“Employee” and “Employer” – Critical Terms to Understand When Reviewing a Workers’ Compensation Claim

Understanding the meanings of “employee” and “employer” under the Virginia Workers’ Compensation Act (“the Act”) is crucial in determining whether the Act applies.  The Act only applies to businesses with three or more employees.  If the injured worker was working for a business with less than three employees regularly in service, his/her injury is not covered under the Act, and he/she cannot receive workers’ compensation benefits.  Certain businesses therefore do not meet the threshold of being covered under the Act.

Who is an employee?

In assessing the status of a person who performs work for another, the determination of whether the person is an employee must be made based on the facts of the particular case in light of well-settled Virginia workers’ compensation principles.  A person who is hired by an employer to work in the usual course of the employer’s business may be held to be an “employee” under the Act regardless of how often or for how long the person may be employed. 

The general rule is that a person is an employee if he works for wages or a salary and the person who hires him reserves (1) the power to fire him and (2) the power to exercise control over the work that is performed.  This right of control over a person is the determining factor in ascertaining the relationship between the parties.  The power of control not only relates to the work result to be achieved, but also relates to controlling the means and specific methods of accomplishing the work result.  The Commission has held that the absolute right to fire a person without cause or notice includes the power to compel that person’s obedience to work tasks and instructions and therefore is an important consideration in the assessment of employer-employee relationships.

This nature of control therefore impacts whether a person is classified as an employee or an independent contractor.   An independent contractor is a person who may freely adopt the means and methods to accomplish the end work result.  Importantly, just calling someone an “independent contractor” or just providing them with a 1099 tax form at the end of a tax year does not make them an independent contractor under the Act.  The Commission looks to the element of control and the freedom of choice in performing the steps that lead to the final work result.

Who is not an employee?

The Virginia Workers’ Compensation Act does note several exceptions to who is classified as an employee and these exceptions are specifically listed in VA Code §65.2-101.

A person who suffers from an injury on/after July 1, 2012, where there is jurisdiction under either the Longshore and Harbor Workers' Compensation Act (33 U.S.C. § 901 et seq.) and or the Merchant Marine Act of 1920 (46 U.S.C. § 30104 et seq.) is not determined to be an employee under the Virginia Workers’ Compensation Act.

Any taxicab or executive sedan driver, provided the Commission is furnished evidence that such individual is excluded from taxation by the Federal Unemployment Tax Act, is not an employee under the Act.

Casual employees are not employees under the Act.  Casual employees are defined as employment where it is not permanent or periodically regular.  It is employment which is occasional and by chance.  It is also important that such employment not be in the usual course of the employer’s trade or business.  

Farm and horticultural laborers are not employees under the Act unless the employer regularly has in service more than three full-time employees. 

An owner-operator of a motor vehicle that is leased with or to a common or contract carrier in the trucking industry is not an employee under the Act only if: (i) the owner-operator performs services for the carrier pursuant to a contract that provides that the owner-operator is an independent contractor and shall not be treated as an employee for purposes of the Federal Insurance Contributions Act, 26 U.S.C. § 3101 et seq., Social Security Act of 1935, P.L. 74-271, federal unemployment tax laws, and federal income tax laws AND (ii) each of the following factors is present:

(1) The owner-operator is responsible for the maintenance of the vehicle;

(2) The owner-operator bears the principal burden of the vehicle's operating costs;

(3) The owner-operator is the driver;

(4) The owner-operator's compensation is based on factors related to the work performed and not on the basis of hours or time expended; and

(5) The owner-operator determines the method and means of performing the service.

What is an employer?

Under VA Code §65.2-101, an employer is “(i) any person, the Commonwealth or any political subdivision thereof and any individual, firm, association or corporation, or the receiver or trustee of the same, or the legal representative of a deceased employer, using the service of another for pay and (ii) any volunteer fire company or volunteer emergency medical services agency electing to be included and maintaining coverage as an employer under this title. If the employer is insured, it includes his insurer so far as applicable.”  Importantly, there is no exception made for family relationship between an employer and an employee; this means that if a husband was the employer, a claimant is not barred from compensation based on their familial relationship.  When determining the employer-employee relationship, the Commission may analyze how an employer operates during its “peak season” if it is not a year-round business to determine both the number of employees at the business and the usual nature of the business.

While there are many items to be considered when an accident happens at a business and when a claim for benefits is filed with the Virginia Workers’ Compensation Commission, this article highlights just a few such considerations.  Businesses should seek the advice of counsel when navigating the initial investigation and later defense of workers’ compensation claims.

Kerry Stolz is a Pender & Coward attorney focusing her practice on workers’ compensation matters.