Recently, two North Carolina courts strongly agreed that an employer could not escape paying for worker’s compensation insurance for an injured worker even though the paperwork said the worker is an independent contractor.

The difference between an employee and an independent contractor, the court said, is not just the words used to describe the worker.

Company asks employee to start his own company

A man worked as an employee for a chimney company for five years until a workplace accident injured him. The company’s workers’ compensation insurance paid the costs of this injury.

Then, the employer and worker signed a new contract saying the worker would never work for the chimney company again. At the urging of the employer, the man started his own company and began working for the chimney company as an independent contractor.

Worker goes back to old job with a new label

As before, the worker had keys to the chimney company’s office, as well as company tools, equipment, vehicle, supplies, expense credit cards, business cards, company-branded uniform, and the company’s instructions for where, when and how to work. He even kept his old job title.

Only now, the company considered him a contractor. Since his insurance was now his own expense, he opted for no coverage.

A spinal injury exposes the true relationship

Then, a fall off a scaffold injured the worker’s spine. The chimney company and their insurer agreed there was no employer-employee relationship and denied his workers’ compensation claim.

The North Carolina Industrial Commission unanimously disagreed with the chimney company, holding them and their insurance company responsible for the worker’s compensation. The three-judge panel of the North Carolina Court of Appeals then agreed with the commission, again unanimously.

The decision once again affirms that North Carolina’s laws separating independent contractors from employees are about the objective facts of a working relationship. An employer can change the status of the worker only by changing the relationship, not simply by calling it by a different name.