Ohio Supreme Finds Ditch Diggers Misclassified as Independent Contractors

Ditch diggers who accepted work assignments online and used their own spades and shovels to do the work cannot be classified as independent contractors by a company that contracted with Time Warner Cable to install underground lines, a divided Ohio Supreme Court ruled this week.

In a 5-2 decision, the high court affirmed a Court of Appeals judgment that Ugicom Enterprises employed the laborers it assigned to bury underground lines and owes the state Bureau of Workers’ Compensation $346,817.55 for unpaid premiums. The majority said in its unsigned opinion that it isn’t drawing a bright line to determine the limits of the gig economy, it is holding only that the bureau had “some evidence” to support its determination that Ugicom was an employer.

“Ugicom’s take-it-or-leave-it approach to pricing the jobs, which foreclosed an installer’s ability to submit a bid, was a means of controlling the installers,” the opinion says.

Whether a worker is an employee or independent contractor is a frequently disputed question for workers’ compensation and liability insurers. Since there are myriad ways that organizations can assign and pay for work, courts generally look to variety of factors to determine whether a worker is an employee or an independent contractor.

The degree of control an employer exercises over the workers, whether it provides the tools for the job, the degree of skill required and whether the work is part of the regular business of the employer are some of the factors considered.

The Supreme said the Bureau of Workers’ Compensation is the sole fact finder for workers’ compensation matters. In reviewing the case, the court’s function is to determine only whether the BWC abused its discretion by entering an order that is not based on “some evidence in the record,” the majority opinion says.

Ugicom contracted with Time Warner to install underground cable in residential areas. The company used the internet to assign specific jobs. Installers were required to sign independent contractor agreements. They would log into the system each morning to obtain job details and select the projects they wanted, then log back in again at the end of the work day to note repair work that was completed.

The installers were allowed to choose their own work hours, provided that they obtained the customers’ consent to be on their properties. Annual pay averaged from $50,000 to $60,000 per year, but some workers made as much as $90,000, the court said.

The BWC audited Ugicom in 2009 to determine whether it had paid the correct amount of workers’ compensation premiums for the previous five years. An auditor determined that the company had misclassified its ditch diggers as independent contractors and invoiced the company for unpaid premiums.

Ugicom challenged the finding through the BWC’s administrative process and filed an action with Ohio’s 10th District Court of Appeals when that failed. The appellate court found that the BWC had used the wrong type of test to determine whether the workers were employees, but allowed the bureau to issue a new order. The BWC’s adjudicating committee heard the matter and found once again that the Ugicom workers were employees.

The Supreme Court listed eight factors that can be used to determine whether a worker is an employee or an independent contractor in 1943 decision. It found “some evidence” that six of those factors support the BWC’s determination that the installers were employees.

1. Ugicom’s regular business is to install underground cable, which is exactly the work that it hired the installers to do.
2. Installers wore badges with the name of Ugicom and Time Warner, evidence that they were not independent of Ugicom.
3. Ugicom did not allow installers to negotiate on price; the installers had to take whatever pay was authorized for specific jobs.
4. The installers did not advertise their services to the community, evidence that they had an ongoing relationship with Ugicom.
5. The independent-contractor agreements that the installers signed contained a clause that prohibited them from working for Ugicom’s competitors.
6. Minimal skill was required for the work. The installer’s job was basically to dig ditches to bury cable and to connect the cable to a box on the home.

Justices Kennedy and O’Connor wrote a dissenting opinion. They said Ugicom is “largely a labor-management company” that contracted with Time Warner to install underground cable lines.

“The some-evidence rule presents a playing field that is tilted toward the bureau, but the bureau must still supports its conclusions with relevant and probative evidence,” the dissenters said. “The majority here has not identified any evidence that supports its conclusion that Ugicom has the right to control the manner or means of the installers’ work.”