In 2010, the Pennsylvania Legislature enacted the Construction Workplace Misclassification Act (CWMA), which, in part, attempted to clarify who is and is not an independent contractor (in the construction industry) for the purposes of workers’ compensation coverage.
Section 3(a) of the CWMA provides: “For purposes of workers’ compensation . . . an individual who performs services in the construction industry for remuneration is an independent contractor only if: (1) the individual has a written contract to perform such services; (2) the individual is free from control or direction over performance of such services both under the contract of service and in fact; and (3) as to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.” 43 P.S. §933.3(a).
To the extent an individual does not meet such definition, the individual will be deemed an employee and the general contractor/employer will be responsible for maintaining and providing workers’ compensation coverage for such individual. Recently, in Staron v. Workers’ Compensation Appeal Board (Farrier), the Commonwealth Court clarified the first prong of the definition – the “written contract” requirement.
In Staron, the claimant responded to an advertisement by Lee’s Metal Roof Coatings and Painting (“Lee’s”) for a painter. Claimant was allegedly a self-employed subcontractor with 20 years experience in painting and roof work. Claimant began working for Lee’s, using his own tools and equipment and taking very minimal direction from Lee’s. Approximately two months into the relationship, claimant fell off a roof and was injured. Lee’s presented claimant with a written independent contractor agreement upon his release from the hospital, which claimant freely signed. Claimant nonetheless sought workers’ compensation benefits from Lee’s, which were granted by the Workers’ Compensation Judge and affirmed by the Workers’ Compensation Appeal Board on the basis that claimant was an employee of Lee’s and not an independent contractor. On appeal, the Commonwealth Court found that claimant was not an independent contractor, as defined by the CWMA, because there was no written contract between Lee’s and the claimant at the time claimant was injured. It did not matter to the Court that claimant voluntarily signed the agreement after his injury. According to the Court, the written independent contractor agreement contemplated by the CWMA must be in place prior to any injury being sustained in order to satisfy the “written contract” requirement of the Act.
Note, the Court did not say that the contract must be signed before any work is commenced in order to render the contractor an independent contractor. The Court simply said that the agreement must be signed prior to the contractor sustaining an injury. Nonetheless, the best practice would be for businesses employing independent contractors and sub-contractors, particularly in the construction trades, to ensure that Independent/Subcontractor Agreements are executed prior to the commencement of any work being performed. Remember though that the existence of a written agreement will not necessarily carry the day in a dispute over the classification of an injured worker. The written agreement is only one part of the test. Accordingly, businesses in the construction trade should be mindful of the other CWMA requirements for independent contractor classification and should periodically review all independent contractor and subcontractor relationships to ensure compliance with the CWMA.