What is the difference between being an employee or an independent contractor for workers’ compensation purposes? Actually there is a very big difference because a true independent contractor is NOT entitled to workers’ compensation benefits. In general, an employer retains the right to control the work that employees perform during the course of their work day. An independent contractor is generally responsible to control his or her own work, and the person who hires them to do a service has no control over the way the job is performed.
The Court initially set up a four part “control” test to determine if a person was an independent contractor or an employee, entitled to workers’ compensation benefits. That test looked at (1) who controlled the employee’s activities; (2) who could terminate the employee; (3) how the employee was paid; and (4) who furnished equipment. If the answer to any of the above pointed to the employer as having control, then the worker was most likely going to be classified as an employee and NOT an independent contractor.
Later cases decided by the Courts in New Jersey simplified the test and looked at only two factors to determine the employee’s status. The “relative nature of the work” test included the following two factors: (1) is the worker economically dependent on the business he or she serves, and (2) does the work constitute a regular and integral part of that business. Basically if your employer tells you what to do during the work day, and you only work for this one employer, you are an employee, not an independent contractor, regardless of the employer’s label.
One example of how this works is in the case of real estate agents. Prior to the Court’s decision in RE/MAX v. N.J Realty in the year 2000, real estate agents were generally treated as independent contractors. After that decision, because the court held that real estate agents are employees for workers’ compensation purposes— under both the control test and the relative nature of the work test — real estate agents are now classified as employees, entitled to workers’ compensation benefits. The court looked at the fact that real estate agents generally work for only one Agency, and that their work is an integral part of the Agency’s business. Without real estate agents, the Agency could not stay in business.
Employers typically tend to label employees as Independent Contractors to avoid the financial cost and inconvenience of having to prepare payroll, pay workers’ compensation premiums, and other bookkeeping activities. Regardless of what your employer tells you, and whether or not you are paid by the employer or get a 1099 form, you can still qualify as an employee for workers’ compensation purposes if your employer controls the work you do, and your work is an integral part of the employer’s business.
Please call the Workers’ Compensation department of Stark & Stark for any questions regarding your right to workers’ compensation benefits.