Workers’ compensation ensures that employees who get hurt on the job are compensated for their injuries and lost wages. However, Iowa workers’ compensation protection covers only employees of Iowa companies—not independent contractors. An independent contractor isn’t eligible to file for workers’ compensation for a work-related injury. How do you know whether you are a covered employee or an excluded independent contractor?
What’s the Difference Between an Employee and Independent Contractor?
While we often think of an employee as anyone who works for someone in exchange for compensation, employee is actually a legal term that comes with many protections and benefits. These include workers’ compensation protection as well as wage and hour benefits (such as minimum wage, overtime pay, and mandatory breaks), paid or protected leave (like sick leave and family leave), protection from discrimination in the workplace, and unemployment benefits.
Not everyone who works for a company has the legal status of an employee; some compensated workers are “independent contractors.” While there are some advantages to being an independent contractor, workers in this category are not entitled by law to many common employee benefits and protections—like workers’ compensation. However, just because an employer tells you that you are an independent contractor does not mean that it is true under Iowa law.
In Iowa, according to Iowa Workforce Development, “an increased effort is being made in Iowa to investigate and enforce existing laws to correct worker misclassification” (that is, employers incorrectly classifying workers as independent contractors rather than employees). This effort is intended both to protect Iowa workers and to ensure that employers pay the right amount of employee taxes.
What Factors Determine a Worker’s Classification?
To determine whether an Iowa worker is an independent contractor or an employee, the courts consider three main factors to evaluate the degree of control an employer has over the worker versus the degree of independence the worker has. The more independent the worker, the more likely he or she is properly considered an independent contractor. A court will ask questions to try to evaluate whether the facts of a particular worker/employer relationship make it more likely that the worker should be classified as an employee or an independent contractor.
1. Determining which party controls a worker’s behavior
Some questions the court will ask include
- Who controls how, when, and where work is performed?
- Who decides what equipment or tools are used and who provides them?
- Who decides what assistants to hire to do the work, and who hires them?
- Where and how are supplies and equipment purchased?
2. Evaluating the financial relationship between the worker and the company
The court will examine whether the worker directs his or her own finances, including asking questions like
- Does the worker make a significant investment of his/her own in the work? (A significant investment is not always a certain dollar amount, but it must have substance.)
- Is the worker reimbursed for business expenses?
- Is there the opportunity to make a profit and the risk to take a loss, or is a worker compensated regardless of result or outcome?
- Is a worker paid per time period he or she has worked (e.g., hourly or daily) or by completion of a job?
3. Evaluating the overall relationship between the worker and the company
The court will examine both the parties’ intent and conduct, including looking at questions like,
- Does the company give the worker benefits like paid leave, pension opportunities, or health care?
- Is the worker’s service essential to the purpose of the business?
- Is there a written contract between the parties that sets forth an intentional relationship as either an employee or independent contractor?
How Can You Tell the Difference?
Determining the right status for a worker depends on the facts of each specific situation. For example, if an Iowa company hires a courier to pick up a package from New York City and transport it to Des Moines but makes no other restrictions on how, when, or in what manner the courier does so, this is a clear independent contractor relationship. On the other hand, if the Iowa company requires that a worker start at a company-controlled warehouse in New York City, put on a company uniform, drive the package in its company truck, make scheduled daily stops to check in with the company, take a particular route, arrive at a specific time, and adhere to a company code of conduct while in transit, the relationship would likely be an employment relationship (albeit a temporary one).
In many working relationships, however, it isn’t this easy to distinguish whether a worker is or isn’t an employee. The courts will evaluate how much control over a worker is enough to establish an employment rather than a contract relationship. For example, if the aforementioned business allows the courier to drive his own truck but requires him to take a certain route and make regular check-ins with the company, it may or may not be enough to turn the nature of the work into an independent contractor relationship. All relevant facts must be addressed on a case-by-case basis to determine whether a worker is properly classified as an employee or an independent contractor.
Workers’ Compensation Protection for Iowa Employees
If you are an employee, workers’ compensation benefits can compensate you in the event of a workplace injury for partial lost wages, paid medical care, and partial or total permanent disability benefits if appropriate. If you have been denied workers’ compensation benefits and believe your work status has been misclassified, contact us today. We will review the facts of your situation and help you figure out whether you are entitled to workers’ compensation benefits following a work-related injury.