Home > Uncategorized > On Hand-Eating Clams and Independent Contractors (Part 1 of 3)

On Hand-Eating Clams and Independent Contractors (Part 1 of 3)

October 8th, 2012

Is that guy you have doing that work you need done an independent contractor or an employee?  Why does it matter?  Well, aside from a whole host of other issues, liability for industrial injuries may hinge on whether that worker was an employee or an independent contractor.

Your humble blogger recently had occasion to visit his uncle Olaf.  For those familiar with the exciting sport of competitive clam-breeding, you’ll no-doubt have heard of Olaf the Clamtastic, world-famous for his exceedingly rare clam-breeding abilities.  He also has a business which sells the Giant Clams he raises, “Olaf’s World of Clams.”  “Uncle Olaf” I said, “who is that nice young man cleaning your prize-winning clams?”  Uncle Olaf looked up from his magazine, Clams and Claims, and peered at his Olympic-sized swimming pool, the one where his giant clams ruled and all others feared to tread.

There, scrubbing the giant clams, was a young gentleman with a nervous look concealed by goggled and a breath mask.

“Oh,” said Uncle Olaf, “That’s Jim – he’s my independent contractor helping me keep the Clams clean.”  As Uncle Olaf turned the page with one of his two hook-hands, I remarked “it’s a good thing he’s a contract worker and not an employee, those clams can be vicious!”  But, the workers’ compensation defense attorney in me felt something was amiss.  So, being the good nephew that I am, I asked Uncle Olaf “how do you know he’s a contractor and not an employee?”

Uncle Olaf smiled, as if his silly nephew couldn’t be any sillier, and said “because I didn’t buy workers’ compensation insurance for him, of course!”

Poor Uncle Olaf…

The State of California does not require independent contractors to be covered by workers’ compensation insurance.  In theory, one could have a thriving business using nothing but independent contractors and saving untold fortunes on workers’ compensation policy payments.

But, the law requires employers to either self-insure or obtain workers’ compensation insurance for their employees.  And, much to Uncle Olaf’s surprise, the nature of a relationship, with respect to employer or contractor, is not determined by the possible employer’s purchase or failure to purchase workers’ compensation insurance.  There is another test out there…

But, let’s start with the basics.

California Labor Code section 3353 defines an independent contractor as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.”  Section 3353 was enacted in 1930, codifying the common law distinction between employees and independent contractors.  But, this distinction wasn’t concerned with workers’ compensation, but rather with tort law.  Whereas an employee could make his employer liable for injuries caused to third parties (imagine an employee-bartender accidentally dropping a crate of fine whiskey on a poor bar patron – an unbearably cruel thought, I know, but one necessary to shock and make the point), the liability buck stopped with an independent contractor.

But, as California Labor Code section 3357 specifically excludes independent contractors from the presumption of employment (and therefore the presumed requirement for the employer to insure or self-insure against those workers’ industrial injuries), the issue is an important one – and case-law expanded the test.  So, poor Uncle Olaf can’t put his checkbook away just because he never took it out to insure against a worker’s injuries.  Uncle Olaf can’t even put his checkbook away just because he doesn’t micromanage the work or “control the means by which such result is accomplished.”

After all, Uncle Olaf thought that, so long as he doesn’t stand over the young gentleman’s shoulder… hovering… judging… making little comments and directing his every move (“you missed a spot; scrub that clam harder, put your hand inside the clam to get a better grip…”) the young gentleman could remain an independent contractor and Uncle Olaf could laugh at the competitor Clam stores paying insurance premiums every month.

But the California Supreme Court has a different take on the proper analysis in this case.  What’s the test?

Sorry to “clam up” on you now (Get it? Because the story is about clams? Get it?), but come back on Wednesday to see what Uncle Olaf missed.

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