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Workers’ Compensation and the Covered Employee Reexamined

August 19, 2014 By Emily F. Belanger

An alleged employer’s argument that a claimant was not entitled to benefits because the claimant was an independent contractor, and not a covered employee, led the Court of Appeals of Maryland to reexamine the level of control exercised over the claimant in Elms v. Renewal By Andersen, to determine who really is a covered employee.  

Claimant was a licensed home improvement contractor, who owned and operated an unincorporated home improvement business.  The claimant had secured workers’ compensation insurance for the business as a sole proprietor.  He did not, however, include himself on the policy. 

In 2006, claimant began installing windows and doors for Renewal By Andersen (“Renewal”), a business that sells and installs windows and doors.  Claimant certified to Renewal that his unincorporated home improvement business carried workers’ compensation insurance. In 2008, while installing a window at a Renewal customer’s home, claimant fell and suffered injury to his right foot. 

Claimant filed a workers’ compensation claim alleging that he was Renewal’s common law employee and was working for Renewal at the time of the injury.  Renewal, in turn, argued that claimant was an independent contractor and not a covered employee for purposes of workers’ compensation benefits.  The Workers’ Compensation Commission agreed with Renewal, concluding that claimant was an independent contractor and therefore not eligible for benefits.

Claimant appealed.  On appeal, the Court of Appeals of Maryland reversed the Workers’ Compensation Commission.  The Court examined the level of control exercised by Renewal and found that Renewal controlled virtually all aspects of claimant’s work including: claimant’s schedule, training and instructions, his clothing and the manner in which the work was to be performed.  Accordingly, the Court concluded that claimant was a covered employee under the Workers’ Compensation Act, and therefore entitled to benefits through Renewal.

As stated, Claimant certified to Renewal that his business carried workers’ compensation insurance.  However, the Court found that the certification was not determinative.  In its opinion, the Court highlighted Section 9-227(a) of the Maryland Code, Labor and Employment Article, which provides that “[u]nless an election is made in accordance with this section, a sole proprietor is not a covered employee”.  Unlike a corporate officer, who must affirmatively elect to not be covered under a workers’ compensation policy, a sole proprietor must affirmatively elect to be covered.

The takeaway for employers: the exercise of control over those whom one may think are independent contractors can, in some cases, equal coverage.