12-21-15; "Dependent Contractor" WC Ruling in Death Claim by Arik Hetue; John Karis on New EEOC Guidance on HIV/AIDS; Add'l Insurance Coverage ruling by Lilia Picazo and more

Synopsis: IL Appellate Court Confirms Our State Follows “Dependent Contractor Concept Sometimes Creating an “Employee for WC purposes. Analysis by Arik Hetue.

Editor’s comment: This article is intended to explore what IL employers, including logistics companies and municipalities/local governments can do to prevent or avoid such an unexpected and expensive legal finding in your future. Lots of smaller government units are trying to “job-out” some tasks or whole departments to what they think are independent contractors to avoid the much higher costs of benefits, pensions and yes, work comp insurance for full-time employees. The classic issues of Independent Contractor vs. Employee become more burdensome when our reviewing courts may bend the facts to fit a classification system not contained in the IL WC Act, and dealt with only in caselaw. We truly feel at this point the “Independent Contractor” status is being relegated to only those classic examples of hiring a professional to perform a specific one-time task.

If you have an ongoing relationship with a “non-employee” contractor, unless you require them to have their own WC coverage, it may be nigh impossible to escape WC liability. In our respectful view, if a municipality, logistics provider or other employer is going to claim a worker who provides regular services for your company or government unit, they have to have their own WC coverage or you are at risk for multi-million dollar IL WC awards. We recently saw a posting on the RIMS website indicating employers/municipalities want to see either MOI’s meaning Memorandum of Insurance or COI’s meaning Certificates of Insurance for all “independent contractors.” The IL WC Appellate Court has once again confirmed they are widening the definition of employee when there is no such WC insurance and we believe they have effectively outlined the role of “dependent contractor” in one of their latest rulings. .

In the recent Bridgeport v. Illinois Workers' Compensation Commission decision the Appellate Court, Workers Compensation Division upheld a hefty award of $605K in benefits for the death of an independently contracted municipal water meter reader. The WC coverage of the death are certainly at issue in addition to the independent contractor/employment issue. Decedent Jacqueline Harvey, contracted to begin performing water meter readings for the City of Bridgeport, IL in March 2011. According to the facts as outlaid in the decision, Harvey spent the first two months on the job in training with another trained contractor working with her to educate her on how to do the job. Harvey began reading meters on her own in May 2011, following the end of her training period. Apparently, Harvey was suffering from a seizure disorder which caused grand mal seizures and loss of consciousness. There is no indication in the record the City was advised of her medical condition.

On May 19, 2011, Harvey suffered a seizure while reading a water meter which happened to be in a flood plain, and during the seizure, she fell face down in a standing pool of water some 8 inches deep and drowned. The Coroner’s report of death listed drowning secondary to clinical seizure as the cause. Harvey’s surviving spouse filed a claim at the IWCC, and a hearing was had before an Arbitrator, with the City arguing Harvey was not an employee. The Arbitrator ruled Harvey was in fact an independent contractor and benefits were denied.

On appeal to the IL WC Commission, the Arbitrator’s decision was reversed – despite the agreement to the contrary, the Commission ruled Harvey was actually an employee and found the accident arose out of employment and occurred in the course of the work performed. The Commission asserted there is no bright line rule, and instead alluded to what it called a “multi-factor control test” without specifically using that language. They did however rule “the single most important factor being whether the purported employer has the right to control the actions of an employee.” We ask the obvious question—doesn’t every employer have the “right to control” an independent contractor? While consistent with case law, we would point out a possible superseding factor following the brief history of the issue noted below.

The law Bridgeport v. Illinois Workers' Compensation Commission is based upon is not contained in the IL Workers Compensation Act or Rules Governing Practice. The Act has the following to state about independent contractors-- nothing. IL WC case law from the 1960s through the 1990s truly fleshed out the law on this issue. It was then, and remains now, clear this question of employment status is the primary initial decision which determines whether a claimant is entitled to compensation under the IL WC Act. As created by our courts, the control test is based upon the following issues:

·         The right to control the manner in which the work is done;

·         The nature of the work performed as it relates to Respondent’s business;

·         The method of payment;

·         The right to discharge;

·         The skill required in the work to be done;

·         Who provides tools, materials, or equipment;

·         The label given to the contractor by the parties in a written agreement;

·         Whether the claimant provided their own workers' compensation insurance.

The Illinois Courts have consistently held the right to control the manner in which the work is being done is the paramount factor to be considered in determining whether a worker is an employee. As employers “control” both employees and independent contractors in a variety of ways, we consider that post-accident legal analysis wholly unpredictable and a very poor guide for our readers to implement. Either way, the Commission used that factor in Bridgeport to reverse the Arbitrator and make an award. We note there are legal scholars who have argued against that nebulous factor being given such weight, and the primary factor should be the distinction of whether the work being performed by the contractor is of a type and nature similar to that done by the purported employer. In any case, both of these issues are substantial factors in the supposed multi-factor control test. The issues of payment, discharge, skill and materials are relevant but not as weighty as the first two factors. The issue the label the parties give to the relationship is the least important, and oftentimes not of any relevance, but we note it here as in a close case the label may swing the balance by confirming the intent of the parties at the outset of their relationship.

In their Bridgeport decision, the IL Appellate Court correctly stated Illinois has no "rigid rule of law" to determine whether a worker is an employee or an independent contractor, and they also noted this is "a vexatious question" to resolve which has been an oft quoted line in this series of cases. We couldn’t agree more, as noted in the variety of issues outlined above. We also note the question comes up frequently in municipal claims, as our municipalities have found the crushing costs associated with providing the myriad of employment benefits for which our Public Sector Unions have successfully negotiated. This has required an outsourcing of sorts, to curb the costs the local governments are facing as we also see declining tax bases and a population migrating to greener pastures as it were. Please remember, the local communities, towns and villages all the way up to the big city governments of Chicago, Cook County, and the State itself, are broke. B-R-O-K-E. They have no money, operate on shrinking credit, and are facing enormous unfunded or underfunded liabilities in the future. Taxes continue to spiral and taxpayers are starting to fight back or move away. Cities/counties and others are looking for any means necessary to staunch the monetary hemorrhaging they are looking at, if only to salve the pain of the future monies they see flowing out, and with the knowledge there is no new money coming in.

The ultimate ruling in Bridgeport was based upon some of the following facts – while the City provided Claimant with her equipment and a vest, they specifically did not provide transportation. While on the job, Decedent was expected to dress presentably; be personable and able to work with angry or difficult customers; read meters on route, record readings, and make the necessary calculations; read the meters between the twentieth and twenty-sixth day of each month; be trained by qualified City water department personnel; identify water meter equipment problems and report defects to city hall; report violations of rules and regulations governing water consumption; maintain assigned tools and equipment; and if using a vehicle to drive the route, Claimant was expected to provide the City with her driver's license and vehicle insurance information. Claimant was paid monthly with no taxes or benefits dues taken out of her check, differently from actual city employees who received bi-weekly checks and had all taxes and benefits dues removed. The IWCC ruling found Decedent was an employee of the City for workers’ comp purposes—a “dependent contractor.”.

The Commission’s reversal of the Arbitrator noted the primary factors most illustrative of the existence of the employer/employee relationship were the City's directing claimant to read the water meters only during a one-week period each month during daylight hours, the intersection between her job duties and the City's business interests, and the similar manner in which Decedent and recognized City employees could have their employment terminated. We caution our readers – this is essentially turning the classification into what we have styled a “dependent contractor” – an independent contractor who must depend on this sole employer for the ability to do this type of work – here the City provided the locations to read, the equipment and training to read the meters, and put limits on the times and dates during which meters could be read. This begs the question, was Harvey truly an independent contractor – as the court noted, this case could have gone either way – and it did! As evidenced by the Arbitrator’s denial and the Commission’s reversal, this was no slam dunk. However, following the Commission review, this issue would not be reversed again unless it was against the manifest weight of the evidence.

The Commission also found Decedent's accident arose out of and in the course of her having to work in conditions that included an eight-inch pool of rainwater, a hazard it found was not confronted by the general public. We note this is an odd ruling and not truly addressed by the reviewing courts, as anyone who lives in a flood plain is potentially presented with just this hazard on a daily basis. We ask our readers the rhetorical question of how standing rainwater outside an area’s homes isn’t a risk common to the public?

You may have noticed our discussion of the factors above did not address the issue of potential personal WC policy coverage. On a possibly brighter note, our review of case law indicates while the Courts have consistently held the control issue and the nature of the work to be the paramount considerations, in actuality, WC coverage appears to be the true deciding factor in close cases for the Commission. If that issue is not raised by the parties, the Commission will default to the blurring multi factor test outlined above, but the Commission has consistently held when claimants have their own WC coverage, they are found to be independent contractors. The Appellate Court and other reviewing courts have upheld Commission decisions under the manifest weight standard – with respect to facts, if there is a basis for a ruling, that ruling will not be overturned unless the opposite ruling is clearly evident.

We caution this coverage issue should not be used as a panacea – if the purported contractor is beholden to significant control by the Respondent, this issue would not sway the Courts. However in close cases, as in the case detailed here, where only a modest or minor amount of control were applied and the other factors weighed in both directions, it would likely be enough to swing the decision in favor of independent contractor status. If such were the facts, as in Earley v. Indus. Comm'n, a 1990 ruling by the Appellate Court, it would appear a denial of benefits based on a determination claimant was an independent contractor would be upheld on review, as it is a factual question and as long as there are facts in support of the finding, it would not be overturned on review.

Please note the claim may still be certified for review and then accepted by the IL Supreme Court. Either way, we would appreciate your thoughts and comments, feel free to reply to ahetue@keefe-law.com or ekeefe@keefe-law.com or post them on our award winning blog.


Synopsis: EEOC Finally Offers Guidance for Employers to Accommodate Employees with HIV/AIDS. This guidance provides significant value to Human Resources professionals and other management decision makers in regards to accommodation requests for any medical condition. Analysis by John Karis, J.D.

Editor’s Comment: On December 1, 2015, in conjunction with World AIDS Day, the EEOC issued new guidance documents addressing the legal rights available to employees with HIV/AIDS under the Americans with Disabilities Act (“ADA”).

Although the guidance is about HIV/AIDS and is not specifically directed to employers, this guidance describes in great depth the basic considerations employers must make when evaluating issues that may involve ADA-protected rights. The guidance makes clear employers must base employment decisions, including decisions on hiring, termination, and whether to grant reasonable accommodations, on objective evidence, not medical myths or stereotypes. Employers are not permitted to speculate or guess on matters relating to how a medical condition affects an employee’s job performance. The guidance goes into detail on what an employee is to expect from the employer when asking for a reasonable accommodation. The guidance notes if more than one accommodation would work, the employer can choose which one to give to an employee.

The EEOC provides excellent detail in terms of what information an employer can require from a health care provider in the context of an employee’s reasonable accommodation request. That requested information can include descriptions of how the employee’s condition functionally limits his or her performance of job functions and major life activities, and how the condition makes a particular change at work or a certain accommodation medically necessary.

The EEOC identifies common reasonable accommodations as follows: altered break and work schedules (e.g., frequent breaks to rest or use the restroom or a change in schedule to accommodate medical appointments); changes in supervisory methods (e.g., written instructions from a supervisor who usually does not provide them); accommodations for visual impairments (e.g., magnifiers, screen reading software, and qualified readers); ergonomic office furniture; unpaid leave for treatment or recuperation; and permission to work from home. If the patient has been working successfully in a job but can no longer do so because of a disability, the ADA also may require reassignment to a vacant position the patient can perform.

This guidance gives clear insight into the approach the EEOC is likely to take when it receives a discrimination charge that alleges ADA violations. Employers should give careful consideration to this guidance in advance of making any decision on an employee’s request for an accommodation, and before taking any employment action that may relate to an employee’s medical condition.

Another important takeaway from these documents is employers should be aware the EEOC has long considered HIV/AIDS to be a disability protected by the ADA. Employers should go through the same analysis and interactive process as with any disability covered by the ADA or applicable state disability law to determine whether any reasonable accommodation can be made.

We highly recommend taking a look at these documents; please see the below for links to them:

Living with HIV Infection: Your Legal Rights in the Workplace Under the ADA

Helping Patients with HIV Infection Who Need Accommodations at Work.

This article was researched and written by John Karis, JD. You can reach John 24/7/365 for questions about EEOC compliance, general liability and workers’ compensation at jkaris@keefe-law.com


Synopsis: Oral Agreement for GL Additional Insured Coverage Prior to Issuance of Certificate of Insurance Was Binding. Analysis by Lilia Picazo, J.D.

Editor’s comment: On December 16, 2015 the United States Court of Appeals for the Seventh Circuit in Cincinnati Insurance Co. v. Vita Food Products, Inc. et al, issued a decision that reversed and remanded the decision of the District Court for further proceedings consistent with its opinions regarding ambiguous contract language.

Facts: On January 15, 2011, the Cincinnati Insurance Company ("Cincinnati") issued a one-year general liability insurance policy to Painters USA (“Painters”). The policy covered bodily injuries caused by an “occurrence” for which the insured was legally liable to an injured party. The policy also included an additional insured provision, which allowed the insured to add an “additional insured” by oral agreement so long as the oral agreement preceded the “occurrence” and a certificate of insurance was issued confirming the additional party’s status. The policy did not require Cincinnati’s permission so long as the relationship between the insured and the potential additional insured was consistent with the intentions of the policy.

While the policy was in effect, Vita Food Products, Inc. (“Vita Foods”) hired Painters to paint on its premises. The parties orally agreed to add Vita Foods as an "additional insured" under the insurance policy. Before Painters requested a certificate, one of its employees slipped and fell while working on Vita Foods' premises. Painters immediately requested a certificate adding Vita Foods as an additional insured. The certificate was issued the next morning.

The employee subsequently filed suit against Vita Foods for injuries sustained while on its premises. Cincinnati filed a separate suit asserting Vita Foods was not covered under its policy because a certificate naming Vita Foods as an additional insured did not exist until after accident. Cincinnati contended despite the oral agreement made between Vita Foods and Painters before the accident, a certificate confirming Vita Foods’ status was not timely prepared as required by the terms of the policy.

The District Court agreed with Cincinnati and granted its motion for summary judgment. The Court noted that Vita Foods was not insured as an “additional insured” under the Policy until a certificate was prepared and signed.

Decision of the United States Court of Appeals for the Seventh Circuit: The Appellate Court found summary judgment in favor of Cincinnati premature. Under the terms of the policy, an oral agreement was sufficient to establish a party’s status as an additional insured and must precede an occurrence. A certificate of insurance would subsequently be issued as an informational document. However, the certificate would not confirm rights upon the certificate holder, or affirmatively or negatively amend, extend, or alter the terms of the policy. More importantly, the certificate would not constitute a contract between the insurer, Cincinnati, and the certificate holder, Vita Foods. The Court noted that while the insurance policy clearly stated an oral agreement must precede an accident, it did not clearly state when the certificate had to be issued. The Court reasoned that if a certificate of insurance was in fact a precondition to insuring a party, the certificate would ultimately amend the terms of the policy, which was not the case with the policy drafted by Cincinnati. Thus, the Court reversed and remanded the case for further proceedings consistent with its opinion.

We agree with the Appellate Court’s decision to reverse and remand the case based on the ambiguous contract language. However, we note this could have been avoided had the oral agreement been memorialized from the get go. When in doubt, memorialize an oral agreement to avoid messy court battles such as the one in this case.

This article was researched and written by Lilia Picazo, J.D. Please feel free to direct comments and questions to Lily at lpicazo@keefe-law.com.




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