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By: Geoffrey S. Pope Published: November 2019

Can You Avoid Liability for OSHA Violations by Calling Your Workers Independent Contractors?

Since OSHA protects employees, companies sometimes try to avoid its reach by depicting workers as independent contractors.  In Secretary v. Fama Construction, OSHA issued citations for multiple violations (including “Repeat” and “Willful” items) and recommended almost $200,000.00 in penalties. 

In contesting the citations, Fama’s primary defense was that its roofing crews were not Fama employees, but subcontractors.  Fama claimed it merely secured roofing contracts, and that the work crews were employees of subcontractors, which were solely responsible to comply with OSHA’s standards.

After trial, the Administrative Law Judge held, in a 29-page decision, that the workers exposed to the violative conditions were Fama’s employees.  Even if they were not Fama’s employees, the ALJ found, Fama was a ”controlling employer” at the worksite and was required to inspect the worksites to satisfy its duty of reasonable care.  Over $280,000.00 in penalties were assessed accordingly.

It weighed against Fama that the inspections before the ALJ were not Fama’s “first time at the rodeo,” and the same Compliance Officers kept encountering the same workers, some of them for the third or fourth time.  Worse, most of the workers unhesitatingly described themselves as Fama employees.

According to Fama’s sole owner, Francisco Martinez, Fama had no employees, other than 3-4 home office employees.  Martinez testified that Fama worked mostly with four building companies, which gave it contracts for roofing work.  Martinez testified that Fama subcontracted the roofing work, for lump-sum prices, to one or more of a roughly stable collection of four work crews, about 12 to 15 workers in all.  Additional crews, for brick flashing work, were sometimes supplied by Francisco’s brother, Daniel Martinez.  Francisco testified that he came to the jobsites before work began, and after it was completed, but did not direct the crews as they did their work.

Francisco’s daughter testified that she had worked for Fama for 15 years, throughout which the roofers  were paid weekly, with the price of tools and supplies bought on Fama’s credit being deducted.  A company rule against hiring new, inexperienced roofers, somebody “from the street or from Home Depot,” was not always observed.  Safety training was provided every 4-5 months, and, assertedly, crews failing to attend, or whose persistent violations came to Fama’s attention, were given less work (one crew being cut off entirely).  Fama forbade its workers to use their cell phones while working on roofs, or driving company vehicles.  Its solicitude for worker safety, Fama claimed, was not in furtherance of an employment relationship, but was based on friendship, and concern for the roofers.

Daniel Martinez claimed that while he considered himself semi-retired, “it’s Fama I work for” in directing the flashing crews (generally, Daniel plus a single helper).  Daniel never formed a company, but contacted Fama whenever in need of work.  Fama paid Daniel, based on the number of linear feet of flashing installed, and Daniel shared the money paid to him with his helper.

Roofer Antonio Cardenas, although testifying that he had worked for Fama for approximately 15 years (in addition to sporadic “temporary work” for an unrelated individual) did not consider himself an employee.  He worked together with Carlos Galicia, and stated that, while previously the two men were issued separate weekly paychecks, since about 2014 Fama issued but a single check (for a non-negotiable fixed price for each job).  A single 1099 form was given to Cardenas, who would then give Galicia a share of the money.  At times, and for various reasons, Cardenas’s two-man crew turned down Fama projects.  Fama supplied Cardenas with safety glasses and a fire extinguisher, and safety kit for his truck.  Cardenas attended mandatory safety training sessions, although there were no morning toolbox talks, or safety inspections, performed by (or on behalf of) Fama.  Cardenas’s testimony about the two men who were on the roof with him and Galicia at the time of the OSHA inspection was that they were friends, hired on a casual basis, to help on a handful of occasions.  Galicia denied knowing these “helpers’” names.

Ultimately, however, when a Form 1099 for 2016, in the total sum of $220,667, was introduced, Galicia admitted that the latter sum (minus expenses) had been split four ways, to include the two “helpers” — who, it turned out, had worked on Fama jobs for “probably” ten years.  Each of them had performed a share of the overall work in 2016 equal to that performed by Cardenas and Galicia, and had each received one-fourth of the money.  The ALJ found that Cardenas and Galicia had deliberately misled the Court, under oath.

Standards that courts use to distinguish between employees and independent contractors are not uniform nationwide.  However, well-known standards were enunciated in the Darden case, an ERISA matter decided by the U.S. Supreme Court in 1992.

The ALJ in Fama found that, while on the evidence presented, certain factors mentioned in Darden (the skill required to perform the job, the location of the work, and the extent of the workers’ discretion over when and how long to work) were neutral,  three of the Darden factors favored Fama’s claim of a contractor-subcontractor relationship) and five (as well as additional factors) favored finding that the workers were Fama employees.

The factors that favored Fama’s argument that the workers were subcontractors were the hired party’s role in hiring and paying assistants; that the men were not provided with any vacation, health, or retirement benefits, and that 1099 tax forms (and not W-2s) were given to Daniel Martinez, Cardenas, and Galicia.

To the contrary, factors weighing in favor of the conclusion ultimately reached by the ALJ — that the roofers were Fama employees — were the 5 remaining Darden factors.  These were:  the provision of instrumentalities and tools; the long-standing relationship between the parties; that Fama had the right to assign the crews additional projects; the issuance of paychecks (and that at least one member of each crew was required to pick the paychecks up at Fama’s office); and that the roofing work performed by the crews was Fama’s chief line of business.

A further, non-Darden factor stressed by the ALJ was the high degree of control that Fama exercised over the roofers.

The violations were all affirmed, and penalties exceeding over $230,000.00 were imposed.

While the status of your workers (for OSHA purposes) as employees or independent contractors depends on multiple factors, you should be aware that the definition of “employee” for OSHA is broader than under the common law.  You can’t dodge OSHA responsibilities simply by paying workers on 1099s.  Flimsy arguments on this point are likely to fail, and you should not want to risk being seen by OSHA as a company that cares little about the safety of those who perform its work.

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