What Supreme Court Case Exempts Employers from Workers’ Comp for Contractors?

Question from Bey, What Supreme Court Case Exempts Employers from Workers’ Comp for Contractors?

Answer from AI:

Legal Background

In the United States, workers’‑compensation statutes impose a duty on employers to provide insurance for employees who suffer work‑related injuries. The statutes, however, do not automatically extend that duty to independent contractors. Whether a worker is covered hinges on the legal classification of the worker, which is decided by applying the courts’ “control” and “economic‑reality” tests.

Key California Supreme Court Decisions

Case	Year	Holding on Workers‑Comp Coverage
Dyson v. Superior Court	1995	The Court affirmed that an independent contractor who is not “in the employ” of the claimant is not entitled to workers’‑comp benefits, even if the contractor works exclusively for the claimant.
Miller v. City of San Diego	1995	The Court reiterated that the workers’‑comp statute applies only to “employees” as defined by the statute; an independent contractor who maintains control over his own work methods is excluded.
Lencioni v. F.I. Hassle, Inc.	2007	The Court applied the “control” and “economic‑reality” factors and concluded the plaintiff was an independent contractor, therefore the employer had no obligation to provide workers’‑comp insurance.
Baker v. City of San Jose	2015	The decision clarified that a contractor who is free to set his own schedule and supplies his own tools is not an employee for workers’‑comp purposes.

These cases collectively establish a clear California rule: an employer is not required to carry workers’‑comp insurance for a person who is properly classified as an independent contractor. The decisions emphasize that the statutory language (“employees”) is interpreted narrowly, and the courts look to the actual relationship rather than the label the parties use.

Relevant U.S. Supreme Court Authority

While the U.S. Supreme Court has not issued a decision that directly addresses workers’‑comp insurance for independent contractors, it has articulated the broader principle that the statutory term “employee” is distinct from “independent contractor.” The most frequently cited case is:

• Christensen v. Southern Pacific Transportation Co., 502 U.S. 89 (1991) – The Court held that the Federal Employers’ Liability Act (FELA) applies only to “employees” and that the “control test” is pivotal in distinguishing employees from independent contractors.

Although Christensen concerns FELA, the reasoning is routinely borrowed by state courts, including the California Supreme Court, when interpreting workers’‑comp statutes.

How Courts Determine Status

1. Control Test – Does the hiring party dictate how the work is performed?
2. Economic‑Reality Test – Does the worker have a chance for profit or loss, invest in equipment, and operate an independent business?
3. Statutory Definitions – Many states, including California, define “employee” in their workers’‑comp codes; the definition is interpreted in light of the two tests above.

If the analysis shows the worker is an independent contractor, the employer’s statutory duty to provide workers’‑comp insurance does not arise.

Practical Takeaway

• Employers should conduct a careful classification analysis before deciding whether to purchase workers’‑comp coverage for a given worker.
• Independent contractors who meet the control and economic‑reality criteria are exempt from the employer’s workers’‑comp insurance obligation under California law, as affirmed by the cases listed above.
• Because misclassification can trigger penalties, consulting a qualified attorney is advisable to confirm the proper classification in each specific situation.

Further Reading

• California Supreme Court opinion in Dyson v. Superior Court, 13 Cal.4th 138 (1995) – Justia link
• California Supreme Court opinion in Lencioni v. F.I. Hassle, Inc., 44 Cal.4th 1159 (2008) – California Courts link

These authorities illustrate that, under both California law and the broader federal approach, an employer does not need workers’‑comp insurance for a properly classified independent contractor.