(Off-the-Job Injury or Illness)
Who Is An Employee Under the Disability Benefits Law?
Employees in For-Profit Businesses
Under the New York State Disability Benefits Law (DBL ), any individual providing services to a for-profit business can be deemed an employee of that business and such an individual is required to be covered by the employer for disability benefits insurance. This applies unless those services are specifically excluded as employment under the DBL (WCL 203, 12 NYCRR 355.2).
There are many factors that are used to decide whether an individual is an employee under the DBL. However, for enforcement purposes, if a business meets any of the criteria listed below and the individual that business is hiring does not meet the criteria listed under Independent Contractors or the services rendered are not specifically exempted as employment under the DBL, that business is required to obtain a disability benefits insurance policy.
- Right to Control – The degree of direction and control a person or organization exercises over someone they contract with to perform a task is always a central issue in determining an employer-employee relationship. A person or organization controlling the manner in which the work is to be performed indicates that the task is being performed by an employee. If the person doing the labor controls the time and manner in which the work is to be done this may indicate that the task is being done by an independent contractor. If an individual is truly independent, the individual generally works under his/her own operating permit, contract or authority.
- Character of Work Is the Same as Employer – Work being done that is consistent with the primary work performed by the hiring business indicates that the labor is being done by an employee. Work done by a person that is different than the primary work of the hiring business may indicate the task is being performed by an independent contractor. (For example, someone installing shingles for a roofer is generally considered the employee of that roofer. Conversely, a plumber hired on a one time basis to fix a broken pipe for a retail store owner is generally considered an independent contractor,)
- Method of Payment – Employees tend to be paid wages on an hourly, daily. weekly, or monthly basis. Naturally, employment is indicated if the hiring business withholds taxes and/or provides other employee benefits (Unemployment Insurance, health insurance, pensions, FICA, etc.) Whether the labor is paid using a W2 or 1099 Form for tax purposes does not matter in determining an employer/employee relationship for workers’ compensation purposes. A business paying cash to an individual for services usually indicates that the individual is an employee. Payment made for performance of the task as a whole may indicate the task is being done by an independent contractor.
- Furnishing Equipment/Materials – A business providing the equipment and/or materials used by people in performing the work tends to indicate an employer-employee relationship.
- Right to Hire/Fire – A business retaining the authority to hire and fire the individuals performing the work indicates an employee is performing the work. An independent contractor retains a degree of control over the time when the work is to be accomplished and is not subject to be discharged by the hiring entity because of the method he chooses to use in performing the work. Naturally, an independent contractor’s services may be terminated if the services rendered do not meet contractual requirements,)
Exceptions: A business that is using individuals that are NOT considered employees under the New York State Workers’ Compensation Law or a business using individuals that are considered Independent Contractors as specified below.
The following are factors that a judge will consider to determine whether an individual is an independent contractor, and thus not an employee:
- Obtain a Federal Employer Identification Number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on work or service performed the previous calendar year;
- Maintain a separate business establishment;
- Perform work that is different than the primary work of the hiring business and perform work for other businesses;
- Operate under a specific contract, and is responsible for satisfactory performance of work and is subject to profit or loss in performing the specific work under such contract, and be in a position to succeed or fail if the business’s expenses exceed income;
- Obtain a liability insurance policy (and if appropriate, workers’ compensation and disability benefits insurance policies) under its own legal business name and Federal Employer Identification Number;
- Have recurring business liabilities and obligations;
- Have its own advertising such as commercials, listing in phone book and/or business cards;
- Provide all equipment and materials necessary to fulfill the contract;
- Control the time and manner in which the work is to be done; and
- The individual works under his/her own operating permit, contract or authority.
Special Note for the Trucking Industry: To be considered an Independent Contractor, drivers must also be transporting goods under their own bill of lading and under their own Department of Transportation Number.
When Coverage Can or Cannot be Required: A business CANNOT require individuals working for that business to obtain their own disability benefits insurance policy.
However, a business should require an independent business that has its own employees to obtain a disability benefits insurance policy if the independent business is working as a subcontractor. (An independent business usually has characteristics such as media advertising, commercial telephone listing, business cards, business stationary or forms, its own Federal Employer Identification Number (FEIN), business insurance (liability WC), and/or maintaining a separate establishment. The independent business has a significant investment in facilities and means of performing work.)
For example, if Business A contracts with Business B to perform services and Business B is an independent business with its own employees, Business A should require Business B to have its own disability benefits insurance policy and obtain a certificate of insurance for this policy.
Employees In Non-Profit Organizations
Other than a nonprofit with NO compensated individuals providing services; or the exceptions listed under Non-Profit Religious, Charitable And Educational Institutions, individuals working for a nonprofit organization are defined the same as those working for a for profit business.