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Apr 22, 2016

How Does an Independent Contractor Become an Employee for Liability Purposes?

By: Tara Sohlman

Is contractually defining a worker as an independent contractor sufficient to avoid a worker being classified as an employee and subjecting a contractor to vicarious liability under Texas law?  A contractor can be vicariously liable under the doctrine of respondeat superior for the negligence of its employee who acts within the scope of one’s employment.  St. Joseph Hosp. v. Wolff, 94 S.W.3d 51, 542 (Tex. 2002).  In contrast, a contractor will generally not be vicariously liable for an independent contractor’s liability; the independent contractor has sole control over the means and methods of its work.  Id.

Generally, a contract defining a person as an independent contractor will be determinative of the working relationship.  Newspapers, Inc. v. Love, 380 S.W.2d 582 (Tex. 1964).  However, the independent contractor can become an employee if there is evidence that the parties did not intend an independent contractor relationship or if the contract was modified by a subsequent agreement between the parties.  See id. at 588-592.  A contractor must take care to avoid making an independent contractor an employee under the law.    

The supreme test as to whether a worker is an employee or independent contractor focuses on whether the contractor has the right to control and is exercising control over the individual’s work.  Bell v. VPSI, Inc., 205 S.W.3d 706, 713 (Tex.App.—Fort Worth 2006, no pet).  A court examines whether the employer has the right to control the progress, details, and methods of operations of the individual’s work.  Limestone Products Distribution, Inc. v. McNamara, 71 S.W.3d 308, 312 (Tex. 2002) (citing Thompson v. Travelers Indem. Co., 789 S.W.2d 277, 278 (Tex.1990); Farrell v. Greater Houston Transp. Co., 908 S.W.2d 1, 3 (Tex. App.—Houston [1st Dist.] 1995, writ denied)).  The employer controls over not merely the end sought to be accomplished, but also the means and details of its accomplishment.   Id. (citing Thompson, 789 S.W.2d at 278; Darensburg v. Tobey, 887 S.W.2d 84, 88 (Tex. App.—Dallas 1994, writ denied); Travelers Ins. Co. v. Ray, 262 S.W.2d 801, 803 (Tex. Civ. App.—Eastland 1953, writ ref'd)).  There are several factors for determining whether a worker is an independent contractor: ‘“(1) the independent nature of [the worker’s] business; (2) [the worker's] obligation to furnish necessary tools, supplies, and materials to perform the job; (3) [the worker's] right to control the progress of the work, except as to final results; (4) the time for which [the worker] is employed; and (5) the method of payment, whether by time or by the job.’”  Tex. A & M Univ. v. Bishop, 156 S.W.3d 580, 584-585 (Tex. 2005) quoting Indus Indem. Exch. v. Southard, 138 Tex. 531, 160 S.W.2d 905, 906 (Tex. 1942).

Defining a worker as an independent contractor in a written agreement will be a key factor in establishing the individual was not an employee, but a contractor must make sure that the independent contractor remains independent.  An individual will not remain an independent contractor when the contractor controls the means and method of how the work is performed, dictates when the work must be performed, provides instruction as to how to perform the work and supervises the work, provides the tools and/or equipment necessary for the worker to perform the work, and pays the worker regularly and a set wage and/or the worker works for the contractor regularly and over a long period.  In contrast, an independent contractor is told what the desired outcome of the work is and determines how to perform certain or many aspects of the work, can assign another to do the job, works on a project-by-project basis, sets one’s own hours, is compensated for the project with no expectation of continuing work, provides one’s own tools and equipment, can work for more than one contractor at a time, and can realize a profit or loss.  Being able to show there is a written contract in place defining an individual as an independent contractor and establishing the factors that support the person is an independent contractor will provide strong protection for the contractor against vicarious liability.