Independent Contractor or Employee: How the Difference Affects Workers’ Comp


Independent Contractor or Employee? How the Difference Affects Workers’ Comp

In Minnesota, employers must purchase workers’ compensation insurance coverage for their employees, but they do not need coverage for independent contractors. Independent contractors cannot receive workers’ comp benefits unless they or their company voluntarily purchase insurance coverage.

Because independent contractors can get hurt while working just like employees, they run the risk of becoming permanently disabled without any benefits to pay for medical expenses and lost wages. Employers who use independent contractors do not face regular insurance premium payments, claims for benefits, and possible increased premiums. As a result, employers have an incentive to improperly classify workers as contractors when under the law they are employees.

Minnesota courts use a five-part test to determine whether a worker is an employee or a contractor. The test asks:

  1. Whether the employer has the right to control the means and manner by which the worker performs the job;
  2. The method by which the worker is paid – e.g., by the hour, by the job, or by a salary;
  3. Whether the employer furnishes tools and materials used to do the job;
  4. Whether the employer has control over the premises where the work is done; and
  5. Whether the employer has the right to discharge the worker (or whether the job ends when the work is completed).

(Guhlke v. Roberts Truck Lines, 128 N.W.2d 324 (1964).) Primarily, courts look at the first factor to determine if the employer controls the worker’s job duties or whether instead the worker determines how to get the job done. (Hunter v. Crawford Door Sales, 501 N.W.2d 623 (1993).) Employers control employees’ job duties, while contractors have discretion to complete tasks in the way they think is best. Courts look at a series of questions about the level of control, listed here.

To further narrow the question of employee or contractor, the Department of Labor and Industry developed guidelines for specific occupations. In particular, there is a special test for determining whether a construction contractor should be considered an employee. This test will be discussed in a future blog.

Some independent contractors choose to purchase short-term or long-term disability insurance to protect against the risk of losing the ability to work. Others opt to purchase workers’ compensation insurance coverage. If you work as an independent contractor but believe that you have been misclassified and should receive workers’ compensation benefits for your workplace injury, contact a lawyer today.

Need help getting workers’ compensation for your injury? Joe Osterbauer, Esq. and the Osterbauer Law Firm stand up for injured Minnesota workers’ rights. Joe’s 27 years of workers’ compensation experience and his team’s speedy service combine to get clients the results they need. To schedule a free consultation, visit Osterbauer Law Firm online or call Joe’s office at (612) 334-3434.