Many businesses owners (wrongly) assume they can limit their company’s liability for employment discrimination claims by entering into an independent contractor agreement. But that is not always true as shown by a recent Michigan Court of Appeals decision. Specifically, this decision provides a reminder that companies must focus on compliance with employment laws for its entire workforce, including contractors.
Michigan discrimination laws: “Independent contractor” versus “employee.”
In Cook v. Farm Bureau Life Ins. Co. of Mich. (Mich. App. 2019) the plaintiff began working as a Farm Bureau “employee insurance agent” in 2000. Later, he became an independent contractor for the defendant in 2013. The company fired the plaintiff in 2016.
Plaintiff sued for age discrimination under Michigan’s Elliott-Larsen Civil Rights Act (ELCRA). The trial court decided in favor of the defendant employer. In reaching this decision, the court concluded the plaintiff could not sue under ELCRA because he was an “independent contractor,” and not an “employee.”
Control and Not the Label of the Employment Relationship Matters.
The Court of Appeals reversed this decision. In reaching this decision, the Court reasoned:
In pertinent part, [ELCRA] provides that, ‘[a]n employer shall not . . . [f]ail or refuse to hire or recruit, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment, because of . . . age[.]’
Notably, the above does not state that an employer is prohibited from engaging in acts of discrimination only against its own employees. Rather … one may bring an action under the ELCRA against an employer if the individual can establish that an employer affected or controlled a term, condition, or privilege of his or her employment.
We find that the trial court erred in pronouncing that plaintiff’s status as an independent agent disqualified him from ELCRA protection, without first inquiring into the amount of control Farm Bureau asserted over the terms, conditions, and privileges of plaintiff’s work.
In applying the law, the Court wasted no time in concluding the independent contractor agreement established that Farm Bureau affected or controlled a term, condition, or privilege of plaintiff’s employment. This was especially true as it related to compensation. However, this reversal was short-lived; the Court went on to decide the plaintiff failed to establish a claim for age discrimination.
HR Compliance Remains Priority for “Employees” and “Independent Contractors.”
Where a true independent contractor relationship is appropriate, it has advantages. But it is never a silver-bullet against employment discrimination claims. Instead, compliance with Michigan or federal employment laws must remain a priority for the entire workforce. And this compliance is needed regardless of whether you are employment W2 employees or contractors.
Use this link to contact Michigan attorney Jason Shinn if you have questions about this article, or complying with Michigan or federal employment laws or litigating claims under both. Since 2001, Mr. Shinn has represented companies and individuals in employment discrimination claims under federal and Michigan employment laws.