A Pennsylvania court recently ruled that a claimant was not entitled to worker’s compensation because he was not an employee, but rather he was an independent contractor.

The Court, while ignoring the independent contractor agreement and the non-compete agreement signed by the company and the claimant, examined the nature of the employment to determine if the driver was an employee and eligible for worker’s compensation. Based on the following factors, it determined that the escort driver was NOT an employee and therefore NOT eligible for worker’s compensation:

1. the company did not control the details of the trip.
2. the claimant may refuse any assignment.
3. the company provides no training or equipment.
4. the drivers did not need to attend any functions at work (i.e. no mandatory employee meetings)

Beacon Flag Car v. W.C.A.B., No. 928 C.D.2006 (Oct. 31, 2006).

What does this case mean for you, as a business owner?  The Unemployment Compensation Board and the Workers Compensation Board are not required to respect your independent contractor agreement.   The boards, including the Internal Revenue Service, will examine your actual relationship with the work to determine if he or she is independent.  So, for examine if you control the hours and activities of the worker, the I.R.S. may declare that your independent contractor is an employee for tax purposes.

What should you do? In addition to carefully drafting your independent contractor agreement, you must critically examine your relationship with the person.  It is best to develop a standard operating procedure for governing and working with your independent contractors.