Laura Tanner worked for Harcourt Brace & Co. from the summer of 1996 to the summer of 1998 under a per diem agreement for independent contractors. She was hired in Hawaii, but came to Anchorage in August 1997 to conduct a demonstration of educational materials for Harcourt. The company paid for her rental car, controlled where she held in-service demonstrations and the types of administrative work she performed. HBC provided Tanner with names of schools and with specific materials for use in her presentations.
On the other hand, Tanner worked from a reworked outline she prepared and she determined how to present the HBC training materials. She used her own overheads and other materials received from other people. There were no scripts she was required to follow. She was free to refuse assignments she felt were outside her expertise and could reschedule presentations.
Tanner was involved in an automobile accident. Was she HBC's employee at the time of the accident?
That's a common question as employers explore alternative employment strategies with employees and independent contractors. The law in Alaska is that an employer is generally liable for the negligent acts or omissions of its employees committed within the scope of his or her employment.
Alaska also recognizes, however, an exception to that rule, commonly referred to as the independent contractor rule. In general terms, because an employer normally does not control the work of an independent contractor, the employer is not held liable for the torts of the independent contractor and its employees.
The numerous issues that must be addressed in engaging the services of an independent contractor and evaluating whether the end result is one of liability to the employer, was extensively reviewed in a Nov. 22, 2002 Alaska Supreme Court decision, Powell v. Tanner, Harcourt Brace & Co., et al. The case was the basis for this report.
In the Powell case, the court noted that, "An independent contractor is any person who does work for another under conditions which are not sufficient to make him a servant of the other." The court identified no less than 10 different factual issues to consider in determining the relationship between a worker and an employer. They include:
whether or not the one employed is engaged in a distinct occupation or business;
the kind of occupation and whether the work is usually done under the direction of employer or by a specialist without supervision;
the skill required in the particular occupation;
who supplies the instrumentalities, tools and place of work;
the length of time for which the person is employed;
the method of payment, whether by time or the job;
whether or not the work is part of the regular business of the employer;
whether or not the parties believe they are creating the relation of master/servant; and
whether the principal is or is not in business.The principal consideration that the Supreme Court focused on is the degree of control required to impose vicarious liability. The court quoted as follows:
"It is not enough that (the employer) has merely a general right to order the work stopped to resumed, to inspect its progress or to receive reports, to make suggestions or recommendations which need not necessarily be followed, or to prescribe alterations and deviations. Such a general right is usually reserved to employers, but it does not mean that the contractor is controlled as to his methods of work or as to operative detail. There must be such a retention of a right of supervision that the contractor is not entirely free to do the work in his own way."
The result of the foregoing is that if the evidence leads to no clear conclusion whether the employed person is, or is not, an employee, then it will be left for the jury to decide the nature of the employment relationship.
If the evidence is clear that there is or is not a master/servant relation, then that determination can be made by the court. With respect to Tanner and Harcourt Brace & Co., the Supreme Court sent the matter back for the jury to decide the matter of the employment relationship.
The Tanner-HBC relationship issue is a familiar one to business lawyers rendering advice to their clients. The lesson from the case is that it is usually worth the effort, at the outset, to spend the time drafting an employment contract with an eye toward eliminating this type of dispute.
While accidents certainly do happen, the time involved in drafting an accurate and through agreement, considering the factors identified by the Supreme Court, can certainly help in minimizing the amount of time that an employer must spend with their employee, insurance carriers, lawyers or other similarly-situated advisers.
The Powell case is a good primer on the legal and factual issues whereby independent contractors are distinguished from employees. The use of independent contractors versus full- or part-time employees is a recurring option that employers frequently use to address business needs.
With legal direction provided by the Supreme Court, efforts can be made to, as much as possible, draft an agreement which minimizes the factual issues that all too frequently are presented when an employer wishes to assert that the involved party is not its employee, but, instead, an independent contractor.
For those who would like to obtain a copy of the aforementioned opinion, it can be obtained from the Alaska State Court System Web site at www.state.ak.us/courts.
Jim Gorski is a member of the law firm of Hughes Thorsness Powell Huddleston & Bauman LLC. He can be reached via e-mail at jmg@htlaw.com.
