Employee vs Independent Contractor status? The Construction Workplace Misclassification Act decides!

Determining the existence of an Employment Relationship.
The injured worker must prove all of the elements of a workers' compensation claim.
Where the Employer disputes the existence of an Employee- Employer relationship, there must be sufficient, competent and credible evidence to support a finding of fact by the Worker's Compensation Judge.

Many past appellate decisions review the factual details of the work relationship, to determine if the essential indicia of an employment relationship exist.

There was a perceived recurring problem in the construction industry regarding the correct identification of individuals as "employees", which was addressed by the 2010 enactment of the Construction Workplace Misclassification Act.

A recent case reports the impact of this act in a rather typical construction employment relationship. The result is reviewed at: Scott Lee Staron d/b/a Lee's Metal Roof Coatings & Painting v. WCAB (Farrier), No. 2140 CD 2014, a panel decision of the Commonwealth Court of Pennsylvania, authored by Senior Judge Friedman on July 17, 2015.


Factual and Procedural Background

Employee slipped and fell off of a roof on May 6, 2011, striking his head and subsequently undergoing surgery to his left ankle and right knee. He was not released to regular duty work.

A Claim Petition was filed, as Employer denied the existence of an Employer-Employee relationship.

Their "relationship" reflects:

Employee answered Employer's advertisement seeking a painter.
Employee had 20 years experience. He worked for different contractors. He did a lot of "sub" work.
Employee was self-employed. He usually did his own work.
Employee owned his truck, tools and some equipment.
They met and discussed Employee's work experience and terms of hire.
Employer agreed to pay him $100 per day.
Employer told Employee he would need to sign a document, in order to work for Employer. 
(no agreement was signed before he started working).

Employee started painting on May 3. He used his own brushes, caulk gun, painter pants and knee pads.
Employer provided ladders and other necessary requirement.
Employee met at Employer's residence and traveled to the job site together.
On the 1st day, Employer told Employee to clean and paint the front part of a roof.
After that ... Employer did not provide any further instructions.

AFTER the injury, Employee met with Employer after his hospital release. Employer presented an Independent Contractor - Sub-Contractor Agreement. This document bears Employee's signature and is dated May 6, 2011, the date of injury. In his testimony, Employee declined to identify his signature. He "might have" signed it.

Employee retrieved his car and his tools. He was paid $300 for his 3 days of work.
Employee did not return to work, in any capacity after May 6, 2011.

WCJ Decision

Employee was found credible regarding his hiring and work for Employer.
He was credible regarding his injuries, treatment and disability.
[He was not credible regarding the declining to identify his signature on the Agreement].

WCJ found Employee had not entered into the Agreement at the time he sustained his work-related injury on May 6, 2011.
Accordingly, he was an Employee not an independent contractor, at the time of his injury.

WCAB affirmed WCJ.

Commonwealth Court Decision

WCJ decision is affirmed. He was an Employee.

Employer argued the Construction Workplace Miscalculation Act (CWMA) did not require the individual to sign a written contract prior to an injury, in order to be considered an independent contractor. This argument was rejected.

HERE, Employee worked for Employer for three (3) days in exchange for remuneration and did not sign an Agreement, until after his injury.

Section 3(a)(1) of the CWMA is unambiguous:

"An 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.
[emphasis added]. 43 P.S. section 933.3(a)(1).

It is simple. As there was no written contract, Employee could not be considered an independent contractor under the CWMA. The fact that employee later signed a written contract did not change his employment status, as it existed at the time of his injury.


Practice Pointers:
1. It is difficult to judge with much accuracy, BUT prior to the enactment of the CWMA, would this individual be considered an Independent-Contractor?

There certainly are sufficient facts presented for a Worker Compensation Judge to conclude that the parties intended that this Individual was an Independent-Contractor. 
Prior appellate decisions looked at all of the facts - workers' experience, tools, method of payment, uniforms ... 

but the most important element to establish an Employer-Employee relationship is the control over the details of the work performed by the worker. The greater control exerted over the individual, the more likely one would be considered and employee. 

Query: Here was it the "pre-injury" intention of the parties to enter into an Independent-Contractor relationship? Did they "ratify" their pre-injury intentions by the post-injury document? Now, these thoughts are not controlling. 

As we see from this Commonwealth court decision, the unambiguous language of the CWMA will be interpreted and rather strictly applied. 
This result reflects the intention of the CWMA; to eliminate this type of post-injury "he said; she said" episodes.  

2. Word to the Wise ... Insurers and Employers ... get your documents in order. Establish a business practice to prepare, sign and retain this type of agreement. 

IRE Determination remains Valid despite subsequent expansion of Injury Description

The Impairment Rating Evaluation Remedy 
and the impact of the changing Injury Description. 

An Employer may change the workers' compensation benefit status of an injured Employee from an unlimited "total disability" status to a "partial disability" status, limited to a duration of 500 weeks. This remedy is accomplished via the request for an Impairment Rating Evaluation (IRE) pursuant to Section 306(a.2) of the Pennsylvania Workers' Compensation Act.

After an Employee has received total disability benefits for a period of 104 weeks, the Employee must submit to an IRE, when requested by the Employer. The IRE remedy is automatic if the IRE request was made within 60 days of the 104th week and the impairment rating is less than 50% according to the AMA Guides. The Employer may request an IRE, at any point beyond the 60 day window, but this remedy is not automatic and requires the filing of a petition.

What is the character or nature of the work injury changes?

The 2009 Pennsylvania Supreme Court decision in Cinram Manufacturing v. WCAB (Hill) discussed 2 types of Review Petitions. The review/correction of the description of injury, is proper where there was a mistake in the injury description since the original compensation document.
The 2nd type of review is an amendment/expansion of the injury description, to address injury which subsequently arises as a consequence of the original injury.

We previously discussed the effect of the review of the description of the work injury upon the Employer Termination petition remedy. ( See: Harrison v. WCAB (Auto Truck Transport at October 10, 2013 Blog Post).
These filings seem to be a recurring theme... Employer files a Termination petition ... Employee files a Review to expand the injury beyond the scope of the Termination medical exam.

A recent appellate decision addressed the impact of a subsequent WCJ decision to grant a review/expansion of the work injury description upon the earlier successful Employer IRE.
See: Duffey v. WCAB (Trola-Dyne Inc.) a reported decision of a panel of the Commonwealth Court of Pennsylvania authored by Judge Cohn-Jubelirer on June 26, 2015.

Factual and Procedural Background

In March of 2009 Employee sustained bilateral hand injuries as a result of handling electrical wires while repairing a machine. Employer voluntarily accepted responsibility for this injury via Notice of Compensation Payable (LIBC-495). This work injury was described as "bilateral hands, electrical burn, striping some wire".

In March of 2011 Employer requested an IRE when Employee received 104 weeks of total disability benefits. A Request for designation of a Physician to Perform an IRE (LIBC-766) was filed. The work injury was described as "bilateral hands - nerve and joint pain". An appointment was scheduled and accomplished.

Bruce E. Sicilia, MD conducted an IRE on June 2, 2011 and issued an Impairment Rating Determination Face Sheet (LIBC-767) with the accompanying report. Impairment was 6%.

On June 28, 2011, Employer issued a Notice of Change of Workers' Compensation Disability Status (LIBC-764) based upon Dr. Sicilia's report.
On July 14, 2011, Employee filed a Petition to Review Compensation Benefit Offset, alleging the IRE was invalid, without further explanation.
On December 16, 2011, Employee asserted the IRE was invalid as the description of injury was incomplete.

Employee Review Petition - Medical Evidence

• Debra A. Bell, MD, the Employee family physician, diagnosed an "adjustment disorder with depressed mood" on August 18, 2010.
• Scott M. Cherry, MD, a board-certified specialist in neurology and internal medicine (together with Dr. Bell) diagnosed post-traumatic stress disorder (PTSD). 
• Employer presented the medical expert deposition testimony of Dr. Sicilia regarding his IRE exam findings and the 6% impairment rating for Employee.  
• Timothy J. Michals, MD, a board-certified psychiatrist, forensic psychiatrist and neurologist, acknowledged the diagnosis of adjustment disorder, but opined Employee fully recovered. He disagreed with the PTSD diagnosis. 

WCJ Review Petition Decision

WCJ accepted Employee testimony and medical expert evidence in granting Employee Review Petition.

WCJ added the diagnoses of adjustment disorder with depressed mood and PTSD to the work injury description.

WCJ concluded IRE was invalid as it did not address these additional work-related injuries. Employee could not modify Employee disability status from TTD to PPD.

WCAB reversed WCJ Decision

IRE was valid as Employee never sought to amend the NCP description of work injury until December 16, 2011 petition (amendment). This was after the June 2, 2011 IRE Determination.
Dr. Sicilia determined Employee was at MMI,  he properly performed an IRE based upon the accepted injuries and the 6% impairment was not refuted. 

Commonwealth Court Affirmed WCAB

Section 306(a.2) governs the manner in which an employer may obtain a change in an employee's disability status based upon an IRE, as well as how an employee may challenge an IRE.

An employee has the right to immediately challenge the IRE and/or appeal the reduction of his/her disability status before the reduction becomes effective, during the post-IRE 60 day notice period. citing: Johnson v. WCAB (Sealy Components Group) and Barrett v. WCAB (Sunoco Inc.).

After the 60 day notice of modification period ends, the employee may challenge the IRE change of disability status, by attempting to Reinstate total disability status, via evidence that a subsequent IRE establishes an impairment rating of 50% or greater. See: Wingrove v. WCAB (Allegheny Energy).

Here, Employee was diagnosed with adjustment order with depressed mood in August 2010. Section 413(a) allows a petition for review and modification of a compensation agreement at any time. He did not seek to review and amend the description of injury until after the IRE.

Employer argued, as a practical matter, the IRE physician can only assess impairment for injuries that are accepted as work-related.

Employee argued that the prior decision at Harrison v. WCAB (Auto Truck Transport Corp) acknowledged instances where the WCJ may review and amend the description of injury in the course of IRE petition proceedings.

Employer argued acceptance of Employee's arguments would allow one to challenge a past IRE based upon injuries that were not yet determined to be work-related!

Commonwealth Court Reasoning

The purpose of an IRE is to determine the degree of impairment due to the compensable injury. The term "compensable injury" is used throughout this section . See statutory language at 306(a)(2); 77 PS 511.2(1).

The Harrison decision states that the NCP establishes the description of the work injury.

Prior decisions note, it is the claimant's physical condition at the time of IRE that governs the validity of the IRE. Westmoreland Regional Hospital v. WCAB (Pickford).

Wingrove v. WCAB (Allegheny Energy) [relied upon by Employee] discussed the litigation of Review Petitions of the work-related injury description in 2009, about 4 years after the IRE. The WCJ granted one Review Petition, and amended the description of the work injury However, this expansion of the work injury did not negate the validity of the 2005 IRE. After 60 days, IRE became fixed and beyond challenge ... in the absence of an IRE demonstrating 50% or greater impairment.

The focus in determining the validity of an IRE is the state of the claimant and the compensable injury, as described in the NCP at the time the IRE is performed.  (slip opinion p 9).

The reform goals of the 1996 amendments are not advanced by allowing invalidation of an otherwise valid IRE, just because one can subsequently establish that work-related injuries exist.
"Employee's position would not improve the efficiency of the WC system...". slip opinion p 12.

Employee's position would effectively strip the Employer of the one opportunity to obtain a self-executing change in employee disability status [during the 60 day window after 104 weeks of TTD] by adding injuries to the NCP at a time after the IRE is performed.

A tactic to delay the review of the description of work injury, as a litigation strategy, does not serve the purpose of the 1996 amendments.

"... our conclusion encourages claimants to be proactive as the end of the 104 week period is approaching and determine whether any work related injuries should be added to the NCP, so they are considered, if or when an IRE is requested and performed". slip opinion p 13.


PRACTICE POINTERS:
1.   It would appear the Employers and Insurers should more vigorously argue the Legislative History and Intent of the 1996 Amendments. In the reasoning of this opinion, the Court references: 

• the purpose of the IRE remedy,
•  the reform effort of the 1996 amendments "to reduce rising Workers'Compensation costs and restore efficiency to the Workers' Compensation system"
• employee position would not improve the efficiency of the WC system,
• employee position would not reduce costs of the WC system,
• employer has only one opportunity to obtain the self-executing version of an IRE,
• delay strategies should not be encouraged.

2.   It seems like a "fairness" argument underlies this reasoning. 

3.   IMHO the IRE remedy remains the MOST effective tool to reduce future worker compensation indemnity wage loss benefit liability. 

4.   An IRE should be scheduled in every case (with a few remote exceptions).

5. As we have witnessed in past appellate challenges to successful IRE determinations: 

• be certain claimant is at MMI; 
• be certain the description of the accepted work-related injury is clear, as the NCP may be implicitly amended by a WCJ decision ... don't just read the NCP;
• do not file a premature IRE request.