Is That Independent Contractor You Are Hiring Really an Employee?

Employment Practices Liability (EPL) claims are on the rise as companies reevaluate staffing levels and continue to outsource work, understanding how your EPL policy will respond is important. 

The gig economy is full of freelancers or independent contractors who provide their services to a company or that company’s clients. These workers are often online platform workers, on-call workers, or contract firm workers. They may work out of their home or work on site.

If you think you are hiring an independent contractor, you may want to verify if that is true. Currently, there are five factors used by the Department of Labor to determine if they are an independent contractor or an employee. Out of those, two factors have the most weight. These two factors can be confusing, so that is why President Joe Biden recommends using the CA ABC Test as the standard.

The CA ABC Test was designed to make it easier to ensure these individuals are not misclassified and have workplace rights and protections if they are entitled to them. By using this test, a worker is an “employee” unless the below criteria apply to them:

1. The employer does not control their work nor give them direction. They are also not controlled by the employer. Examples;
   1. They are not told when to report to work.
   2. They are not told how to do their work.
2. The type of work they do is not something that the employer does within their own business.
3. The work is done by someone who has their own business doing the work that they customarily do.

Currently, over 30% of the workforce are independent contractors. If you are using independent contractors and classifying them incorrectly, they may not be covered in your EPL policy. Independent contractors are generally not covered in EPL policies. You will need to make sure they are included either in the base policy or added by endorsement.

The Trusted Choice Insurance Agents at Richey-Barrett Insurance working in conjunction with your risk manager and human resource staff will ensure that your EPL policy is properly constructed to meet your specific needs. So, before you purchase or renew your EPL policy contact us!