Misclassifying Employees as Independent Contractors to Avoid Workers Compensation Insurance


March 31, 2013

Georgia law requires employers with at least 3 employees to obtain a workers' compensation insurance policy to cover employees injured at their place of work or arising out of and occurring within the course and scope of employment.This means that workers' compensation benefits cover more than tasks performed during work hours or on the employer’s premises, but also tasks and recreational activities that are encouraged or supported by the employer or for the benefit of the employer. While workers' compensation benefits can provide a vital resource for medical care and lost income resulting from workplace injuries, a growing number of employers are implementing policies to avoid incurring the cost of paying for workers' compensation insurance.

Many companies designate those they hire to provide services as independent contractors (ICs) to reduce labor cost by avoiding liability for workers' compensation insurance, taxes and benefits. ICs are not entitled to workers' compensation benefits for work-related injuries. Sometimes employers attempt to shirk their responsibilities by mislabeling employees as independent contractors.

Our experienced Georgia workers' compensation attorneys analyze the nature of a company-employee relationship rather than simply rely on the characterization of the company or an IC agreement. We examine the manner, time, method and type of work to identify employers that are attempting to evade workers' compensation obligations by misclassifying employees.

The line between an IC and employee is sometimes difficult to draw, but there are a number of factors that should be considered:

  • Method of Compensation: An employee typically receives a guaranteed paycheck on a recurring basis – daily, weekly or monthly. When a worker is paid on an hourly basis, this is a strong indication that the worker is an employee, since independent contractors are typically paid based on the completion of a particular project, rather than on an hourly basis. Independent contractors are paid on a per job or project basis, usually based on a profit or loss rather than a guaranteed recurring paycheck.
  • Tools of Job: Employees generally have work supplies, equipment or tools furnished by the employer or receive reimbursement from their employer. ICs typically make a significant investment in their own work tools and supplies.
  • Number of Employers: While employees work regularly for an employer (or a couple of employers), an IC may perform the same type of work for a fair number of companies or clients.
  • Eligibility for Benefits: While employers usually pay employees benefits, ICs do not generally qualify for benefits, such as health insurance, retirement accounts or other benefits.
  • Duration of Employment: Employees usually have a permanent or indefinite tenure whereas ICs are hired to perform a specific job or until the contract ends.

Our Georgia workers' compensation attorneys at Montlick and Associates are available to provide effective legal representation to clients throughout all of Georgia and the Southeast, including but not limited to Albany, Athens, Atlanta, Augusta, Columbus, Gainesville, Macon, Marietta, Rome, Roswell, Savannah, Smyrna, Valdosta, Warner Robins and all smaller cities and rural areas in the state. No matter where you are located our attorneys are just a phone call away, and we will even come to you. Call us 24 hours a day/7 days a week for your Free Consultation at 1-800-LAW-NEED (1-800-529-6333). You can also visit us online at www.montlick.com and use our Free Case Evaluation Form or 24-hour Live Online Chat.


Please Note:
Many of our blog articles discuss the law. All information provided about the law is very general in nature and should not be relied upon as legal advice. Every situation is different, and should be analyzed by a lawyer who can provide individualized advice based on the facts involved in your unique situation, and a consideration of all of the nuances of the statutes and case law that apply at the time.