Recently, the Tenth District Court of Appeals ordered the Administrator of the Ohio Bureau of Workers’ Compensation (BWC) to set aside a BWC determination that certain cable installers were employees. Zashin & Rich attorney Scott Coghlan argued the BWC abused its discretion by applying a statutory test for construction contracts in deciding whether the cable installers were independent contractors or employees. The Tenth District agreed, ordering the BWC to vacate its finding based upon the BWC’s faulty analysis.
Following a 2009 audit, the BWC reclassified cable installers providing services for an Ohio corporation as employees instead of independent contractors, resulting in an alleged six-figure underpayment of workers’ compensation premiums. After the corporation protested and appealed this determination, the BWC ultimately upheld the auditor’s finding, relying upon a statutory test for determining independent contractor status in construction contracts. The corporation moved for a writ of mandamus (a court order compelling a government entity to act), which a magistrate for the Tenth District recommended granting. The BWC’s Administrator objected to the magistrate’s decision, and the case proceeded to the Tenth District for independent review.
To obtain a writ of mandamus, the party seeking the writ must show: (1) a clear legal right to the relief sought; (2) the opposing party’s clear legal duty to perform the act requested; and (3) a lack of a plain and adequate remedy in the ordinary course of the law. A clear legal right to relief exists in cases where the BWC abuses its discretion by entering an order not supported by “some evidence.”
The Tenth District’s decision focused on whether the BWC used the appropriate test in finding the cable installers were the corporation’s employees. In its analysis, the BWC relied upon R.C. 4123.01(A)(1)(c), which sets forth a 20-factor test for determining independent contractor status pursuant to a “construction contract.” A construction contract is one that involves construction-related activities performed upon a building, structure, highway, or bridge. As the cable installers did not perform work pursuant to a construction contract, the Tenth District held that the R.C. 4123.01(A)(1)(c) test was inapplicable.
Next, the Tenth District found the BWC based its determination upon the R.C. 4123.01(A)(1)(c) test instead of the appropriate common-law test. The common-law test for independent contractor status focuses on the central question of “who had the right to control the manner or means of doing the work?” Under this test, the decision maker can give unequal weight to the facts relevant to the inquiry of who has the right to control. In contrast, the statutory construction contract test relies on a mathematical formula giving equal weight to the statutory factors.
Based upon the BWC’s improper application of the 20-factor construction contract test instead of the common-law test, the Tenth District upheld and adopted the magistrate’s decision, finding the BWC abused its discretion. Although the Tenth District refrained from making a determination as to the cable installers’ independent contractor status under the appropriate common-law test, the court ordered the BWC’s Administrator to vacate and set aside its prior determination and issue a new order that is supported by the evidence and applies the correct independent contractor test.
This case demonstrates the complexity surrounding independent-contractor status. The Tenth District’s decision is important for businesses and employers as it rejected the BWC’s attempt to expand the 20-factor test set forth in R.C. 4123.01(A)(1)(c) beyond the context of construction contracts. By rejecting this attempt and reinforcing the applicability of the common-law test, this decision provides clarity to businesses and employers as to the appropriate analysis for independent contractor status and acts as valuable precedent for overturning employee status determinations based upon faulty analysis.
Scott Coghlan successfully argued for a writ of mandamus in this case. For more information about this decision, independent contractor status, or workers’ compensation law, please contact Scott | sc@zrlaw.com | 216.696.4441