Sept/Oct 2012

INDEPENDENT CONTRACTORS ON THE JOBSITE

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Before utilizing or allowing "independent contractors" on the jobsite, it may be necessary to realize the possible ramifications of having them there.

SB 459 amended the Labor Code with respect to independent contractors by increasing penalties for purposefully misclassifying an employee as an independent contractor. This misclassification is somewhat common in the construction industry by contractors who want to avoid paying taxes or workers' compensation for the "independent contractor" employee. Under SB 459, the CSLB is also required to initiate a disciplinary action against the contractor and that contractor will be disbarred from bidding projects based on violations of the Labor Code.

The Employment Development Department and the Internal Revenue Service indicate that the best way to determine if someone is an independent contractor or an employee is whether or not the principal has the right to direct and control the manner and means by which the work is performed. If the "right of control" exists, then there is an employer/employee relationship. If there is no "right to control" then generally it is an independent contractor relationship. If it is still not clear, there are secondary factors that can help determine the relationship.

If a contractor employs individuals that are not on the workers' compensation insurance but should have been, then that contractor runs the risk of having its license deemed invalid -- unlicensed. As you may or may not know, there are significant ramifications for being unlicensed including having to reimburse all monies paid on a project during the time frame the contractor was considered unlicensed.

Additionally, in the case of Tverberg v. Fillner Construction, Inc., the Court of Appeal held that a direct contractor may be held liable for an independent contractor's injuries when the direct contractor has control of safety conditions on the jobsite. In this case, Tverberg was an independent contractor of one of Fillner's subcontractors. This case shows that the liability from conditions that are possibly created by others is a high probability to the direct contractor. There are indemnity and insurance provisions that can be incorporated into the construction contracts to help protect all involved.

Now you see some of the reasons why utilizing or allowing independent contractors on the jobsite can be risky. It is imperative that your independent contractors are classified properly and would not be considered employees. You should also have your contracts contain proper terms and conditions to better protect yourself. Good luck!