Archive for November, 2009

A Matter of Time: Independent Contractors Morph into Employees

Tuesday, November 10th, 2009

We turn yet again to the ever-troubling issue of independent contractors. In today’s case we examine a situation where two individuals, beginning as legitimate independent contractors, morph over time into employees. It’s a cautionary tale that demonstrates what is true today may no longer be true tomorrow.
Fred Cromwell and Jeff Bankston became involved in the restoration of damaged telecommunication lines along the Mississippi Gulf Coast in the wake of Hurricane Katrina. They were hired as independent contractors by Driftwood Electrical, a subcontractor of BellSouth. Cromwell and Bankston provided their own trucks, testing equipment, connection equipment, insulation equipment and hand tools – a total personal investment of $66,000. BellSouth supplied materials, including cables.
Each day Cromwell and Bankston reported to BellSouth’s location to receive their assignments. They worked 12 hours a day for thirteen days and then had one day off. (Tough working conditions, indeed.) They were paid a fixed hourly wage for their work and labored under these exhausting conditions for about 11 months.
At issue is the rate of pay: Driftwood paid them a set hourly rate. (They also, we note with interest, provided workers comp coverage.) Cromwell and Bankston sued for overtime pay under the Fair Labor Standards Act (FLSA). A district court granted summary judgment against Cromwell and Bankston on the grounds that they were independent contractors, not employees, and thus exempt from the overtime provisions of the FLSA. The U. S. Fifth Circuit Court took up the appeal.
The court found that Cromwell and Bankston were to a significant degree independent contractors:
– They controlled the work, with no direct supervision from Driftwood
– They provided their own tools
– They could theoretically work for others (although they did not)
The court also found, however, that in comparing this case to others, there were significant differences:

The plaintiffs in this case worked full-time exclusively for the defendants for approximately eleven months…The plaintifs did not have [a] temporary, project-by-project, on-again-off-again relationship with their purported employers.

While the court found “facts pointing in both directions” regarding the issue of employment status, they determined that on balance, and as a matter of economic reality, Cromwell and Bankston were economically dependent upon Driftwood and were not in business for themselves. “The permanency and extent of the relationship [with Driftwood], coupled with Driftwood’s…complete control over…schedule and pay, had the effect of severely limiting any opportunity for profit or loss by Cromwell and Bankston.”
Thus, even though Cromwell and Bankston controlled the details of the work, were not closely supervised, invested in equipment and tools and used a high level of skill in performing the work, they were not “in business for themselves” during the eleven stressful months of Katrina clean up. The judgment of the district court was vacated and the case was remanded back to that court for reconsideration.
The Lessons of Time
The lessons here are clear: even when virtually all the criteria for independence are met, independent contractors may still be considered employees, especially where they work for a substantial block of time for only one employer. The case serves as a warning to contractors going forward: if your “independent contractors” only work for you over a substantial period of time, they are likely to morph into employees, with all the rights and considerations attached to that fundamental and eternally-perplexing relationship.
NOTE: A special thanks to Michael Maslanka, a Texas attorney blogging at WorkMatters, for highlighting this case. His blog, just celebrating its one year anniversary, is an excellent resource.

Disabled Carpenter Climbs a Mountain

Monday, November 9th, 2009

Christopher Robin Briejer used to be a carpenter. He suffered a back injury in 2000 and was disabled from work. Except that he apparently kept on working. In 2003 he hurt his back again while working without comp coverage. He claimed the new injury was a recurrence of the 2000 incident. The claim was re-opened and he began collecting benefits. Between January 2004 and April 2008, Briejer received 121 state checks totaling $258,995 for time-loss compensation, $75,295 in medical services and $31,651 in vocational retraining – for a total of nearly $366,000.
The state of Washington recently indicted Breijer for comp fraud, alleging that the 2003 injury was not a recurrence, but a new injury. Someone dropped a dime on him.
Breijer states: “I have a permanent back injury with permanent damage to my spine.”
For a man collecting disability payments, Breijer maintains a very active life style. He likes to “rock crawl” and last year he climbed Mount Ranier.
“It doesn’t take a back to climb a mountain, it takes legs,” he said. [Think about that for a moment.] “I’m an active injured person. Even though I’m injured, I take care of my body. My doctors are 100 percent in favor of me hiking.” Hmm. I wonder if his doctors are 100 percent in favor of him working…
A Famous Bear of LIttle Brain
Breijer appears to have been named after Christopher Robin, the boy who appears in the Winnie the Pooh books written by A.A. Milne. (I refer to the books, not to an abomination of the same name from the Disney folks.) It seems that Breijer took to heart one of the Pooh bear’s famous quotes: “A bear, however hard he tries, grows tubby without exercise.” No bear belly for Breijer!
I’m guessing that Breijer might resent being named after a character in a children’s book. Well, the original Christopher Robin resented it, too. Christopher Robin was based upon Milne’s own son, Christopher Robin Milne, who in later life became unhappy with the use of his name. “It seemed to me almost that my father had got where he was by climbing on my infant shoulders, that he had filched from me my good name and left me nothing but empty fame”. Children can be so harsh!
Well, as Pooh himself famously said: “People who don’t Think probably don’t have Brains; rather, they have grey fluff that’s blown into their heads by mistake.” And again: “If the person you are talking to doesn’t appear to be listening, be patient. It may simply be that he has a small piece of fluff in his ear.”
I wonder if the prodigiously active Christopher Robin Breijer might have just gotten a little confused, Pooh-bear style, between right and wrong, between being truly disabled and being able to work. Such confusion is rampant in these morally compromised times. It’s a bit like distinguishing one hand from another, which Pooh himself found to be quite difficult:

Pooh looked at his two paws. He knew that one of them was the right, and he knew that when you had decided which one of them was the right, then the other was the left, but he never could remember how to begin.

When it comes to confronting moral hazards, it’s really important to remember how to begin.

Compensable Shampoo?

Friday, November 6th, 2009

Ginger Wilson works as a librarian in Montgomery County, Virginia. One day she arrived at work, got out of her car and headed for the library entrance. Then she remembered that she had a hair appointment at noon, so she returned to the car and opened the door to fetch a bottle of shampoo. A gust of wind caught the door, which slammed against her. She fell, breaking her wrist.
Compensable under workers comp? Not likely, as the return to the car was a definitive deviation from her work routine – she had already exited the car and was headed toward the library. The fetching of shampoo was a personal errand, having nothing to do with work.
Ah, but this is Montgomery County, home of the $32 million comp problem. Ginger was awarded $5,500 in comp benefits, covering her medical costs and six weeks of lost time.
Associate County Attorney Susan Chagrin (who immediately earns a place on my All Name team for attorneys) has sued Ginger for repayment, asserting that the injury had nothing to do with employment. I’m with Chagrin, but to our mutual chagrin, the county is unlikely to prevail. There is nothing fraudulant in Ginger’s filing a claim. She apparently was completely candid about the circumstances of the injury. The claim was accepted by the adjuster. Getting money back on this one is likely to be as difficult as the proverbial putting toothpaste back into the tube.
I have a few random questions for Montgomery County and for Ginger:
1. Why does a librarian with a broken wrist have to miss 6 weeks of work? Library work is about as light duty as it gets.
2. If Ginger returned to her car for the specific purpose of fetching the shampoo, why is she still in “the course and scope of employment”?
3. According to her testimony, Ginger planned to “eat my lunch while I was getting my hair done.” Excuse me and with all due respect, that is a truly revolting example of multi-tasking.
4. Finally – admittedly a bit off point – why does Ginger have to provide her own shampoo for a hair appointment?
As is so often the case, the best opportunity for controlling the outcome of questionable claims is at the beginning. If compensability is in doubt, adjusters should take aggressive action at the outset. Given the particulars of Ginger’s situation (at least as this article presents them), there was enough evidence to deny the claim when it was first filed. Once accepted as compensable, however, it’s unlikely that the decision could be reversed. Ms. Chagrin, in all likelihood, will remain, well, chagrinned.

Cavalcade of Risk & other workers’ comp news briefs

Thursday, November 5th, 2009

Debbie Dragon or Wise Bread hosts this week’s Cavalcade of Risk, which she dubs the “the How Much Assurance Does Your Insurance Offer edition.” As usual, a good source of some of the best biweekly risk-related posts in the blogosphere!
OSHA – frequent citations – OSHA recently announced its Top 10 Enforcement Citations. For a more generic, non-company specific view, see the top 10 lists for the most frequently cited standards and the standards with the highest penalties. To narrow down to information to an industry SIC code, a state, or a size of employer, see the interactive frequently cited OSHA standards page.
Montana Supreme CourtMontana’s Supreme Court ruled that workers’ compensation benefits for permanently and totally disabled workers are meant to assist them for their “work life,” and not into retirement. Writing for the 5-2 majority, Justice William Leaphart stated that, “By acting to terminate benefits as it does, (the law) rationally advances the governmental purpose of providing wage-loss benefits that bear a reasonable relationship to actual wages lost.”
Chronic illness – This week, Roberto Ceniceros has featured a pair of posts related to chronic illness on his Comp Time blog. The first highlights a research report from the Integrated Benefits Institute in which nine in ten workers reported one or more chronic health problems. The report is based on 27,000 employee surveys. In his second post, Ceniceros explores the issue of wellness programs as they relate to chronic illness and workers comp. He makes the point that an increasing number of employees may be getting better health care attention after reporting a comp injury, but that is likely true mostly for employees of large, sophisticated employers.
Related to this issue, Peter Rousmaniere writes about “the elephant in the room” in his column in Risk and Insurance, noting that co-morbidities — such as obesity, depression, diabetes, sexual trauma, smoking, and drug addiction — derail the recovery of injured workers and pose challenges for claims adjusters and case managers. He makes the point that the the workers’ compensation courts are more inclined today to rule that insurers “own” the comorbidity that impedes recovery, as evidenced by the recent weight-loss surgery rulings.
Long road to recovery – the Pocono Record features the story of John Capanna’s long, slow recovery from a severe industrial injury. John was severely burned and disfigured in a flash explosion at an oil refinery some 30 years ago. It’s a story of courage and strength. Thanks to SafetynewsAlert for pointing us to this story.
Saving lives through safety – Robert Hartwig, president of the Insurance Information Institute, makes the case that insurers don’t get enough credit for saving lives with safety research in this month’s National Underwriter. Among the points that he makes: “Today, workers’ comp insurers are a primary source of loss control expertise for millions of American businesses – with tangible results. Consider that in 1926, an employee working in a manufacturing setting had a 25 percent chance of being injured on the job. In other words, one-in-four workers suffered injuries each year. In 2008, the odds were only about 5 percent, or just one-in-20.”
Ferreting out fraud through social networking – Attorney Molly DiBianca discusses risks entailed in using Facebook to investigate employee fraud, suggesting guidelines to ensure employer protection.
Quickies
Surgical Fire Prevention
Who is the authorized employee for Lockout/Tagout?
Lack of paid sick days may worsen flu pandemic
Your forklift questions answered
More forklift questions, more answers

OSHA issues largest fine on record to BP

Tuesday, November 3rd, 2009

At the end of last week, OSHA issued $87 million in penalties against BP for failure to make make the changes which were specified in a settlement agreement related to the 2005 explosion at a Texas refinery which killed 15 and injured more than 170 others. The second-highest penalty that OSHA has imposed was in 2005 for $21 million – also issued to BP related to the same explosion.
BP had paid the $21 million fine and agreed to corrective actions to eliminate potential hazards similar to those that caused the 2005 tragedy as part of a settlement agreement with OSHA in September 2005. The penalties were imposed after a 6 month OSHA investigation. BP had recently sought but was denied more time for compliance.
OSHA issued 270 “notifications of failure to abate” previously identified hazards, as well as 439 new willful violations for failures to follow industry-accepted controls. A willful violation is defined by OSHA as an intentional violation of the Act or plain indifference to its requirements.
Unsurprisingly, BP is contesting the fines, stating that they have spent more than $1 billion on modernization and safety and have taken 550 corrective actions. (See BP’s offical response and October 5, 2009 response to OSHA, a 17-page PDF). The company has also gotten support from Texas City’s mayor, Matt Doyle, who has criticized OSHA for the fines, calling OSHA’s actions “one of the biggest affronts to the working men and women of this country” and “an example of intrusion into private business by government.”
Jordan Barab, acting assistant secretary of labor for OSHA, noted that BP had four years to comply with the agreement, and defended OSHA’s actions as protecting the safety of working men and women. While Barab acknowledged that improvements had been made, he noted that some of the most important things had not been addressed, particularly pressure relief and automatic shutdown systems, problems directly related to the accident. “Our experts say BP is 10 years behind where a lot of the leading refineries are when it comes to process safety,” Barab said. “This is a company that should have known better.”

The Tennessee Solution

Monday, November 2nd, 2009

It’s safe to say that no state has really solved the independent contractor/sole proprietor conundrum. Rather than require comp coverage for all workers, most states either exempt sole proprietors from coverage or make it optional. As a result, many small construction sites are full of “sole proprietors.” No one works for anyone. Thoeretically at least, no one is in charge. Nonetheless, the building goes up on schedule. And the final cost of construction is far less than similar job sites where all workers are protected by comp. If one of these sole proprietors is severely injured, the state will try to pin the cost on a general contractor, if they can find one. Otherwise, the state fund usually pays for the benefits.
Solving this problem creates new problems. In Massachusetts, the attorney general issued an advisory with a catch-all definition of “independent contractors” that is so broad, it includes virtually everyone. As a result, when general contractors cannot produce certificates of insurance for subcontractors, the cost of these subs is added to the payroll for calculating comp premiums. The cost of doing business goes up substantially.
In Delaware, they passed a law a few years ago requiring coverage for everyone, including sole proprietors. That is the cleanest and most comprehensive way to solve the problem. Alas, it’s also fraught with political risk. The subsequent uproar led legislators to back track and repeal the law.
Now, Tennessee is moving ahead with a new law that mirrors the one repealed in Delaware: limited to construction workers, the law requires coverage for everyone, including sole proporietors. Cost estimates for individual policies range from a few hundred to as much as $6,000. The latter figure is pretty daunting to a part-time, semi-retired craftsman who earns less than $25,000 a year.
The Tennessee legislature is considering some modifications to the law, which is scheduled to go into effect on December 31, 2009. They may allow for cheaper-than-usual policies that include high deductibles. Or they might let sole proporietors off the hook, if they can show that their own health insurance will cover workplace accidents. (Now there’s a cost-shifting measure that will create some interesting dialogue on the health care side!) The legislature has the right idea: find a way to make comp affordable to people who cannot afford much in the way of premiums.
With the legislature not scheduled to meet again until mid January, the law will go into effect as written on the last day of the year. Solve one problem, create another. Welcome, once again, to the ever-complicated world of workers comp.