By
Kevin L. Connors, Esquire
Recently, the National Workers’ Compensation Defense Network, with ConnorsLawLLP being the Pennsylvania representative thereof, was asked to answer several questions regarding possible scenarios posed by an out-of-state insurer, seeking to access potential liabilities that might exist for Workers’ Compensation Claims involving family members and casual labor.
Our analyses of the scenarios are set forth below:
I. UNPAID FAMILY MEMBER SCENARIO:
The insured has an employee who is an unpaid family member, and the unpaid family member does not receive any payroll from the business. No insurance premiums were collected by the insurer for the employee. The employee is injured, and the insurer is asking if there is any Workers’ Compensation coverage for this employee?
The insurer also asked a second question as to whether the potential coverage issue would be different if insurance premiums were collected by the carrier, utilizing a calculation of hours worked times minimum wages for premium purposes.
In response, we answered that if an unpaid family member is injured during the course and scope of their unpaid employment with the family business, there would be Workers’ Compensation coverage for the injury claim, as the injured employee would be entitled to receive Workers’ Compensation benefits and those Workers’ Compensation benefits would be payable under the insurance policy issued by the insurer to the insured employer.
In this scenario, if Workers’ Compensation benefits are paid to the injured unpaid employee, the insurer would have a right to audit the employer for additional uncollected premiums. If the injured unpaid employee is, however, only entitled to receive medical compensation benefits as there were no wages paid to the employee, the absence of any pecuniary benefits being paid whatsoever, to include there being no ancillary benefits for payments of health insurance premiums, pension benefits, etc., there would, in this scenario, be no wages upon which to base a calculation of indemnity compensation benefits, the same also being dependent upon the injured family employee not being concurrently employed for wages elsewhere.
The second part of the question is asking whether or not the coverage issue would change if insurance payments had been collected by the carrier utilizing a calculation of hours worked times minimum wages for premium purposes.
The second part of the question does not change how the Pennsylvania Bureau of Workers’ Compensation Act is administered by the Bureau’s Workers’ Compensation Judges, as they would only consider the compensability issue, as the WCJ’s would not look at the coverage issues between insurer and insured, as those issues are contractual and do not neatly tie into compensability issue as to whether or not an injury has occurred within the course and scope of employment, resulting in the unpaid, injured family member being entitled to reasonable, necessary, and related medical treatment for their work-related injury.
II. UNPAID FAMILY MEMBER IS INJURED WHILE BEING PAID UNDER THE
TABLE:
Is there Workers’ Compensation coverage in the event of an injury claim, in a scenario where an unpaid family member is injured while being paid under the table?
Under the Pennsylvania Workers’ Compensation Act, the answer must again be, “yes”, as an injury has been sustained by an employee during the course and scope of their employment, and the method of payment, herein “cash under the table”, while, perhaps, intended to be “off the books”, would still be interpreted as wages paid for services rendered.
In this situation, the insurer’s remedy, after becoming responsible for the payment of the Workers’ Compensation benefits, would be a collection or audit action against the insured for failing to report wages that otherwise should have been used to calculate insurance premiums for workers’ compensation coverage.
The second part of this question was whether the coverage analysis would change if insurance premiums had been collected by the insured, utilizing a calculation of hours worked times minimum wages for premium purposes?
The answer to that question is that the compensability issue would not change, as compensability is still dependent upon an analysis as to whether an employee has sustained a work-related injury in the course and scope of their employment; the issues of whether the insurer has collected premium for the injury is not relevant before a Workers’ Compensation Judge for the purposes of determining compensability issues; however, it is relevant for the insurer’s claim against the insured for breach of contract, and failure to report paid wages necessary to correctly calculate insurance premiums.
III. CASUAL LABOR FOR SERVICES:
If an insured hires casual labor, such as a neighbor college student to perform lawn mowing services during the several summer months at the insured’s dental office location, and the insured pays the neighbor college student cash payments, if the neighbor college student is injured at the dental practice, is there Workers’ Compensation coverage for this claim through the dental practice’s Workers’ Compensation insurance coverage.
The answer to this question is that the commercial business, whether a dental practice or otherwise, would not appear to be liable for Workers’ Compensation benefits, as the casual laborer’s services would more probably be characterized as work being performed by an independent contractor, and not under the direction and control of the commercial business, such that any work performed is independent of the business, there being master/servant or employer/employee relationship.
As is well-established under Pennsylvania Workers’ Compensation Law, the existence of a master/servant or employer/employee is a necessary precedent to establish that an injury occurs within the course and scope of employment, a condition precedent to liability for Workers’ Compensation benefits attaching.
Ancillary to this question is whether this answer would change if the dentist had maintained records of payments made by the dental practice to the neighbor college student, with the answer being since there is no change in the nature of the relationship, that of an independent contractor relationship, that there is, again, no master/servant or employer/employee relationship, the same again being necessary conditions precedent to establish that an injury has occurred within the course and scope of employment.
Obviously, it is always better to have a written agreement between the parties, but that is rarely the case in situations like this.
IV. CASUAL LABOR FOR ONE DAY:
Here, the insured, again a commercial dental office location, hires casual labor, or a buddy, to help out on a one day job, whether it be to mow the lawn, or just do some office repairs, and the insured pays the laborer or buddy cash under the table, and the casual labor or buddy is injured, begging the question as to whether or not there is workers’ compensation coverage for the injury.
Again, this scenario appears to be an independent contractor scenario rather than an employer/employee relationship, particularly given that the job at hand is limited to one day, and the job itself is not directly controlled by the commercial business, such that it is highly unlikely that workers’ compensation benefits would be payable under this scenario.
The caveat to this is that there are some Workers’ Compensation Judges in Pennsylvania who might award benefits on this type of claim for the very simple reason that there was no formal agreement between the parties, such as a written contract clearly delineating that the work would only be for one day and that it was independent of the employer/employee relationship.
The risk for this type of scenario is that the injured worker claims that they would have been asked to work for more than one day, such that it is not work that is considered “casual”, as the commercial business might have believed, leaving the perception as to how long the job would last, or the work would continue, to be based upon the subjective perceptions of the parties, always a dangerous position to be in.
While there are some Pennsylvania Workers’ Compensation Judges who might find this claim to be compensable, any award of Workers’ Compensation benefits on these skeletal facts would scream for the business found to be the employer to file an appeal, based on the grounds that it was not an employer, that the work could not withstand the course and scope of employment factors as there was no master/servant or employer/employee relationship, and that the person injured was truly an independent contractor.
Generally, it is our impression that more than 90% of the Workers’ Compensation Judges in Pennsylvania would find this type of claim to be not compensable, and they would deny the claim if the casual laborer petitioned for Workers’ Compensation benefits.
Another caveat to this scenario is that there might be third-party negligence liability under this type of claim, and the claim would, therefore, have to be analyzed as to which form of coverage, commercial liability versus commercial workers’ compensation, might be better utilized to control the potential exposure associated with this type of claim.
Obviously, we encourage our clients to contact us with questions regarding Pennsylvania Workers’ Compensation issues.
ConnorsLaw LLP
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