The Barrister Fall 2017 - 8

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INDEPENDENT CONTRACTOR OR EMPLOYEE:

THE BATTLE BETWEEN THE
COMMON LAW TEST AND THE CWMA
By Gabriela Raful, Esquire

H

ow can an "employer" in the construction industry
succeed in not paying workers' compensation by
claiming the injured person is an independent
contractor and not an employee? The answer is not as simple as
labeling the worker as "independent contractor." The nature of the
relationship is a question of law that is determined on a case by
case basis. To make such determination, are courts applying the
Construction Worker Misclassification Act ("CWMA") or the
common law test?
In 2010, the Pennsylvania legislature enacted the CWMA.
Section 933.3 establishes the criteria for when a worker in the
construction industry may be classified as an "independent
contractor" as opposed to an employee for purposes of workers'
compensation and unemployment compensation. 43 P.S. § 933.3.
The significance of the distinction is that putative employers are
not responsible for providing workers compensation coverage
for independent contractors under the Pennsylvania Workers'
Compensation Act ("WCA"). The distinction has a corresponding,
but distinct, set of implications in the context of personal injury
claims, as an exclusivity of the WCA prevents an employer from
being held liable in tort. See, e.g. Patton v. Worthington Associates,
Inc., 89 A.3d 643 (Pa. 2014).1
An injured worker who petitions for workers' compensation
benefits has the burden to establish an employer-employee
relationship. See 77 P.S. § 22; Universal Am-Can, Ltd. v.
W.C.A.B. (Minteer), 762 A.2d 328, 330 (Pa. 2000). To make such
determination, courts apply a common law test based on principles
of a master-servant relationship. Universal Am-Can, 762 A.2d at
330. The common law test considers various factors, including:
control over the work completed and the manner in which it is
to be performed, terms of the agreement between the parties,
the nature of the work, the skill required, who supplied the tools,
payment by the time or by the job, whether the work is part of
the regular business of the employer, and the right to terminate
the employment at any time. Hammermill Paper Company v. Rust
Engineering Company, 243 A.2d 389, 392 (1968).

In contrast to the WCA, the CWMA provides a specific set
of statutory requirements that must be met in order for a worker
to be classified as an independent contractor in the construction
industry. Those requirements include: having a written contract;
working free from control or direction; and customarily engaged
in an independent trade, occupation, profession or business. 43
P.S. § 933.3. The CWMA further provides that an individual
is customarily engaged in an independently established trade,
occupation, profession or business only if: (1) He possesses the
tools, equipment, and other assets necessary to perform the
services independent of the person for whom the services are
performed; (2) The individual shall realize a profit or suffer a loss;
(3) The individual performs the services through a business in
which the individual has a proprietary interest; (4) The individual
maintains a business location that is separate from the location
of the person for whom the services are being performed; (5) The
individual previously performed or holds himself as a person who
is able, and in fact is able, to perform the same or similar services
for another; (6) The individual maintains liability insurance during
the term of this contract of at least $50,000. Id.
Failure to withhold income taxes or pay unemployment
compensation contributions or workers' compensation premiums
is not to be considered in the analysis. 43 P.S. § 933.3(c). An
individual who is an independent contractor, as defined under
the Act, will not be considered an employee for purposes of the
Workers' Compensation Act. 43 P.S. § 933.3(d).
The most recent decision to examine these CWMA
requirements was D&R Construction v. W.C.A.B. (Suarez, Travelers
Insurance Co., Uninsured Employers Guaranty Fund, & T & L
Development), 1558 C.D. 2016, 2017 WL 3254789 (Pa. Cmwlth.
Aug. 1, 2017). In D&R, the Commonwealth Court examined
the distinction between the criteria set forth in the CWMA
for classifying a worker as an independent contractor and the
traditional common law analysis.

The "independent contractor" label also has implications for landowners, as there is a general rule against liability of landowners
for acts of omissions of independent contractors and their employees. See generally §§ 409-414 of the Restatement (Second) of Torts.

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The Barrister Fall 2017

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