Independent Contractor or Employee?

Most workers compensation acts set the following criteria for compensability:

  • Employment relationship
  • The injury must be accidental
  • The injury must occur in the course of the employment
  • The injury must arise out of the employment

If you are injured on the job and want to know more about what you can do contact the South Carolina personal injury lawyers to help you. Determining employer-employee relationship is not as straightforward as you think. The two most common misconceptions regarding independent contractor status include worker not included in employer’s payroll and the existence of a written agreement between the parties stating the worker is an independent contractor. Neither of which insulate the employer from his responsibility to provide workers compensation coverage.

Once the worker has proven that at the time of the injury the worker was providing work or services for the employer, the burden shifts to the employer to prove that the worker was an independent contractor and not an employee. Courts will generally find in favor of the worker, barring any statutory exclusion.

The primary test in most jurisdictions is whether the employer has the right to control the details of the employee’s work. Secondary criteria includes whether there is evidence that the employer exercises that right, how the compensation is paid, whether the employer furnishes equipment or tools for performance of the work, and whether the employer has the right to terminate the employment relationship.

While the following is not all inclusive, it contains the highlights from the statutory criteria for determining independent contractor status:


No rigid rule of law exists regarding whether a worker is an employee or an

independent contractor in Illinois. Rather, courts have articulated a number of factors to consider in making this determination. The single most important factor is whether the purported employer has a right to control the actions of the employee. Also of great significance is the nature of the work performed by the alleged employee in relation to the general business of the employer. Additional factors to consider are the method of payment, the right to discharge, the skill the work requires, which party provides the needed instrumentalities, and whether income tax has been withheld. Finally, a factor of lesser weight is the label the parties place upon their relationship.  The term employee should be construed broadly for purposes of the Illinois workers compensation Act.


Following the amendments made to the law in 1990, all nine of the following criteria must be met for an individual to be considered an independent contractor (IC): 1) Maintains a separate business with own office, equipment, materials and other facilities. 2) Holds or has applied for a federal employer identification number with the IRS. 3) Operates under contracts to perform specific services or work for specific amounts of money and under which the IC controls the means of performing the services or work. 4) Incurs the main expenses related to the service or work performed under contract.  5) Is responsible for satisfactory completion of work or services contracted to perform and is liable for failure to complete the work or service.  6) Receives compensation for work or service performed under a contract on a commission or per job or competitive bid basis and not on any other basis. 7) May realize a profit or suffer a loss under contracts to perform work or service. 8) Has a continuing or recurring business liability or obligations. 9) The success or failure of the IC’s business depends on the relationship of business receipts to expenditures.


In the employment relationship determination, the two most important indicators are the degree of control and the degree of independence. The evidence of the degree of control falls into three categories: 1) Behavioral control – Employer’s right to direct and control the work.2) Financial control – The extent to which the employee can realize a profit or gain, assumes responsibility for expenses. 3) Relationship of the parties regarding any benefits provided such as pension, sick pay, insurance, etc.


The state of Indiana has always considered ten factors when determining independent contractor status: 1) the extent of control by agreement exercised over the details of the work.2) Whether or not the one employed is engaged in a distinct occupation or business.3) the occupation, the work is usually done under the direction of the employer without supervision. 4) Skill required 5) whether the employer supplied tools and the place of work for the person performing the work 6) Length of time employed 7) Method of payment by the time or by the job. 8) Is the work part of the regular business of the employer. 9) Relationship of master and servant. 10) Whether the principal is or is not in business. Indiana is now considering using the IRS regulations to determine IC status:

All evidence of the degree of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Relationship of the Parties, similar to Iowa above.


Individuals who are independent contractors are excluded from coverage under the Minnesota Workers’ Compensation Act. In Minnesota, whether an individual is an employee or independent contractor is determined by applying Minn. Rules 5224.0010 through 5224.0340.  Whether an individual is an employee or independent contractor primarily depends on control over the work or services to be performed. The greater the control the employer has over the worker, the more likely Minnesota courts will deem that individual an employee.  This applies even if there is an agreement between the parties classifying the person of the independent contractor-the courts look at the party’s actions, not the written document, to determine independent contractor status.

Provided by: Lori Gibowski, Work Comp Claims Supervisor at West Bend Mutual Insurance