Industrial Injuries – Independent Contractors, Employees and Liability of Owners

By Doug Owens

A recent case highlights the importance of defining the relationship between an owner who hires a person to do work on a structure, and that person in the event of an injury to the worker. Washington’s Industrial Insurance Act provides a state guaranteed mechanism for injured employees to receive medical treatment for their injuries, and imposes the burden on the employers of such workers to pay into the industrial insurance fund for such treatments.

Ordinarily the relationship between a worker and a property owner on whose property the worker is doing work is not difficult to analyze. Either the worker is an employee of the property owner or the worker is an independent contractor. If the worker is an employee, then the employer pays the industrial insurance premium and receives immunity from any lawsuit by the worker to recover damages for any on the job injury. If the worker is an independent contractor, then the independent contractor is responsible for paying his own industrial insurance premium to the state fund. There are several tests to determine in general whether a worker is an employee or an independent Contractor. One of the tests is whether the property owner has the right to control the way the worker does the work. If yes, the worker is an employee, if no generally the worker may be an independent contractor.

However, for some situations there is an additional test that can affect whether the property owner can be sued by an injured worker. That test is whether the worker consented to be an employee of the property owner. In this recent case, a worker was hired as day labor by an owner of a company which was building a residence. The owner told the worker he would be working for a company called NDTS which at that time was inactive. The worker was injured on the job and inquired of the owner who had hired him and was told that he was responsible for his own industrial insurance premium payments because he was not an employee of the company. The worker received industrial insurance benefits and the state then filed a claim for unpaid employer’s insurance premiums against one of several companies that were jointly owned by the owner who had hired the worker. One of these companies called Superior Floors paid the state’s claim for unpaid insurance premiums.

Then the worker filed a lawsuit against several of the companies involved, seeking damages for his injuries. The related companies including Superior Floors asked the court to dismiss the case based on the employer’s immunity under the Industrial Insurance Act. The court decided that for purposes of establishing employer’s immunity, in addition to the control test the employer must satisfy the test that the employee consented to the employment relationship. The court found that the worker had never received a check from Superior Floors, had not been kept on that company’s books as an employee and that company had never reported any earnings or withheld any taxes for the injured worker. The court determined that for these reasons and since the injured worker had never heard of Superior Floors before the injury, he could not have consented to become an employee of that company.

The related companies also argued that because Superior Floors belatedly paid the employer’S insurance premiums, that company enjoyed the employer’S immunity from a lawsuit for damages caused by the on the job injury. The court rejected that argument, saying that if the employer had paid compensation to the injured worker, then it might have a claim to immunity from the lawsuit, but the belated payment of the industrial insurance premium would not give that result. The court also noted that even the belated payment of the industrial insurance premium would not establish that the injured worker had consented to be an employee of Superior Floors.

The teaching of this case is that when investors hire people to work on their property, it is vital to clearly establish whether the people are employees or independent contractors, and if the latter, to ensure that the contractors pay appropriate industrial insurance premiums. The preceding is intended to be educational and should not be considered legal advice.

About the Author…

Doug Owens practices real estate law and general business law from his office in Seattle. He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or dougowens@seattlelawyer.com.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi.” We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest.

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