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Utah’s Employer/Independent Contractor Distinction Remains Cloudy, Even To Judges

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In a February 3, 2022 opinion by the Utah Court of Appeals, the struggle that courts have in distinguishing between employees and independent contractors continues.  In Jensen Tech Services and Sentinel Insurance Company, Ltd., v. Labor Commission and Sergio Herrera, 2022 UT App 18, the Utah Court of appeals was asked to consider whether an individual was entitled to worker’s compensation benefits when he fell of a ladder while working to install I.T. systems at a location.  There was no dispute that the injured worker had signed a contract in which he had agreed he was an independent contractor.  He worked on various installations for more than one contractor, used his own vehicle, used his own tools, but installed cables and other hardware that were supplied to him by the contractor. There were times when Jensen Tech Services provided him with so much work that he could not work for anyone else.  He received a 1099, had no withholding, and contractually disavowed any employer-employee relationship.  His agreement, however, had a non-competition clause.  When he sued for worker’s compensation benefits under Utah law, which require that he be an “employee”, the administrative law judge found for the contractor agreeing that the worker was an independent contractor.  On an appeal to the Utah Labor Commission, the Commission reversed the ALJ decision and found that the worker was an employee, and thus was entitled to worker’s comp.  On appeal to the Utah Court of Appeals, the Utah Court of Appeals found that the Commission’s analysis fell short of what was required, and remanded the case back to the Commission to “reconsider [the worker’s] status as an employee or an independent contractor in light of the governing law and the guidance we have suggested.”  id. at ¶ 33. 

In other words, the ALJ found the worker was not an employee, the multiple members of the Utah Labor Commission found that he was not an independent contractor, and the three person panel of the Utah Court of Appeals found that a serious question remained whether he was an independent contractor.  With so many judges and commission members struggling to agree on what relatively undisputed facts mean as a matter of law, the state of the law in Utah remains a bit unsettled.  Consequently, to a contractor desiring that the individuals providing labor and services are independent contractors rather than employees, the following are critical factors to take into account on the relationship.

  • A written contract;
  • No non-compete;
  • No control over means and methods;
  • Payment on a per job basis; and
  • Responsibility with worker for insurance, equipment, transportation, and safety.

The Utah Court of Appeals’ recent decision, while confirming that reasonable minds will continue to disagree on what undisputed facts mean under the law, nevertheless was helpful in providing renewed and fresh guidance on the factors that everyone should take into consideration.