Businesses have struggled with the determination of who is an independent contractor vs employee for many decades. One of the challenges rests with the fact that the applicable legal test may be different depending on the area of law at issue. Thus, employers could find themselves in a situation where the IRS determines that a specific factual relationship to be an independent contractor while a state Department of Labor for purposes of Unemployment Benefits may determine otherwise. Obviously, such conflicting decisions place the employer in a tricky predicament.
In recent years, changes to the independent contractor tests by various federal agencies and subsequent legal challenges have compounded the problem. For example, the U.S. Department of Labor’s new worker classification rule under the Fair Labor Standard Act set to go into effect on March 11, 2024, is now facing at least four different lawsuits. Last year, the National Labor Relations Board issued a decision that once again changed the standard for determining independent contractor status and reverted to its pre-2019 standard. However, the D.C. Circuit has twice rejected the adoption of that standard so legal challenges here are inevitable. Not surprisingly given the current Administration, these changes make it more difficult to establish independent contractor status.
So what about OSHA? In a 2001 standard interpretation, OSHA stated that if a construction worker is truly self-employed (is not an employee) and has no employees working for him/her, then OSHA has no authority to require that individual to abide by OSHA construction requirements.
The Occupational Safety and Health Review Commission (“OSRCH”) typically applies two tests to determine independent contractor status: the common law test and the economic reality test. Both tests generally assess the degree of control present between the parties. The most relevant factors include:
- What is the degree of skill and independent judgment the hired party expects the independent contractor to exercise?
- What party supplies the tools and equipment needed to complete the work contracted for?
- Does the hiring party have the right to assign additional projects to the independent contractor?
- What is the method of payment?
- Who receives payment?
- Is the work a part of the regular business of the hiring party?
- Does the independent contractor receive employee benefits?
- What taxes are the hired party paying that relate to the hiring of the independent contractor?
For now, there are no imminent changes to the OSHRC’s approach to determining independent contractor status. However, from a practical standpoint, it is clear that over the years most federal agencies have narrowed the circumstances of when they will find a bona fide independent contractor relationship, thus permitting them to extend their jurisdiction and OSHA is no exception. Accordingly, businesses need to carefully review their independent contractor relationships.
Of course, employers should be aware that OSHA’s Multi-Employer Citation Policy permits it to cite certain employers even if it was not that employer’s employees were exposed to a hazardous condition, e.g., the creating, correcting, or controlling employer. Under this policy, OSHA stresses that general contractors have a reasonable duty of care to provide a safe working environment for subcontractors and their employees. However, that duty is less than what is required of an employer with respect to protecting its own employees.