Pervasive throughout the horse industry is an apparent lack of understanding about state worker’s compensation laws. There seems to be confusion about whether these laws even apply to horse trainers, boarding facilities, and other employers and those who work for them. Some employers fail to understand that they are required to obtain worker’s compensation insurance coverage for their workers. Without this coverage, employers are exposing their businesses, and the owners of their businesses, to significant financial liability. Unfortunately, worker’s compensation laws provide few absolutes applicable in all cases that would make it easy to distinguish between those employers that do need to provide insurance and those that do not, or those workers for whom insurance is required and those for whom it is not. Each employer-worker relationship presents its own set of facts, and these facts and relationships must be thoughtfully analyzed on a case-by-case basis.

This article discusses worker’s compensation laws generally, and Oregon law in particular. Another article specifically addressing Washington’s worker’s compensation laws will appear in an upcoming issue of Flying Changes.

What Is Worker’s Compensation Insurance?

Worker’s compensation laws provide for payment of insurance benefits if a “subject worker” suffers from work-related injuries, occupational diseases, or death. The objective of these laws is to:

• provide medical treatment and income benefits to injured workers, regardless of fault;
• reduce litigation between employers and workers over work-related injuries, disease, or death;
• enable injured workers to return to physical and economic self-sufficiency as soon as possible; and
• encourage employers to implement effective risk management and loss prevention programs.

Since their introduction, worker’s compensation laws have virtually eliminated most lawsuits brought by injured workers against employers who provide worker’s compensation insurance. Thus, worker’s compensation laws provide limits for employer liability for work-related injuries.

Are You Required by Oregon Law to Provide Worker’s Compensation Insurance for Your Workers?

With limited exceptions, the general rule is that any employer having one or more workers is subject to Oregon’s worker’s compensation laws, and is required under state law to provide worker’s compensation for all employees¹. These laws provide coverage not only for traditional “employees,” who are typically paid an hourly wage or salary, but also certain “independent contractors” performing labor as a normal and personal part of the employer’s business. Additionally, even so-called “volunteers” may be considered employees for purposes of worker’s compensation laws. Employers of anyone who may be described as an “independent contractor” or “volunteer” such as grooms, stall cleaners, working students, and others may be required under state law to provide worker’s compensation insurance for their workers.

In Oregon, What is the Difference Between a Complying and a Noncomplying Employer?

“Complying” employers are those who provide worker’s compensation insurance when required by law. These employers receive the legal and financial protections provided by their compliance with worker’s compensation laws. One of the most important benefits of compliance is a virtual ban on workers’ ability sue their employers for their work-related injuries or disease, or a similar lawsuit by a deceased worker’s estate for the worker’s death. By obtaining worker’s compensation insurance coverage, the employer is effectively shielded from financial liability for work-related injuries, disease, or death.
On the other hand, “noncomplying” employers are those who do not provide worker’s compensation insurance despite being required to do so by law. These employers are not protected from liability for injuries to or the death of a “subject worker.” In fact, these “noncomplying” employers—and their owners—are exposed to significant financial liability for their violation of state law for several reasons, including the following:

• “Noncomplying” employers are liable for a “subject worker’s” injuries or death as though worker’s compensation laws did not even exist. Generally, any worker can sue a “noncomplying” employer for work-related injuries, disease, or death. Depending upon the nature and extent of these injuries or disease, or in the event of death, the employer is potentially exposed to millions of dollars in liability.
• A “noncomplying” employer’s commercial liability insurance policy will typically exclude liability coverage for any work-related claim that should be covered under state worker’s compensation laws.
• “Noncomplying” employers may not assert certain legal defenses to liability for a worker’s injury, disease, or death. These defenses include negligence of the worker and the worker’s assumption of the risk associated with the job. If these defenses were available, an employer could shift legal responsibility for the worker’s injuries, disease, or death from the employer to the worker. However, without these defenses, an employer generally cannot shift responsibility in this manner.
• In addition to financial liability for worker injuries, disease and death, “noncomplying” employers are also subject to certain state-imposed fines and penalties because of their noncompliance. These fines and penalties can be assessed even if the employer simply has a temporary lapse in coverage due to an inadvertent failure to timely renew his/her/its policy.
• If a “noncomplying” employer is a separate legal business entity—such as a corporation or limited liability company—the employer’s owners will be also be held financially liable for violating state law. Generally, the owners of a business entity are shielded from personal liability for the debts of the legal business entity. However, in the context of worker’s compensation laws, the owners of “noncomplying” employers are not shielded from personal liability.
• If a “noncomplying” employer fails to obtain insurance to become a “complying” employer, an injunction may permanently bar an employer from employing “subject workers” under state law.

How Can You Determine Whether You, or Your Workers, are “Subject” Workers Protected By Oregon’s Worker’s Compensation Laws?

There is unfortunately no ‘one-size-fits-all’ rule to determining precisely whether a employer-worker relationship falls within the scope of state worker’s compensation laws. Employer-worker relationships must be analyzed on a case-by-base basis to determine whether state worker’s compensation laws apply. Several different “tests” are used in this analysis, examining various aspects of the particular employer-worker relationship in question.

Does a Employer-Worker Contractual Relationship Exist?

The first, and simplest, test of whether worker’s compensation laws apply is whether an employment contract exists between an employer and a worker. By this, I mean whether a worker agrees to provide or perform services on behalf of an employer in exchange for some kind of payment, or remuneration. A “worker” is anyone who furnishes services for remuneration subject to the direction and control of an employer². In some cases, even services provided by so-called “volunteers” may draw the employer-worker relationship within the scope of worker’s compensation laws.

Remuneration can take many different forms, including any of the following:

• Payment of money to the worker;
• The employer’s donation of money to an organization of which the worker is a member, rather than payment to the worker directly³;
• Bartering of services, such as cleaning stalls, grooming horses, or doing other barn chores in exchange for free or reduced-cost board, riding lessons, training services, show entries, etc.⁴;
• Employer-provided meals or token “gifts,” such as T-shirts, mugs, or other commemorative items; and
• Free or reduced admission to events, including educational programs.

Does the Employer Have the “Right to Control” the Worker?

If a contractual employer-worker relationship exists, then Oregon courts have determined that additional tests are appropriate in determining whether the relationship in question falls within the scope of the worker’s compensation laws.

The Oregon courts established the “right to control” test, which is the first test used to determine whether a worker is a “subject worker” or an “independent contractor” under worker’s compensation laws⁵. If the worker is a “subject worker,” coverage is mandatory. If the worker is an “independent contractor,” no coverage is required. Here, the key to the analysis is determining the right to control, which “is based not on the actual exercise of control…, but on the right to control.⁶”

Several factors are considered in determining the extent of the employer’s right to control the worker, including:

	If yes, then the employer’s right to control is…	If no, then the employer’s right to control is…
Does the employer pay the worker wages, rather than a flat rate to complete the job?	More likely	Less likely
Does the employer furnish and maintain the equipment used by the worker to perform the services?	More lkely	Less likely
Does the worker have the right to hire an assistant?	Less likely	More lkely
Does the employer have the right to discharge, or fire, the worker?	More likely	Less likely
Does the employer have the right to control how the worker performs the services, rather than just dictating the end result?	More likely	Less likely
Does the employer have the right to control the worker’s work schedule?	More likely	Less likely

No single factor is more conclusive in this analysis than the employer’s unrestricted right to end the worker’s services whenever the employer chooses, regardless of the final result of the work and without liability for breach of contract⁷. Interestingly, the payment of wages—rather than a flat rate—is the least conclusive factor.

The more these factors indicate the employer has a right to control the worker, the greater the likelihood that the worker is a “subject” worker for purposes of worker’s compensation laws. Alternatively, the more these factors indicate the worker has control over his/her own performance of services, the greater the likelihood that the worker is an “independent contractor.”

What is the “Relative Nature of the Work” Performed by the Worker?

In some cases, the right-to-control described above can be inconclusive because the employer has the right to control the worker’s performance in some aspects, but not others. If the right-to-control test is inconclusive, then another test of the employer-worker relationship is needed. The “relative nature of the work” test, established in the Woody v. Waibel case, focuses on the character of the worker’s work and its relationship to the employer’s business. ⁸

Questions pertaining to the character of the worker’s work include:	An “independent contractor” is generally indicated by…	An "employee" is generally indicated by…
What degree of skill is required to do the work?	Greater skill	Less skill
How much of a separate enterprise is teh worker's work (i.e., does the worker have his/her own business or perform work for multiple employers)?	Greater separation	Less separation
To what extent should the worker be expected to carry the burden of a work-related accident?	Greater expectation	Less expectation

Questions pertaining to the employer's business include:	An “independent contractor” is generally indicated by…	An "employee" is generally indicated by…
To what degree is the work perormed by the worker as part of the employer's regular business	The work performed is not part of the employer's regular business	The work performed is part of the employer's regular business
Is teh work continuous or intermittent?	Intermittent	Continuous
Does the duration of employment indicate hiring for continuous services or a particular job?	Hiring for a particular job	Hiring for continuous services

In the end, if the employer has the ‘right to control’ the worker, then the employer must provide worker’s compensation coverage for the worker. Similarly, if the ‘relative nature of the work’ test supports a finding that the worker is an employee and not an independent contractor, then the employer must provide worker’s compensation coverage for the worker.

Is the Worker an “Independent Contractor” Under Worker’s Compensation Laws?

To complicate analysis of the employer-worker relationship, the 2005 Oregon Legislature revised the definition of “independent contractor” as it applies to worker’s compensation laws. This new definition may enable more workers—for better or worse—to fall outside of the protection of worker’s compensation laws because more workers will qualify as “independent contractors” rather than “employees.”

Oregon statutes now define an “independent contractor” as “a person who provides services for remuneration,” and set forth several factors for analysis, including whether the worker is:

• “free from direction and control over the means and manner of providing these services,” subject to the employer’s right to specify desired results;
• “customarily engaged in an independently established business” of his or her own; and
• responsible for obtaining any necessary licenses or certificates to provide the services.⁹

Further, Oregon law requires a separate determination of whether the worker is indeed engaged in an “independently established business.” If the worker satisfies at least three of five more factors listed below, the worker is engaged in an “independently established business.” To do so, the worker must:

• Maintain a business location separate from the employer’s, which may include a portion of the worker’s residence;
• Bear the risk of loss related to the business;
• Provide services for two or more different employers within a twelve-month period, or routinely advertise his/her services and solicit new employment;
• Make a significant personal investment in the business; and
• Retain the authority to hire and fire others.

Other Issues for Consideration

• Part Time Workers: “Subject workers” who are employed part-time are still covered by worker’s compensation laws even though they are employed on a part-time basis. The nature of the employment relationship, not the number of hours worked per week, determines “subject worker” status.

• Out of State Workers: “Subject workers” employed within Oregon remain subject to Oregon worker’s compensation law even if they are injured outside Oregon.

How Do These Legal Tests Apply in Oregon’s Horse Industry Cases?

One Oregon case involving an injured “working student” is particularly instructive, Buckner v. Kennedy’s Riding Academy¹⁰. In the Buckner case, Mr. Kennedy, who operated the riding academy, used several teenage girls to perform various barn chores. In exchange for their labor, the girls were provided free lunch, free rides on the riding academy horses, and occasionally small cash payments. One of the teenage girls was injured when she was stepped on by one of the riding academy horses. Mr. Kennedy did not consider these girls to be employees for whom worker’s compensation insurance was required. Workmen’s Compensation Board found otherwise, and further found Mr. Kennedy was a noncomplying employer. Despite this, the Board found the injured girl was not an employee on the particular day of her injury, so she was not entitled to worker’s compensation insurance coverage for her injuries. Both parties appealed the Board’s decision. The Oregon Court of Appeals determined the girl was indeed an employee who suffered a compensable injury, and Mr. Kennedy was a noncomplying employer liable for her injuries. Thus, a worker characterized as a “working student” and is not paid money may be a “subject worker” protected under Oregon’s worker’s compensation laws.

Another Oregon case, In the Matter of Compensation of Richard R. Pate, involved worker’s compensation coverage for a horse farm manager. In Pate, the owner of a “hobby” horse farm approached Mr. Pate about taking over the manager’s duties at her farm. Mr. Pate’s responsibilities included feeding and turning out horses, cleaning stalls, assisting the vets and farriers, and providing general maintenance on the farm premises. In exchange, Mr. Pate lived rent-free in a residence on the premises. While preparing to feed the horses one day, Mr. Pate suffered multiple leg fractures from a fall onto a concrete floor when the hay hook he was using to pull a bale of hay slipped. Mr. Pate filed a worker’s compensation claim for his injuries. However, the farm owner claimed Mr. Pate was her business partner or an independent contractor, which did not require her to provide worker’s compensation insurance. Applying both the “right to control” and “relative nature of the work” tests in the case, the Worker’s Compensation Board determined Mr. Pate was indeed a “subject worker” at the time of his injury, entitling him to worker’s compensation coverage for his injuries.

Conclusion:

Given the enormous financial risks associated with noncompliance, every employer should carefully review each of its employer-worker relationships to determine whether worker’s compensation insurance is mandatory under state law. Similarly, every worker should inquire about whether he/she has worker’s compensation coverage before an accident or injury occurs. Anyone with concerns about these issues should consult a qualified attorney and/or a worker’s compensation insurance provider for guidance.

About the Author:
As a rider, owner, exhibitor, breeder, and judge, Kathryn A. Hall has been involved with horses for over 30 years. Ms. Hall has been practicing law since 2004, and is licensed in Oregon and Washington. Ms. Hall’s clientele includes horse owners and industry professionals, including trainers, breeders, and boarding facility owners. Ms. Hall is the current President of the Oregon Hunter Jumper Association, and is an active member of the United States Equestrian Federation and a former member of the American Hanoverian Society.

Disclaimer:
This article does not constitute legal advice, nor does it create an attorney-client relationship. If you have any questions regarding a specific situation, your question should be directed to a knowledgeable attorney.

Footnotes:
¹ORS 656.802
²ORS 656.005[30] [2009].
³Whitlock v. State Ind. Acc. Com., 233 Or 166, 377 P.2d [1962] [students representing Future Farmers of America [FFA] painted a building in exchange for a donation to FFA; fact that the payment was made to FFA rather than to students did not alter employer-employee relationship].
⁴Bucker v Kennedy’s Riding Academy, 18 Or. App. 516, 521-522, P.2d 450 [1974].
⁵S-W Floor Cover Shop v Nat’l Council on Comp. Ins., 318 Or 614, 872 p.d2 1 [1994].
⁶S-W Floor Cover Shop, 318 Or at 622.
⁷Carlile v. Greeninger, 35 Or. App. 51, 54, 580 P.2d 588 [1978].
⁸Woody v. Waibel, 276 Or. 189, 554 P.2d 492 [1976].
⁹ORS 670.600[2] [2009].
¹⁰