Self-Employed Nebraska Subcontractor Not Aided by Statutory Employer Protections

A Nebraska appellate court held that a self-employed person engaged in his own self-employed business, and who elected not to bring himself within the state’s Workers’ Compensation Act, was not considered an “employee” as that term is defined in Neb. Rev. Stat. § 48-115 [Wright v. H & S Contr., Inc., 29 Neb. App. 581, 2021 Neb. App. LEXIS 69 (Mar. 9, 2021)]. Accordingly, Nebraska’s statutory employer—i.e., “contractor-under”—provision did not not provide coverage when the self-employed person fell from a roof, suffering fatal injuries, since it affords protection for “employees” of a subcontractor who are injured on the job [see § 48-116].

Background

H & S Contracting, Inc. (H&S) hired Robles to perform siding work on a construction site. While working on September 29, 2015, Robles fell from the roof. Robles’ fall paralyzed him from the neck down, and the injury ultimately contributed to his death on August 8, 2018. The personal representative of his estate and Robles’ widow sought workers’ compensation benefits, claiming that H&S was either Robles’ employer or his statutory employer. The Nebraska Workers’ Compensation Court determined that Robles was an independent contractor and that the contractor who hired him was not obligated to provide benefits. The personal representative and widow appealed.

Appellate Court’s Review of Evidence

The appellate court noted that testimony during the workers’ compensation hearing showed that at the time of his accident:

• Robles owned his own roofing company, Navarro Roofing, and always represented himself as the owner of the company.
• Robles performed jobs for H&S intermittently since 2008, invoicing H&S for each project he completed.
• H&S paid Robles per job, based on its size, as opposed to an hourly wage that it paid to its employees.
• H&S issued him a 1099 tax form for each year, including the year 2015; it never issued him a W-2 tax form.
• Robles was free to turn down a job from H&S and could freely work for another company, which he periodically did.
• Navarro Roofing had its own checking account and filed tax returns.
• Robles deducted substantial business expenses for vehicles, contract labor, and insurance. He also depreciated and amortized certain business equipment.
• Robles indicated on his federal tax returns from 2010 through 2013 that he was an independent contractor by filing a self-employment tax form.
• Despite being urged by his insurance agent to purchase workers’ compensation insurance, Robles consistently refused. He did, however, carry general liability insurance.

Additional evidence tended to show that H&S did not supervise Robles or his work crew on how to complete a job; rather, Robles supervised his own crew. H&S did, however, ensure that the job was completed and that work materials were cleaned up at the job site. It would also do a quality control inspection and check on the job periodically if supervisors had time to do so.

Additionally, H&S did not set Robles’ hours or work schedule and did not control how he completed the work, although he was expected to follow the customer’s expectations and manufacturer warranties for each job. H&S supplied the materials and items such as trailers and nails for each job. However, Robles supplied his own tools and equipment, including “ladders, scaffolding, nail guns, compressors” and “a hammer” and “nail pouch.”

Did H&S Pay Workers’ Compensation Insurance Premiums Based on Robles’ Earnings?

At the hearing, additional information was presented concerning the workers’ compensation policy maintained by H&S. The insurance agent for H&S at all relevant times was also the insurance agent for Navarro Roofing. On or about September 9, 2015—three weeks before Robles fell—her office received a request from Travelers Property Casualty Company of America (Travelers), H&S’ workers’ compensation insurance carrier, asking for Robles’ certificate of workers’ compensation insurance. The agent’s office forwarded a certificate of insurance that inadvertently indicated that Navarro Roofing carried workers’ compensation insurance. Shortly thereafter, however, the insurance agent contacted Travelers to tell it that coverage was erroneously indicated. As a result, when Travelers performed its audit of H&S’ payroll in August 2016—after the injury—it recalculated H&S’ insurance premium based upon payroll that included payments made to Robles. According to H&S’ office manager, he contested the inclusion of payments to Robles, and Travelers issued a premium adjustment, based upon payroll that excluded payments made to Robles. H&S’ office manager testified that H&S never paid the premium that included Robles’ wages.

As indicated above, based on the foregoing evidence, the compensation court determined that Robles was an independent contractor and dismissed the claim.

Appellate Court’s Decision: Employee Status

As to Robles’ status as an employee, the appellate court stressed there was no single test for determining whether one performed services for another as an employee or as an independent contractor; rather, the ten-factor test set forth in Larson v. Hometown Communications, Inc., 248 Neb. 942, 540 N.W.2d 339 (1995), must be considered. Based upon the evidence presented at the hearing (summarized above), the court concluded that the compensation court’s factual determination that Robles did not have employee status was not clearly erroneous.

Statutory Employer Status

Nor was H&S Robles’ statutory employer. Citing earlier precedent, the court said the protections provided under § 48-116 were to ensure that companies could not use subcontractors to absolve them of the responsibility to ensure that employees are properly insured under the Nebraska Workers’ Compensation Act. Reviewing Nebraska case law, the court added that liability under § 48-116 presupposed that the injured worker was an “employee” of the subcontractor, to whom the subcontractor had an obligation to procure workers’ compensation insurance protection. Liability existed under § 48-116 only when the claimant was an employee of the subcontractor and the principal contractor failed to require the subcontractor to carry the proper insurance. Thus, stressed the court, the applicability of § 48-116 depended on whether or not the injured party was an employee under the Nebraska Workers’ Compensation Act.

Because Robles was a self-employed person engaged in his own self-employed business and elected not to bring himself within the Nebraska Workers’ Compensation Act, he was not considered an employee as defined in § 48-115. As such, the statutory employer provision did not provide him coverage, because it affords protection for employees of a subcontractor who were injured on the job.

Travelers’ Premium and Coverage

The personal representative and widow also contended that in as much as there was some evidence that Travelers had collected premiums on Robles’ “wages,” it could not subsequently refuse to cover Robles when he sustained a catastrophic accident. The court said the appellants ignored that there was a conflict in the evidence as to whether H&S ever paid the increased premium. Because the compensation court considered potential payment of a premium as an “eleventh factor” of the 10-factor Larson test, the appellate court found no error weighing this factor in favor of a finding that Robles was an independent contractor. For the reasons noted, the appellate court affirmed the compensation court’s order dismissing the claim.