Worker's Compensation - Worker Classification

Is a Worker an "Employee" or an "Independent Contractor"?

Employers are required by law to correctly classify each worker as either an "employee" or "independent contractor" for purposes of the employer's obligations under the law for worker's compensation insurance.

The worker's compensation insurance law uses a definition of "employee" (with exceptions) to separate those individuals (workers) whose employer is obligated to provide worker's compensation benefits (employees) from those whose employer is not obligated to provide worker's compensation benefits (independent contractors).

The Wisconsin Worker's Compensation Act (Act) defines an employee as "every person in the service of another under any contract of hire, express or implied, all helpers and assistants of employees, whether paid by the employer or employee, if employed with the knowledge, actual or constructive, of the employer, including minors, who shall have the same power of contracting as adult employees" but not including (1) domestic servants, (2) any person whose employment is not in the trade, business, profession or occupation of the employer unless the employer elects to cover them."

It is important that you carefully read the definition of "employee" and the exceptions in the worker's compensation law: Wis. Stats. 102.07(4)(a) and 102.07(8).

Steps to Classify a Worker

If you are an employer or a worker and want to determine how to properly classify a worker as either an employee or an independent contractor for worker's compensation insurance, continue to the worker classification test to begin the process:

Begin the Process

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Definitions

Any Contract of Hire

A contract of hire means that the person performs services for which he or she is compensated. Compensation is something of value and may be cash or in-kind.

Domestic Servant

Although neither the statutes nor case law provide a definition of "domestic servant" as it is used in s. 102.07(4) of the Act, the department has consistently ruled that persons hired in a private home to perform general household services such as nanny, baby-sitting, cooking, cleaning, laundering, gardening, yard and maintenance work and other duties commonly associated with the meaning of domestic servant, meet the definition of domestic servant intended by the Act.

Trade, business, profession or occupation of the employer

Cornelius v. Industrial Commission, 242 Wis. 183, 185 (1943) defines a trade or business as an occupation or employment habitually engaged in for livelihood or gain. If a person's employment is in the trade, business, profession or occupation of the employer, he or she is an employee, no matter how casual or isolated the employer's trade, business, profession or occupation may be. For example, typically a home-owner who hires someone to mow his or her lawn is not an employer subject to the Act because being a home-owner is not associated with a trade, business, profession or occupation.