Indicia of the Independent Contractor versus Employer – Employee Relationship

 

Indicia of the Independent Contractor versus Employer – Employee Relationship

The Pennsylvania Workers’ Compensation Act does not have a “hard and fast rule” that governs the distinction between an employer-employee relationship and an owner-independent contractor relationship. 

Past cases were decided on a case-by-case basis. Specific facts may alter the outcome of the assessment of a purported employer-employee relationship.

The Construction Workplace Misclassification Act (43 P.S. 933.3 effective 02/10/2011) was a significant step to advancing certainty in the assessment of the presence/absence of an independent contractor in the construction industry. An individual who performs services for renumeration in the construction industry is an independent contractor only if all three of the following criteria are satisfied:

1. The individual has a written contract to perform such services;
2. The individual is free from control or direction over performance of such services both under contract of service and in fact;
3. As to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.

A recent memorandum appellate decision addressed the presence/absence of an independent contractor relationship in the soon-to-be archaic - newspaper delivery boy position. The court gave review of the independent contractor status in Pennsylvania Workers’ Compensation Law and the indicia necessary to establish an employer-employee relationship.

See: the Commonwealth Court Decision at Shannon v. WCAB (Ogden Newspapers of Pennsylvania), No. 46 C.D. 2020, Memorandum Opinion filed August 25, 2020.  

An application for allowance of appeal was recently denied by the Supreme Court of Pennsylvania at 292 WAL 2020 on April 1, 2021. 

The facts are not remarkable.  Claimant was engaged in delivery work for the Altoona Mirror, a newspaper owned by Ogden Newspapers. (Ogden hereinafter). He was injured in a customer’s icy driveway.  (NOTE: The case was bifurcated for the issue of employee status; therefore, the Appeal Board and Commonwealth Court did not evaluate the medical evidence presented).

The ”modern” newspaper delivery person is unlike quintessential figure of a teen riding a bicycle with a canvas carrying bag - Claimant worked for Ogden for approximately nine years.  On an average day, he would receive 500-600 newspapers at his home between 2:00 a.m. and 3:00 a.m.  He traveled approximately 70 miles per day to deliver these papers.  Ogden imposed a 6:00 a.m. deadline for delivery to all customers in homes, stores, and newspaper vending machines.  Claimant did not select his own delivery route but was instead instructed by Ogden.

Ogden imposed several requirements in addition to delivery time and manner.  At times, claimant was required to deliver newspapers to non-customers, in hope they would become customers.  Claimant was also provided with advertising inserts he was required to place within the newspapers.  At times claimant was required to use holiday-themed advertising bags as delivery packaging.  Claimant did not have control or discretion over these requirements.  He did not collect money from customers or select customers to be included on his route.  If customers had complaints or concerns, claimant did not handle,  it was directed to Ogden. 

One customer complained her newspaper was being thrown in her driveway and it should be delivered on her front porch.  As a result, claimant was required to get out of his car and walk on the customer’s driveway to deliver the newspaper.  On December 17, 2017, claimant left his vehicle, walked on the customer’s driveway to deliver her newspaper to her front porch as requested.  While walking on the driveway he slipped and fell, fracturing his ankle.  He was hospitalized for 11 days. 

Claimant previously signed an independent contractor agreement.  This document stated claimant was “an independently established business enterprise”, and that as an independent contractor, he understood that he was not entitled to employee benefits from Ogden, including workers’ compensation benefits.

The claim petition was denied by the Workers’ Compensation Judge and the Appeal Board affirmed that denial.  On appeal to the Commonwealth Court, claimant argued his case is distinguishable from prior case law based upon the evolution and change in the newspaper delivery boy position.

The Commonwealth Court denied the claim petition based upon an analysis and assessment of the employment relationship.  As often stated – the existence of the employer-employee relationship is a question of law based upon the Workers’ Compensation Judge findings of fact.  Claimant had the burden to establish an employment relationship existed at the time of the injury and the injury was related to the employment.  As often stated - the findings of a Workers’ Compensation Judge can only be disturbed if there is no competent evidence to support those findings.  Citing:  Universal Cyclops Steel Corporation, 305 A.2d 757 (Pa. Cmwlth. 1973).

The Court noted that Pennsylvania does not have a “hard and fast rule” that governs the distinction between an employer-employee relationship and an owner-independent contractor relationship.  Citing Hammermill Paper Company v. Rust (Pa. 1968). 

Factors to be considered in the establishment of an employment relationship include:

1. control of the manner of work to be done;
2. responsibility for result only;
3. terms of agreement between the parties;
4. the nature of the work or occupation;
5. skills required for performance;
6. whether one is engaged in a distinct occupation or business;
7. which party supplied the tools;
8. whether payment is by the time or by the job;
9. whether work is part of the regular business of the employer;
10. also the right to terminate the employment at any time.

While each factor is relevant, certain guidelines have been elevated to be dominant considerations, such as control over the work to be completed and the manner in which it is to be performed are primary factors in determining employee status.  Citing JFC Temps Incorporated (Pa. 1996).  Claimant argued Ogden controlled the manners and methods by which he was required to deliver newspapers: they set a delivery time deadline, a delivery route, and the means of delivery (although not explicitly stated, his motor vehicle).

The Workers’ Compensation Judge identified 11 factors that suggested that claimant entered into an independent contractor relationship with Ogden.  This was based upon testimony of Ogden’s District Manager.  He stated he would often not see claimant for months.  The WCJ considered this was an indication there is not a degree of supervision that one normally sees in an employment relationship and is more akin to the standard independent contractor relationship.  Also while claimant was shown the quickest delivery route by Ogden, he was free to use his own route.  He was required to supply his own vehicle for use in deliveries but he was not reimbursed for mileage or use.  The WCJ noted that employees are generally reimbursed for use of their privately-owned vehicles for activities in the furtherance of the business affairs of their employers.

The controlling case in this area is Johnson v. Workers’ Compensation Appeal Board (Dubois Courier Express).  In Johnson, the Commonwealth Court held a 13-year-old newspaper carrier was an independent contractor because the newspaper did not exercise substantial control over his activities.  As in the present case - the 13-year-old was only told to deliver papers by a specific time, he was never directed otherwise as to the time or mode of delivery or the route traveled.  Following drop-off of the newspapers, the company had no further investigation or supervision regarding delivery of the papers.  That carrier was also eligible to deliver competing newspapers and was permitted to substitute a person to deliver his papers without giving the newspaper company notice or receiving prior approval. 

In the instant case, Claimant also had the opportunities for “unrestricted substitutions” and additional delivery routes for competing publications.  Claimant asked the Court to consider the erosion of the newspaper boy independence that has occurred since the Johnson case; however, the Court thought this consideration was beyond its scope of review. 

Claimant attempted to distinguish the prior case law by noting that they involved newspaper distributors who purchased the newspapers from the publishing company and after making sales to customers, kept the profits.  These newspaper distributors were considered to be independent contractors.  Claimant attempted to draw a distinction which was not convincing.  Citing: Balinski (Pa. Superior 1935) and Rodgers (Pa. Super. 1960). 

Claimant attempted to distinguish a more recent case, Gallagher (Pa. Cmwlth. 2015).  The Court did not accept this argument.  Claimant was similar to the carrier in Gallagher in that he was able to enlist a substitute without prior notice or permission and there is no prohibition on delivering competing newspapers.  However, this supports the conclusion that the individual company did not control claimant’s work or the manner of his performance, only the results.  On this basis, claimant’s position was not distinguishable from the prior caselaw reflecting the understanding of a newspaper delivery person to be an independent contractor.  The company’s lack of control over claimant’s newspaper delivery constituted an independent contractor relationship. 

Although the newspaper delivery position had been historically somewhat unique, the analysis of the employer-employee relationship employed by the Court for workers’ compensation purposes was not.  The Court has employed the “control test” as a determining factor in the assessment of the existence of employment relationship or an independent contractor relationship. 

It is noteworthy that one of the early decisions of the then-newly constituted Commonwealth Court addressed the employee-employer relationship question.  See:  J. Miller Company v. Mixter, 277 A.2d 867 (Pa. Cmwlth. 1971).  It is safe to say that this may be one of the few legal principles that has remained untouched by the Commonwealth Court since 1971. 

“Control in an employment relationship exists where the alleged employer possesses the right to select the employee, the right and power to discharge the employee, the power to direct the manner of performance and the power to control an employee.  See:  American RD Lines v. WCAB (Royal), (Pa. Cmwlth 2012). 

Recommendation

Although each case may present a unique set of facts, the assessment of the presence or absence of an employer-employee relationship will be made based upon a review of the facts presented and application of these legal principles. 

When addressing the question of the presence or absence of an employment relationship, obtain as many factual  details as available regarding the relationship of the parties, the “control” exercised by the purported employer and the “freedom” of the purported employee to conduct his/her affairs.