Workers' Compensation Alert: Predetermination/Misclassification in the Construction Industry

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In Nate Holyoke Builders, Inc. et al. v. WCB AIU, WCB App. Div. No. 14-11 (April 24, 2014), the employer appealed a decision imposing a $30,000 penalty for misclassification of nine employees as independent contractors. The nine employees had been predetermined by the WCB to be independent contractors.

The Appellate Division affirmed, finding the workers were "employees" and that the employer was required to secure workers' compensation insurance, notwithstanding that the workers had been predetermined to be independent contractors. It vacated the portion of the decision imposing a penalty.

The Appellate Division found the provisions imposing civil penalties ambiguous with respect to the construction industry. It held the WCB should not subject an employer to a penalty for failing to recognize the legal status of the workers to be employees, given the "complicated legal analysis that was preliminarily determined in the employer's favor by the very agency later charged with making the ultimate determination."
 
This decision makes clear that workers' compensation insurance will be required in the event a predetermination finding of independent contractor status is later reversed. But an initial predetermination finding, even if later reversed, may serve to insulate against penalties for misclassification, at least in the construction industry.

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