Agency penalized for excluding contractors from coverage

In Washington state, an employer can be assessed premium, penalties, and interest for failing to provide workers' compensation coverage to an independent contractor.

Case name: Xenith Group, Inc. v. Department of Labor and Industries, No. 66013-6-I (Wash. Ct. App. 02/13/12).

Ruling: The Washington Court of Appeals upheld the employer premium, penalties, and interest the Department of Labor and Industries assessed against an agency.

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What it means: In Washington state, an employer can be assessed premium, penalties, and interest for failing to provide workers' compensation coverage to an independent contractor.

Summary: A home health care referral agency referred patients to its affiliated home care providers. The care providers signed forms that stated, "I am not an employee of [the agency]." The documents described the providers as independent contractors and informed them that they were responsible for maintaining their own tax and business records. The Washington Department of Labor and Industries received a workers' compensation claim from an injured provider who identified the agency as her employer. The department discovered that the agency did not have a workers' compensation account and had not paid premiums. It audited the agency and assessed premiums, interest, and penalties against the agency. The agency appealed the assessment. The Washington Court of Appeals upheld the assessment.

The court noted that the legislature broadly defined the terms "worker" and "employer." A "worker" includes a person working for an employer under an independent contract, the essence of which is her personal labor. An "employer" includes a corporation who contracts with workers, the essence of which is the personal labor of the workers. The court said that the statutes reflect a legislative intent to provide workers' compensation coverage to an independent contractor whose personal labors are the essence of the individual's contract. The providers qualified as workers because they were independent contractors engaged in contracts whose essence was their personal labor.

The court rejected the agency's contention that an employer had to exercise the requisite control over the worker and the worker had to consent to be an employee. The court said the agency's argument ignored the statutes. The agency did not meet the exceptions for excluding certain independent contractors from coverage.

Read more at the WorkersComp Forum homepage.

March 22, 2012

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