Just this Tuesday, August 1, 2017, the Pennsylvania Commonwealth Court decided that the rigorous elements of the Construction Workplace Misclassification Act (CWMA) could not be applied to the common law determination of whether someone is a contractor or an employee.
What is the difference between the CMWA and the common law?
The CWMA has a checklist of criteria that must be met for a construction worker to be considered an independent contractor as opposed to an employee, for purposes of the Workers’ Compensation Act and the Unemployment Compensation Law. For example, some of the factors include (a) a written contract, (b) a separate business entity with its own location, (c) liability insurance of at least $50,000.
On the other hand, the common law looks at factors, including which party supplied the tools, the degree of control over the work to be done, the skill required, and how the payments are done. Unlike the CWMA, none of the factors in and of themselves is controlling. They are considered together as part of an entire picture of the working relationship.
What does this Commonwealth Court’s decision mean to employment law?
Courts and agencies have used the CWMA to help with the independent contractor/employer distinction in a variety of contexts, including situations outside of the construction industry, Workers’ Compensation Act, and Unemployment Compensation Law. This decision redirects courts and agencies away from a checklist analysis and toward a slightly more employer-friendly flexible approach.
The independent contractor/employee distinction matters to employers. Among other things, you, as the employer, are responsible for your employee’s Workers’ Compensation insurance, tax deductions, and meeting many other legal requirements. This decision gives employers some assurance that a Pennsylvania state court will not apply the CWMA checklist.
While this is a good decision for employers, the independent contractor/employee distinction is still crucial for employers of all sizes. Where there is doubt as to whether someone is a contractor or employee, courts and agencies tend to err in favor of determining that a worker is an “employee”. The best advice is to contact legal counsel if you wish to make the independent contractor distinction from the beginning of the relationship.
The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice Group. Jeffrey T. Tucker, Esquire, is our editor-in-chief. EPELog is meant to be informational and does not constitute legal advice.