Friday, May 11, 2018
The independent contractor question in employment law is developing into a unique form of incoherence. When the California Supreme Court issued its recent opinion in Dynamex, I pointed out that the independent contractor test that court employed—a modified form of the ABC test—was only applicable to industries covered by “wage orders,” under a legal construct—the wage order—launched in the early twentieth century. Dynamex did not reach the employee definition under workers’ compensation, however, and the present situation is that California now possesses multiple employee definitions, depending on the state statute in question, or on whether an industry is covered by a wage order defining employee broadly (or independent contractor narrowly, if you prefer). My casual reading of some recent commentary suggests that many folks in the workers’ compensation community feel that it is just a matter of time until the ABC test—or something like it-- makes its way into California workers’ compensation. Perhaps. But a recent case from Massachusetts—a state that Dynamex specifically mentioned as utilizing the ABC test in certain contexts—reveals that this may not necessarily be true. It seems quite possible that some states will be willing to simultaneously function with multiple employee definitions applicable to different state employment statutes.
In September 2010, Ms. Ives Camargo fell off a ramp and hurt her right knee and right hand. She missed no time from work on that occasion. On January 7, 2011, Ms. Camargo reported a second injury; she slipped on ice while delivering newspapers, injuring her right leg. Following this second injury, she was hospitalized and eventually underwent two surgeries, one for her right knee and the other for her right hand. She filed an initial claim for workers compensation benefits in 2012 with the Massachusetts Department of Industrial Accidents. The insurance carrier disputed the claim. After a preliminary conference, an administrative judge issued an order directing the carrier to pay temporary total incapacity benefits. The carrier appealed and, following a formal administrative hearing, an administrative judge determined that Ms. Carmago was an independent contractor and therefore not entitled to workers' compensation benefits. The appellate division of the administrative agency affirmed.
On review, in Ives Camargo’s Case, No. SJC-12368, 05/10/2018, the Massachusetts Supreme Judicial Court made clear that various employee tests exist under Massachusetts employment law (or, depending on how you look at it, various separate independent contractor tests). "Employees,” under workers’ compensation law, are defined as "every person in the service of another under any contract of hire, express or implied, oral or written," with certain exceptions not relevant to the case at hand. The employee vs. independent contractor test within workers’ compensation law involves 12 factors that may sound familiar:
(a) the extent of control, by the agreement, over the details of the work; (b) whether the one employed is engaged in a distinct occupation or business; (c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision; (d) the skill required in the particular occupation; (e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (f) the length of time for which the person is employed; (g) the method of payment, whether by the time or by the job; (h) whether the work is a part of the regular business of the employer; (i) whether the parties believe they are creating the relation of master and servant; (j) whether the principal is in business; (k) the tax treatment applied to payment . . .; and (l) the presence of the right to terminate the relationship without liability, as opposed to the worker's right to complete the project for which he was hired . . .
The problem is that Massachusetts also has another employment law provision distinguishing independent contractors from employees. Under Massachusetts General Laws, Chapter 149, section 148B—the chapter of Massachusetts laws applicable to Massachusetts labor laws generally, but not to workers’ compensation law (though it cross-references the workers’ compensation statute, Chapter 152)—it is more difficult to classify a worker as an independent contractor rather than an employee. The provision states, in relevant part:
For the purpose of this chapter and chapter 151, an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless:
(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
(2) the service is performed outside the usual course of the business of the employer; and,
(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
(b) The failure to withhold federal or state income taxes or to pay unemployment compensation contributions or workers compensation premiums with respect to an individual's wages shall not be considered in making a determination under this section.
Readers will recognize this as a version of the ABC test, and the court is undeniably correct in confirming that the Massachusetts legislature has explicitly afforded less statutory coverage to workers under the workers’ compensation statute than under other state labor laws. Indeed, the court goes on to say that no fewer than four employee definitions are applicable under various Massachusetts employment laws (I’ll omit discussion here in the interest of space). Why all the variability? According to the court, “Each involves a complex allocation of costs and benefits for individuals, companies, and State government itself. Other States that employ multiple tests for determining employee or independent contractor status depending on the context have emphasized these differences.” That answer is not satisfying, and one may be forgiven for entertaining a different explanation: certain potentially liable regulated entities under one statute have the “ear” of the legislature, while other regulated entities, governed by other statutes, do not. It would make for an interesting empirical study, for example, to investigate whether workers whose benefits are paid from public tax money are more likely to be classified as “employees” than those paid benefits by private insurance carriers.
In any event – the confusion has caused me to think about a very particular torts question. If all independent contractors are really not the same, should the businesses utilizing them always be insulated from tort liability when their independent contractors engage in tortious conduct (which is the normal tort rule)? After all, the premise for insulation from tort liability in such circumstances is that the independent contractors, and not the businesses utilizing them, are in control of the work. But can that any longer be assumed to be true? We now have a plethora of independent contractor definitions within states; and it seems to me that courts in tort cases may have an increasingly difficult time dismissing cases (at least on the pleadings) alleging a business is liable for the negligent conduct of its “independent” contractor. Under many new state gig laws, a business could in fact be controlling (within the meaning of tort law) work performed by workers who are not formally classified as employees.
Back to Ms. Camargo. She worked as the independent contractor of an independent contractor (a more common situation these days)—Publishers Circulation Fulfillment, Inc.—since 2001. “PCF provides home delivery services for newspaper publishers and pays delivery agents to deliver newspapers to subscribers. PCF does not publish its own newspapers. Instead, it acts as a middleman to deliver published newspapers.” So, first the newspapers stop directly employing people to deliver and hire an independent contractor to do the work. Then the employees of the independent contractor are themselves deemed independent contractors. It is a game of musical chairs, and Ms. Camargo simply wasn’t fast enough. Still, her injuries are real, and as I tell my first-year law students, someone will pay (even if it is her). The only question is who. Perhaps she was more likely to have been covered as an employee under the 12-factor test in Massachusetts than under the new gig law in Iowa. But that will hardly matter to her now.
Michael C. Duff