2.2 Employer-employee Relationship

• Library: Workers' Compensation Practice in Virginia (Virginia CLE) (2020 Ed.)

2.2 EMPLOYER-EMPLOYEE RELATIONSHIP

2.201 Employments Covered and Excluded.

A. Employment Covered. Section 65.2-101 of the Virginia Code provides that employers who have three or more regular employees in the same business in Virginia are required to furnish workers' compensation coverage at no cost to their employees. "Regular" may include part-time employees. When an employer defends a claim on the ground that the employer is not subject to the Act, the Commission must make two distinct inquiries: (i) did the employer prove by a preponderance of the evidence that it had fewer than three employees in service in Virginia; and, if so, (ii) at the time of the incident, did the employer's "established mode of performing business" regularly require three or more employees? ² If it did, the employer is deemed subject to the Act, even though it had fewer than three employees on the date of the alleged incident. ³ The proper analysis requires one to look not only at the number of employees engaged in performing the employer's established mode of work but also at the character of the business's "contacts and activities" within the Commonwealth. ⁴ When the number of employees exceeds the statutory minimum, the issue to be determined is "the amount of contact necessary to trigger coverage." ⁵ That the employer may perform only a small percentage of its overall business in Virginia does not mean that the

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"service" of its employees within Virginia is not "regular." ⁶ Local maritime employments are also covered by the Act. ⁷

B. Employment Excluded. There are a number of specific employment classifications excluded from coverage under the Act. Notably, the following are excluded: (i) casual employees—those performing work that is not usually or normally performed by the employer; ⁸ (ii) domestic servants; ⁹ and (iii) farm and horticultural laborers (with certain exceptions). Farmers must furnish coverage if they regularly employ more than three fulltime employees (as opposed to three or more regular employees). ¹⁰

Virginia Code section 65.2-101 provides a lengthy list of excluded employments, including certain officers and employees of the Commonwealth elected by the General Assembly and certain officers and employees of municipal corporations and political subdivisions who are elected by the people. ¹¹ Also excluded are certain employees of common carriers, members of volunteer fire departments and volunteer emergency medical services agencies, certain sports referees, and taxicab drivers. ¹² In 2015, this Code section was amended to exclude certain owner-operators of commercial trucking vehicles as well. ¹³

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Code Section 65.2-101 further exempts a licensed real estate salesperson or a licensed real estate broker associated with a real estate broker from being an "employee" under the Act if (i) substantially all of the salesperson's or associated broker's remuneration is derived from real estate commissions; (ii) the services are performed under a written contract specifying status as an independent contractor; and (iii) the written contract includes a provision that the salesperson or associated broker will not be treated as an employee for federal income tax purposes.

The courts have declined to depart from the legislature's clear language describing exceptions to the statutory employer rule. "[W]here the legislature has used words of plain and definite import the courts cannot put upon them a construction which amounts to holding the legislature did not mean what it has actually expressed." ¹⁴

C. Corporations, LLCs, Sole Proprietors, Partners, and Joint Ventures. Any sole proprietor or all partners of a business whose employees are eligible for compensation may elect to be covered under the Act. ¹⁵ Section 65.2-101 defines employees to include executive officers of a corporation and every manager of a limited liability company. ¹⁶ However, in considering the differences between "officers" and "managers" as employees under the Act, the Commission considers that

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the officers of corporations and managers of LLCs who are elected or appointed pursuant to the articles of organization or an operating agreement of the LLC, are automatically considered employees for the purposes of the Act, while members of an LLC are only considered to be employees if they elect coverage and notify the LLC's insurer of the election. ¹⁷

Two businesses may combine to employ workers as a joint venture and thereby have the requisite number of employees to be covered by the Act. Such businesses have been defined by the Commission as arising "when two or more persons combine in a joint business enterprise for their mutual benefit, with an express or implied understanding or agreement that they are to share in the profits or losses of the enterprise, and that each is to have a voice in its control or management." ¹⁸

D. Business Entities Electing Coverage. Section 65.2-101 provides that the term "employee" includes "[a]ny sole proprietor, shareholder of a stock corporation having only one shareholder, member of a limited liability company having only one member, or all partners of a business electing to be included as an employee under the workers' compensation coverage of such business if the insurer is notified of this election." ¹⁹

2.202 Definitions.

A. Employer. Section 65.2-101 defines "employer" as "any person . . . the Commonwealth or any political subdivision thereof and any individual, firm, association or corporation, or the receiver or trustee of the same, or the legal representative of a deceased employer, using the service of another for pay . . . . If the employer is insured, it includes his insurer so far as applicable."

B. Employee. Section 65.2-101 defines "employee" as "[e]very person, including aliens and minors, in the service of another under any contract of hire or apprenticeship, written or implied, . . . except . . . one

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whose employment is not in the usual course of the trade, business, occupation or profession of the employer . . . ." This is the short, introductory definition; the statute continues to describe at length what is and is not an employee.

Sections 65.2-101, 65.2-502, and 65.2-603 of the Virginia Code include alien workers, whether lawfully or unlawfully employed, as employees within the scope of the Act. However, an employer is not required to pay compensation for temporary partial disability to any injured employee not eligible for lawful employment. ²⁰ Moreover, a partially disabled employee who is not eligible for lawful employment is not entitled, during partial incapacity, to receive temporary total disability benefits under section 65.2-500. Additionally, an employer is not required to furnish vocational rehabilitation services under section 65.2-603 to an injured employee not eligible for lawful employment. These sections overruled Granados v. Windson Development Corp., ²¹ which governs only those injuries and accidents occurring before April 19, 2002.

2.203 Creation of Relationship.

A. Essential Elements. The Act contemplates a contract of employment. For an employer-employee or master-servant relationship to exist, there must be a contract of hire or employment between the parties. A contract of hire is an agreement in which an employee provides labor or personal services to an employer for "wages" or "other things of value supplied by the employer." The contract of hire may be expressed, implied, oral, or written. ²²

The distinction between "employee" and "independent contractor" is a frequent source of controversy in contested claims. If the injured claimant is found to be an "independent contractor," there is no coverage for the claimant as an employee under the Act. ²³

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In establishing the employee-employer relationship, common law principles govern. The essential elements to be considered are:

1.	The right to hire;
2.	The power to dismiss;
3.	The obligation to pay wages; and
4.	The power to control.

As stated in Phillips v. Brinkley ²⁴ and Coker v. Gunter, ²⁵ the most important element is the power to control and direct the employee in the performance of his or her work. If a business operator, for instance, contracts with a person for a defined result, such as to build an addition to a house or to landscape an area, and thereafter relinquishes all other power over the injured claimant, there is no obligation of the business owner to pay benefits to the independent contractor. ²⁶ However, the mere fact that a claimant and an employer had executed an agreement that specifically designated the claimant as an "independent contractor" is not enough to allow the employer to escape liability under the Act. ²⁷

In James v. Wood Products, ²⁸ the Virginia Court of Appeals held that there was an implied contract of hire and that Wood Products had the right to exercise control over the claimant. This contract of hire was implied where "one party has rendered services or labor of value to another under circumstances which raise the presumption that the parties intended and understood they were to be paid for." ²⁹ The court also evaluated the

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claimant's employment status to determine if he was an independent contractor or an employee "in the service" of Wood Products. The court found that the right to control the manner in which an employee's work is performed to be determinative, rather than the actual exercise of that control. The court noted that Wood Products' supervisor directed the claimant when to take breaks, when to take his lunch period, where to position equipment, and even how to position equipment. On these grounds, the court reversed the Commission's finding that the claimant was an independent contractor.

In Hamilton Trucking/Hamilton Terminal Corp. v. Springer, ³⁰ although an independent trucker had monies taken out of his weekly paycheck for insurance, the complete lack of control by the...