People are generally aware that there is a legal distinction between employees and independent contractors. In fact, many know that the IRS requires an employer to issue its employees a W2 form, while independent contractors receive a 1099. However, the form used to report taxable income is not what determines whether someone is an employee or an independent contractor.
An employer’s legal liability is vastly different depending on whether the negligent party was their employee or their independent contractor. An individual or business that hires an independent contractor generally will not be liable for the contractor’s negligent actions. In contrast, an employer is held responsible for the negligent actions of its employees—made within the scope of their employment—under the theory of respondeat superior. This legal theory imputes the liability of the employee to the employer.
Normally, an employer of an independent contractor is only concerned with the end result of the job or service it contracted out. To illustrate, a homeowner might hire an independent contractor to install a sprinkler system. The homeowner would set the specifications for the job such as, the location of the sprinkler system (front yard, backyard, both), and perhaps the brand or model of timer/sprinklers. However, the homeowner would not control how the worker installed the sprinkler system because the homeowner is not an expert in sprinkler system installation. The homeowner would only be worried that the end result was a functioning sprinkler system that met his or her specifications.
Why does this distinction exist?
It makes logical sense why the liability of an employer is treated differently based on the status of the worker. An employer of an independent contractor does not control how the work is done by the independent contractor. Therefore, the hazard associated with the work are the responsibility of the contractor. So, the independent contractor (who actually controls the work) is the proper party to hold responsible for preventing the risk of harm—and to bear responsibility if he or she is negligent and injury results.
On the other hand, an employer typically exercises significant control over his or her employees. An employee is told when and how to work and usually must follow the policies, procedures, and/or manuals provided by the employer. Further, the employer typically trains, manages, and oversees its employees. The employer is the responsible party because it retains and exercises control over its employees.
How does Wyoming make the distinction?
There are two different ways for an employer to be held liable for the actions of its independent contractor. The first exception to the rule of non-liability for an employer of an independent contractor is really not an exception at all. This path to liability involves a sort of misclassification where the level of control exercised by the employer equates to an employee/employer relationship—not an independent contractor relationship. This would require evidence of the employer controlling the manner/means/method of the contractor’s work. If an employer exercises pervasive control over an independent contractor, then the employer will be held liable under respondeat superior.
The second exception is more nuanced. This exception establishes liability based upon the employer retaining or exercising control over the hazard that caused the harm. This exception is a type of direct negligence by the employer that actually led to the injury. This exception was explained by the Wyoming Supreme Court decades ago in Jones v. Chevron. In Jones, an employer hired a contractor to paint powerline poles. The contractor was allowed to paint the poles using its own manner, means, and methods; however, the employer retained control over the energization and de-energization of the electrical lines. One of the workers of the contractor was painting near the electrical line when he was electrocuted. The employer was held liable because it retained control over the de-energization of the electrical lines, which is the hazard that caused the harm.
If you have any questions regarding independent contractor law or are looking for representation regarding the same, please contact the attorneys at Hirst Applegate, LLP.