Should he get workers’ comp for his injury? Let us know what you think in the comments below.
(Theodore v. Krazy Korner, No. 2012-CA-0173, Court of Appeals of Louisiana, Fourth Circuit, 5/23/12)
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Tags: bouncer, employee or independent contractor, Krazy Korner, Workers' comp
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June 5th, 2012 at 7:04 am
From the limited information in the article, it sounds like Krazy Korner was trying to take a short cut by classifying him as independent but treating him like an employee.
June 5th, 2012 at 9:52 am
It is only slightly fuzzy but does not require bifocals to clear up. The BAR - “employer” did not fit the measure of declaring the bouncer as a contractor. What they were trying to do was two things that happen regularly. First is they save the FICA withholding amount from his payment “wage”. i am sure that if you looked at his hourly wage records and payments they were not distinctly separate from the hourly employees. IE he bills on a separate invoice. Also the BAR stands to save some 15-20% on his wages in the form of WC premiums as it takes a special person to be a “bouncer” and there is always someone that is tougher. “I’ll show him!!” creating a very high experience rate. The injured employee should get covered and the employer and many others should get their act together. The bar simply tried to save somewhere in the neighborhood of 30% on this position. BUSTED!!
June 5th, 2012 at 10:12 am
The 5 points made by Theodore are exactly what independant contractors usually do. Our company hires labor ready and with exception to item #3, where the contractors perform physical labor each other item is met. It is not unusual to have an on site independant contractor. Sounds like their required documentation was in place-and we have a bleeding heart judge who wants to “give the poor guy something.” With our independant contractors we certainly do tell them what we want done-if they don’t comply it is bye bye and we replace them with someone who will comply; including plant security.
June 5th, 2012 at 10:54 am
The employee classified himself as an independent contractor by knowingly signing all those documents. If he didn’t want to be classified as an independent contractor he could have seeked employment elsewhere. The owner of any company, when hiring an independent contractor can instuct that contractor on how things are going to be. If that contractor isn’t satisfied with these instructions given to him he could refuse the work and seek employment elsewhere. No WC
June 5th, 2012 at 10:55 am
Or one could say Theodore wanted to be an independant contractor without taking out the necessary insurance coverage and such.
I can see both side of the arguement although if Theodore was getting a 1099 instead of a W-2, he should have been well aware of his employment status with the bar.
June 5th, 2012 at 1:32 pm
In FL, he would have been untitled to WC. What Doug stated happens all too often down here.. employers trying to save money by telling the person they are a subcontractor, when under definition of law, they really ought to be an employee.
June 5th, 2012 at 5:36 pm
By training and advocation I am a Inspector mostly Petrochemical and Power Industries but suffice to say I am a “code” junkie.
I also operate on the very fuzzy line of independent contractor. I have my own supplies, tools, printer, copier books and on and on. I “respect” the time that others are working and as such work a near mirror of their time schedule. I present an invoice and statement for billing and make darned sure that i am reimbursed for my time ( you too! ). When a project is done so am I without any thought of continuing on with the last client. I stand to make a bunch but just as well could loose my rear as well ( probably not ). Anyway the IRS and most State taxing agencies would love to have enough investigators to wrap around the topic as it really is a “Golden Goose”. Now if the Bouncer was getting say $45 to $50 per hour for his “Chief of Security” gig then we would all say he was well compensated etc but the fact is probably closer to $20. Either he has terrible negotiating skills OR he was really an employee.
Below is a tidbit from the IRS website ENJOY
Topic 762 - Independent Contractor vs. Employee
For federal tax purposes the usual common law rules are applicable to determine whether a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker and the business. All evidence of the degree of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Type of Relationship of the parties.
The IRS defines these “behaviors” so I think it important that if you have these relationships ongoing you might want to consult a reliable and responsible CPA and Counsel for further depiction in your application of these codes.
For more information, refer to Publication 15-A (PDF), Employer’s Supplemental Tax Guide, or Publication…
June 6th, 2012 at 3:45 pm
Sadly to say but many of us are not knowledgeable in all that entitles employee vs contractor concerning labor laws and could fall into pitfalls like Theodore (I am giving him the benefit of the doubt). I guess it will be a good learning lesson for him if facing a similar situation and yes, I agree, he should get some compensation. Now the bar will have to spend the 30% they tried to save -according to Dough calculations and expertise in the matter.
June 7th, 2012 at 8:05 am
No Gigi, he shouldn’t get anything. The article stated that the company has all the documents that Theodore himself signed stating that he was an independent contractor. The company should look into getting more legal advise because a contract was signed. A contract is binding as long as there is no illegal actions involved with it. Theodore needs to be accountable for his actions which was signing a contract stating he was an independent contractor. He was also getting a 1099 to fill out himself for taxes just like a contractor would instead of a W-2 which a normal employee would get. He was all happy with being an independent contractor until he got injured. If he felt he was really an employee why didn’t he change his status before the injury? It is also Theodore’s fault that he didn’t have insurance on himself that contractors are required to do.