The Pennsylvania State Legislature enacted the Construction Workplace Misclassification Act in 2010 in an effort to clarify whether an injured party is deemed to be an independent contractor or an employee. Most typically, we see these issues arise in the construction industry where a General Contractor believes they have hired a person as a Subcontractor. I’ve had my share of these types of cases.
The Misclassification Act defines three elements to determine whether an individual is an independent contractor or an employee. Those elements are: 1) individual has a written contract; 2) individual is free form control or direction over performances of the services; and 3) the individual is customarily engaged independently in the established trade. It is important to note, this is NOT a pick and choose test. ALL THREE elements MUST be met. If not, the individual will be deemed to be an employee, and thus, fall under the Workers Compensation Act. It is also a fact sensitive test. Failure to provide workers compensation insurance coverage can result in significant financial burden to an uninsured employer, as an individual, and will lead to fines and jail time as well. What happens in these instance is that the Uninsured Guaranty Fund will step into the role as the insurance carrier. If the Fund is forced to pay out wage loss and medical benefits, it will then seek reimbursement from the General Contractor or individual contractor that hired the injured worker. Many contractors simply do not understand the substantial risk and potential legal trouble that lies ahead. The individual contractor WILL BE ultimately responsible for wage loss benefits and all medical bills of the injured worker, should the contractor not have workers compensation coverage, and the injured individual is determined to be an employee.
Recently, the Commonwealth Court further defined element one, the written contract element. In Staron v. WCAB (Farrier) No. 2140 (Pa. Cmwlth 2015), a worker for a general contractor fell off a roof and was injured. In these facts, the General Contractor had the injured worker sign an Independent Contractor agreement upon his release from the hospital. The injured worker voluntarily signed the agreement. That was the point emphasized by the General Contractor, that it was voluntarily signed.
HOWEVER, the Court rejected that argument. The Court said;
Here, Claimant worked for Employer for several days in exchange for remuneration and did not sign the Agreement until after he was injured. Section 3(a)(1) of the CWMA is unambiguous: “[A]n individual who performs services in the construction industry for remuneration is an independent contractor only if ․ [he] has a written contract to perform such services.” 43 P.S. § 933 .3(a)(1) (emphases added). No written contract existed between Claimant and Employer at any point during Claimant’s work for Employer and, thus, Claimant could not be considered an independent contractor under the CWMA.
To put in easier terms, the written contract MUST be in place PRIOR to the work injury. If it is not signed prior to the injury, then element one is not met and the injured individual is, under the Workers Compensation Act, an employee, and therefore entitled to benefits provided by the Act.