Kentucky Adopts Economic Realities Test for Workers Compensation Classification Cases

The Supreme Court of Kentucky adopted the economic realities test for determining if a worker is an employee or independent contractor for the purposes of a workers compensation claim in the recent case of Oufafa v. Taxi LLC, No. 2022-SC-0003-WC (KY 02/16/23).

In Oufafa, a taxi driver, Daoud Oufafa, was shot by a passenger and permanently paralyzed while driving a taxi. Mr. Oufafa was classified as an independent contractor by the taxi company but filed a workers compensation claim. The taxi company denied the claim, the administrative law judge agreed, the Workers Compensation Board reversed, the Court of Appeals reversed the Workers Compensation Board and the case was appealed to the Kentucky Supreme Court.

The court reviewed the case history, the various standards used in determining whether Mr. Oufafa was and employe or independent contractor, the lower court discussion of whether the taxi company was a taxicab company or a taxi leasing company, and then determined that the proper standard to determine if a worker is an employee or independent contractor for the purposes of workers compensation is the economic realities test.

The Court said:

In Mouanda, this Court adopted the economic realities test to determine the difference between employees and independent contractors in the context of the Kentucky Wage and Hour Act (KWHA). That test has six factors:

  1. The permanency of the relationship between the parties,
  2. The degree of skill required for the rendering of the services,
  3. The worker’s investment in equipment or materials for the task,
  4. The worker’s opportunity for profit or loss, depending upon his skill,
  5. The degree of the alleged employer’s right to control the manner in which the work is performed, and
  6. Whether the service rendered is an integral part of the alleged employer’s business.

The court went on to say:

This Court hereby adopts the economic realities test to safeguard the protections afforded by workers’ compensation. Accordingly, our holding in Mouanda is extended to the workers’ compensation context.

The court then sent the case back to the lower court to determine if Mr. Ofafa was an employee or independent contractor. Given the lifelong paralysis that Mr. Ofafa endures as result of his job, one might hope that he will be able to succeed with his workers compensation claim. However, this case is a stark reminder that the classification of a worker as an employee or independent contractor can have significant implications.

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