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Auto Owners Ins. Co. v. All Star Lawn Specialists Plus – Defining Employee Versus Independent Contractor

Although workers’ compensation law varies from state to state, there is one general principle that remains fairly consistent: Exclusive remedy. This holds that if an employee is injured or killed while working and his employer carries workers’ compensation insurance, the only damages he may collect from his employer is workers’ compensation.
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There are, of course, options for third-party liability lawsuits and social service benefits for long-term disabilities. But in general, workers’ compensation will be the only money collected from an employer and/or an employer’s insurer in these instances.

However, an exception can be made when the company did not carry workers’ compensation insurance coverage, or when the individual making the claim was not an employee. Independent contractors have no right to collect workers’ compensation coverage, and therefore may pursue litigation. Sometimes, this issue is straightforward. Bear in mind, though, just because a company labels a worker an “employee” does not necessarily make it so. When there is a dispute, courts will weigh a host of factors, such as the degree of control a company had over the worker’s duties and method of payment.

Atlanta workers’ compensation lawyers recognize while benefits are a lifeline for many people, it can be preferable in these instances to claim independent contractor status. This is because damages awarded in a successful negligence lawsuit will tend to be higher than what a worker could expect to receive from no-fault workers’ compensation coverage.

In the recent case of Auto-Owners Insurance Co. v. All Star Lawn Specialists Plus, Inc., the Michigan Supreme Court was tasked with determining whether a lawn maintenance worker was an employee or independent. Hinging on this decision was the type of coverage the worker could seek for his employment-related injury.

His employer carried three separate insurance policies – one for workers’ compensation, one for commercial general liability and another for commercial auto insurance. If the worker was labeled an employee, he could only collect from the first. However, if he could show he was an independent contractor and the company was negligent, he could collect from the latter two.

According to court records, the worker was using a leaf vacuum machine to load leaves onto a truck owned by the company when the machine fell over, striking him. The worker alleged the company/co-owner negligently failed to secure the machine to the truck.

The company and its insurer sought summary judgment, which the trial court denied on the grounds the worker was an independent contractor. Because he was not entitled to workers’ compensation coverage, he could seek liability coverage for negligence. The appellate court affirmed in part and reversed in part. It affirmed the worker’s position as an independent contractor, but only because it was bound by precedent set in recent case law, which allowed any one of three criteria to be met in order to achieve this status. The court held that if it were not bound by the precedent set in the previous case, it would have reached a different conclusion because it would have considered whether the worker met all three criteria (rather than any of the three).

In order to be considered an employee, the worker must meet at least one of the three criteria:

  • Does not maintain a separate business
  • Does not hold himself or herself out to and render service to the public
  • Is not an employer subject to state law

The court ruled the worker was independent because he held himself out to and rendered similar services to the public as what he performed for the defendant company.

A special appellate panel was convened to weigh this matter, and in a split 4-3 decision, the majority reversed the trial court’s judgment in favor of the worker.

However, the Michigan Supreme Court found the definition of “employee” was defined properly in the precedent-setting case law, and thus reversed the appellate court and ruled in favor of the worker.

For information on Atlanta work injury compensation, contact J. Franklin Burns, P.C., at 1-404-303-7770.

Additional Resources:
Auto-Owners Insurance Co. v. All Star Lawn Specialists Plus, Inc., Nov. 25, 2014, Michigan Supreme Court
More Blog Entries:
Presley v. Dalton Logistics: Extraterritorial Workplace Injury Issues, Nov. 30, 2014, Atlanta Workers’ Compensation Lawyer Blog