State News : North Carolina

Written by: Scott Farwell 

An independent contractor is an individual who generally falls outside of the structure of the Workers’ Compensation Act. Whether a person employed to perform specified work for another is to be regarded as an independent contractor or as an employee within meaning of Workers’ Compensation Act is determined by application of ordinary common-law tests.  Youngblood v. N. State Ford Truck Sales, 321 N.C. 380, 364 S.E.2d 433 (1988). There are generally eight factors, with no one factor being determinative, which indicate classification as an independent contractor – namely, the person employed: (1) is engaged in independent business, calling, or occupation; (2) is to have independent use of his special skill, knowledge, or training in execution of work; (3) is doing specified piece of work at fixed price or for lump sum or upon quantitative basis; (4) is not subject to discharge because he adopts one method of doing work rather than another; (5) is not in regular employ of other contracting party; (6) is free to use such assistants as he may think proper; (7) has full control over such assistants; and (8) selects his own time. McCown v. Hines, 140 N.C. App. 440, 537 S.E.2d 242 (2000) aff’d, 353 N.C. 683, 549 S.E.2d 175 (2001). The fact that the work must meet specific standards and requirements is not enough to find sufficient control. The control must be in the method in which the results were obtained, not in the results themselves. Grouse v. DRB Baseball Mgmt., Inc., 121 N.C. App. 376, 465 S.E.2d 568 (1996).

The term “statutory employer” is not defined in the North Carolina Workers’ Compensation Act. However, North Carolina Courts have applied the term in situations involving general and sub contractors when the sub contractor is the employer but has neglected to cover themselves with workers’ compensation insurance. The chain of liability for making workers’ compensation payments extends from the immediate employer of the injured employee up the chain to the first responsible contractor who has the ability to pay. N.C. Gen. Stat. § 97–19. Spivey v. Wright’s Roofing, 737 S.E.2d 745 (N.C. Ct. App. 2013).

The statutory employer statute (N.C. Gen. Stat. 97-19) is an exception to the general definitions of “employment” and “employee” set forth in the Workers’ Compensation Act, and provides that a principal contractor, intermediate contractor, or subcontractor may be held liable as a “statutory employer” where two conditions are met: (1) the injured employee must be working for a subcontractor doing work which has been contracted to it by a principal contractor, and (2) the subcontractor does not have workers’ compensation insurance coverage covering the injured employee. Putman v. Alexander, 194 N.C. App. 578, 670 S.E.2d 610 (2009).[1]

As long as the general contractor obtains a certificate of insurance (COI) from the subcontractor, the general contractor will not be liable for workers’ compensation benefits for injured employees of the subcontractor. N.C. Gen. Stat. § 97–19. In Patterson v. Markham & Associates, 123 N.C. App. 448, 474 S.E.2d 400 (1996), a general contractor was not a statutory employer where the plaintiff worked for a subcontractor on a job which was contracted to the subcontractor by the general contractor because when work under the contract began, the subcontractor’s insurance agent sent the general contractor a certificate of insurance indicating coverage for the subcontractor for one year; and when the subcontractor’s insurance was canceled for its failure to pay its premium, the general contractor was not notified of the cancellation.

[1] In Masood v. Erwin Oil Co., 181 N.C. App. 424, 639 S.E.2d 118 (2007), a petroleum wholesaler had a contractor/subcontractor relationship with its gas station operator, who did not have workers’ compensation insurance, and thus the wholesaler was the gas station cashier’s statutory employer for purposes of the cashier’s workers’ compensation claim.