North Carolina workers’ compensation law generally does not apply to an independent contractor. Employers sometimes seek to avoid their responsibility to their employees for workers’ compensation benefits by calling them independent contractors.
An independent contractor is one who exercises independent employment and contracts to do a piece of work according to his or her own judgment and method, without being subject to the person who hires them except as to the results of his or her work.
The test is whether the party for whom the work is being done has the right to control the worker with respect to the manner or method of doing the work, as distinguished from the right merely to require certain definite results conforming to the contract. Whether or not the employer has the right to control the worker's methods is important in classifying independent contractor status.
The issue of whether a worker is an employee or an independent contractor is one which is greatly abused by employers. It is very common for an employer to seek to have all of his employees determined to be independent contractors so as to avoid the employer’s liability under the Workers’ Compensation Act. Employers use various methods to falsely seek to impose independent contractor status upon their employees. One method is to stamp a statement on the back of each check made to the worker so that the worker, upon endorsing the check, acknowledges that he or she is indeed an independent contractor.
Another reason employers seek to have their employees classified as an independent contractor is to seek to avoid liability to the state and federal government for withholding and Social Security taxes. Employers do not deduct these taxes from people they claim to be independent contractors but instead send a Form 1099 to the taxing authorities. Then it is the worker's responsibility to pay the state and federal government estimated taxes on their income documented on 1099s.
The issue of whether a person is an independent contractor is very case-specific and sometimes it is not possible to predict in advance how the North Carolina Industrial Commission will rule on this issue. That is why it is important for the injured worker, at the outset, to employ an experienced workers’ compensation attorney. A worker might receive a 1099, but the employer could dictate when, where, and how the worker completes their duties - those methods of control are associated with employer-employee relationships. In some cases like this, the Industrial Commission could recognize a worker as an employee, even if the employer had been paying the worker via 1099 status. Again, every case is unique and the outcome of one worker's claim does not necessarily mean another worker's claim will be processed the same.
How can independent contractors receive benefits for their injuries? Depending on their line of work, the contractor could purchase and maintain liability and/or disability insurance in advance to help provide benefits in the event of an accident or debilitating health condition. Our attorneys also have experience representing insurance dispute cases, so if an insurance company is not providing benefits according to the terms outlined in the policy, let us know and we can explain your rights and options.