An examination of the independent contractor vs. employee issue
A recent landmark ruling by a Maryland Workers’ Compensation Commissioner found that a person working for a home healthcare company was operating as an independent contractor – rather than an employee – thereby denying a claim for benefits based on an injury that occurred on the job. PK Law regularly advises clients concerning how best to structure their organization in order to maximize the likelihood of this type of result and Mr. Stellman provides more insights and information on this situation in the following interview.
Q. Explain the situation involving home healthcare companies and their use of independent contractors.
A. When the industry first began, the services were predominantly provided by family members – usually a young adult taking care of an elder grandparent. Through an arrangement with Medicaid, these family members were reimbursed for their time as an aid. However, a change in wage and hour laws occurred when it was apparent that the home healthcare industry was being overtaken by larger companies and the sector required oversight. With a blessing from the United States Department of Labor, this meant that workers were now subject to overtime wages and had access to unemployment and insurance benefits, as well as workers compensation coverage. Payroll taxes and FICA taxes were also put into play.
Q. Occasionally, home healthcare workers get injured on the job.How do Maryland Workers’ Compensation Laws interpret this situation?
A. It is our position that these workers report to the patient, which controls their day-to-day activities and terms of their employment, rather than a specific company.Based on the applicable law, the presumption is that they are employees and otherwise deemed so, unless they demonstrate involvement in an entity that is not part of their core business. An exceptionalso exists for sole proprietors who typically request their workers to sign a proprietary waiver which states “I don’t work for you, and I am responsible for my own workers compensation coverage.”
Q. Discuss the recent ruling by a Maryland Workers’ Compensation Commissioner
A. PK Law represented a home healthcare company in Maryland that argued successfully before a Commissioner that a worker, injured while running an errand for a patient, was not acting as an employee on behalf of thatcompany. This Commissioner agreed and ruled that the worker was not eligible for compensation benefits from the company. The ruling was based on evidence that the hours were largely set by the patient and not the agency. In fact, only the wages per hour were the jurisdiction of the company. At one point in the trial, the claimant lawyer asked if there existed any quality control procedures over the worker. “Yes,” was the reply, “we have a supervising nurse that does that.” Doesn’t she work for you, asked this lawyer? “No, she is an independent contractor as well.” Case closed.
Q. Explain why this ruling was significant for home healthcare companies.
A. All of the injuries and medical costs incurred by this individual are not the responsibility of the company. Rather this falls on the individual involved, which represented an enormous savings to the company.
Q. Based on the current environment and this ruling, what course of action do you recommend for home healthcare organizations or others with independent contractors?
A.There are a number of things that companies need to do to preserve independent contractor relationships. This starts by examining their contracts to make sure they include updated and well-written independent contractor agreements. Additionally, they need to make sure these individuals maintain their right to work wherever they want without risking their continuing assignment. Many companies also require these “so-called contractorsto sign non-compete agreements” which is inconsistent with the spirit of the relationship. It is unreasonable for them to be loyal to one organization and retain an independent contractor status.
Mr. Stellman brings more than 40 years of experience as an education law, labor and employment attorney. He has represented the majority of Maryland’s school districts in virtually every type of school-related litigation and has also litigated widely in both the public and private sectors, defending employment discrimination and wrongful discharge lawsuits against employers. He also has extensive wage-hour law and occupational safety and health law experience. Mr. Stellman, who has taught law school at Johns Hopkins University and the University of Baltimore, can be reached at 410.339.6752 or email@example.com
Pessin Katz Law, P.A. (PK Law) is the ninth largest law firm in the Baltimore area and has been serving clients for thirty years. PK Law maintains full-service offices in Towson, Columbia, and Bel Air and is comprised of more than 50 lawyers. Practice areas include corporate and business law, real estate and zoning, education law, estate planning, elder law, labor and employment, litigation, insurance law and medical malpractice defense. For additional information, visit www.PKLaw.com.