On February 16, 2023, the Supreme Court of Kentucky, in
Oufafa v Taxi, LLC, adopted, for the first time, the economic realities test to determine whether a worker is an employee or an independent contractor for purposes of workers compensation (WC).
In this case, a taxi driver—who worked for a taxi company that identified drivers as independent contractors and leased vehicles to drivers that could only be used for company rides—suffered a permanent injury from a gunshot inflicted by a passenger. The taxi company denied the driver’s petition for WC benefits asserting that the driver was an independent contractor.
The driver brought his claim before the Department of Workers’ Claims where an administrative law judge (ALJ) agreed with the taxi company and denied WC benefits finding that the driver was an independent contractor. In its ruling, the ALJ applied a group of factors from prior court decisions to determine employee/independent contractor status. The driver appealed the ALJ’s decision. The appellate court held that it was reasonable to conclude that the taxi company was a leasing company, and,
applying a different standard, upheld the ALJ’s determination that the driver was an independent contractor.
The state’s supreme reviewed the case and, in its decision, adopted the economic realities test which has been relied upon in the context of the state’s Wage and Hour Act. Under this test, the court found that a group of six factors should be considered to ascertain employee or independent contractor status. However, the supreme court stressed, the central question to this test is the “worker’s economic dependence upon the business for which he is laboring.” With this decision, the court remanded the case back to the ALJ to determine whether, under the economic realities test adopted by the court, the driver is an employee or an independent contractor.
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