September 2009 e-Newsletter Articles
Working with Independent Contractors | Drivers Must Be Qualified | Accident Reporting |
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KNOW YOUR RISKS - WORK SAFELY WITH INDEPENDENT CONTRACTORS

Businesses hire independent contractors to perform a variety of work including maintenance and janitorial duties, building construction and renovation, production activity and more. When you hire an independent contractor, do you know your risks? In theory, independent contractors are responsible for themselves and their liability is not transferred to your company (the hiring company). However, several factors could transfer liability to your business. Did you know that:

• You could be held liable for an independent contractor's acts or omissions?
• Laws in some states may require you to cover the workers' compensation benefits for independent contractors who are, in fact, considered to be employees?
• You may be required to cover the workers' compensation benefits of independent contractors who do not have insurance available for their injured worker?
• You have a duty of reasonable care for the safety of contractors while they are on your premises or engaged in your business operations?

Knowing the risks associated with hiring independent contractors can help you protect your business from unnecessary or harmful liability claims. In this Safety Advisor, you'll learn about:

• The types of negligence for which your business may be cited
• How the courts determine liability: employee versus independent contractor
• OSHA standards on contractor safety
• Our recommendations for working safely with independent contractors
  
  Types of negligence
• Contributory negligence - It may be alleged that you are partly to blame for an accident. The likelihood of this increases if the contractor was using your equipment at the time of the accident, or if the loss occurred on your property.
• Negligent entrustment - It may be alleged that you either knew or should have known that the contractor you hired was incompetent, reckless or not qualified for the task. For example, you may be liable for an auto accident caused by a driver known to be reckless.
• A non-delegable duty - Some duties cannot be shifted to an independent contractor. For example, a landlord has a non-delegable duty to provide a reasonably safe environment to a tenant.
• Inherently dangerous activities - In some cases, strict liability may be imposed on a business engaged in inherently dangerous activities, for example, the disposal of hazardous waste materials.

Independent contractor or employee?

Businesses have a higher degree of responsibility for their employees than they do for independent contractors. If a court rules that you have treated a contractor like an employee, you could be held liable. Courts will look at several factors to determine if someone is considered to be an independent contractor or an employee of your business. Although the factors are similar to those used by the IRS for tax status, courts may interpret them differently. In addition, interpretation and emphasis varies from state to state. Courts will review the following factors to make their determination:

• The amount of control your business has over how the work is performed. Case law surrounding the issue of employment has consistently held that the most important element is control. A worker that is subject to instructions about when, where, and how to work is usually an employee. The more control you exert over how the contractor's work is performed, the more likely the hired party will be considered your employee in the case of a contractor's liability suit.
• The independence of the hired party. The following questions will be reviewed:

- Does the hired party operate as an independent entity and represent itself to the public as a business for hire to others?

- Does the hired party work for any other businesses?

- Does the hired party advertise their services?

- Does the hired party have the right to hire and fire its own workers?

• The tools, equipment and materials used to perform the job. Employees are normally provided necessary work tools and materials, while independent contractors tend to furnish their own.
• The existence of a contract or agreement naming the worker as an employee versus an independent contractor.
• Insurance covering the acts of the worker. Some courts have held that this indicates that the worker is an employee. You should require any independent contractors to carry general liability insurance, naming your business as an additional named insured. Preferably, you should require the independent contractor to make his own insurance arrangements. It is important to note that none of the above factors is conclusive and courts may place a greater emphasis on one factor above another.

Know the laws:

OSHA standards on contractor safety
Several OSHA standards include sections that spell out your responsibilities for outside contractors and contract workers. These standards include, but are not limited to, provisions affecting contractor selection, employee training, the exchange of safety information and emergency action plans. Become familiar with the following OSHA standards. You can view them in their entirety on OSHA's Web site, www.osha.gov.

• Hazard Communication (29 CFR 1910.1200). The Hazard Communication standard includes requirements regarding contractor exposures to chemicals and other hazardous materials.
• Process Safety Management of Highly Hazardous Chemicals (29 CFR 1910.119). This standard identifies responsibilities of work site employer and contract employers with respect to contract employees involved in maintenance, repair, turnaround, major renovation or specialty work, on or near covered processes.
• Welding, Cutting and Brazing (29 CFR 1910.252). This standard applies to your responsibility for advising contractors about flammable materials or chemicals of which they may not be aware.
• Hazardous Waste Operations and Emergency Response (29 CFR 1910.120). This standard covers potential fire, explosion, health and safety hazards of hazardous waste operations.
• Permit Required Confined Spaces (29 CFR1910.146). The OSHA Confined Space standard provides instructions when arranging to have contractors perform work in confined spaces such as tanks, silos, vats and pits.
• The Control of Hazardous Energy (CFR 1910.147).The Control of Hazardous Energy (Lockout/Tagout) standard establishes requirements for the control of hazardous energy during servicing and/or maintenance of machines and equipment.
• Grain Handling Facilities (29 CFR 1910.272). This standard applies to potential fire and explosion hazards in grain handling facilities and contractors performing work at these facilities. Failure to meet these OSHA guidelines could lead to a citation for you, the contractor you've hired, or both of you, depending on the particular situation. In a hazardous situation in any industry, you could potentially be cited for a violation of OSHA's Multi-Employer Worksite Policy.This policy is expressed in OSHA Instruction Directive CPL 2.103, and defines four categories of employers:
• Creating employer - an employer who has created a hazard
• Exposing employer - an employer whose employees are exposed to a hazard, no matter who may have created it
• Correcting employer - an employer who is responsible for correcting the hazard
• Controlling employer - an employer who has general supervisory authority over the worksite

OSHA will follow a two-step process to determine whether more than one employer is to be cited under the Multi-Employer Worksite Policy. Once the type of employer is determined, the second step will be to determine whether the employer's actions were sufficient to meet his obligations. Two of the biggest factors in this determination are:

• Whether the employer took immediate steps to protect his employees from the hazard (such as removing employees from the area or providing protective equipment)
• Whether the employer brought the hazard to the attention of another employer who had the responsibility to correct the hazard. OSHA's decision on the type of employer is dependent upon the ‘reasonableness' of their actions. The exception is when an employer is ruled to be a "creating employer." A "creating employer" will be cited whenever anyone's employees are exposed to a hazardous situation.

How to work safely with independent contractors

• Select contractors based upon their expertise in performing the necessary work and their safety performance. Consider the contractor's accident rate, safety culture, compliance history, etc., to determine if the contractor meets your safety expectations. Look for a low OSHA recordable injury rate (below industry average) and a low Experience Modification Rate (typically below 1.0).
• Require a contract or agreement that clearly denotes the nature and scope of the work being performed. The agreement should also shift all responsibility to the contractor for safety and health issues, including the identification and correction of any issues. Don't contractually shift responsibility for safety but then continue to take an active role in contractor safety issues. Balance or limit your involvement in contractor safety issues with your need to protect the safety of your employees. Be sure your contract or agreement includes an unambiguous indemnification and hold harmless clause, as well as requirements for liability and workers' compensation insurance.
• Your contractor and any subcontractors should be required to carry a full line of insurance coverage, including general liability and workers' compensation coverage. Certificates of insurance with specified levels of coverage should be required. Secure the original certificate of insurance and make sure the coverage is up-to-date and maintained year-to-year. If you allow a contractor or sub to begin work without verifying their insurance documentation, you are at immediate risk for assuming liability as their employer.
• Prior to the start of a new job, conduct a meeting with all contractor representatives to discuss contract requirements for safety and health, special work permits or procedures, compliance programs, emergency response plans and known information about on-site hazards and/or hazards created by the contractor's operations.
• Limit your employees' access or exposure to contractor work areas. If an unsafe act or condition is noted in an area or by an activity created or controlled by the contractor, report it in writing to the designated contractor representative. If the contractor or subcontractor does not take prompt corrective action or disagrees that the condition is hazardous, take measures to protect your employees. Your contractor agreement should grant you the right to inspect work in progress and to order work to stop. Develop a written contractor safety policy that addresses the above guidelines. Your policy should clearly establish the following guidelines:
• Procedures on contractor selection
• Company and contractor safety and health responsibilities
• OSHA compliance obligations
• Company safety and health rules and policies
• Procedures for the immediate reporting of incidents or accidents on-site
• Guidelines for the exchange of information

Working with independent contractors is a regular part of business for many companies. Know the risks associated with hiring independent contractors and help reduce them by following our recommendations. You'll not only help keep your insurance costs low, but you'll also protect the integrity of your business.

Source: Sentry Insurance