Are My Laborers Covered by South Dakota Workers’ Compensation Laws?

Contractors, no matter their size, must often make difficult decisions to operate their businesses profitably, while at the same time complying with the law and mitigating risks. Managing financial interests along with finding laborers with adequate skill sets can feel overwhelming for contractors that are trying to grow their business. An often-confusing area is the classification of laborers as 1099 independent contractors. Mistakenly classifying an employee as an independent contractor can lead to significant liabilities for the business and the potential for disastrous lawsuits.

This article focuses on properly classifying workers for purposes of South Dakota’s worker’s compensation laws. A much longer analysis is necessary to comply with IRS regulations.

When faced with the question of whether a worker is an employee or independent contractor for purposes of workers’ compensation, South Dakota courts presume the worker is an “employee until his status as an independent contractor is established.” Jackson v. Lee’s Travelers Lodge, Inc., 1997 S.D. 63, ¶ 10, 563 N.W.2d 858, 861. A worker is an employee until the employer establishes the following:

(1) The individual has been and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and

(2) The individual is customarily engaged in an independently established trade, occupation, profession or business.

To reiterate, the burden is on the employer to prove both elements. In Jackson, the worker performed services for hourly wages, was not free from control or direction, was provided the equipment necessary to perform the job (except for a shovel which the worker provided), was instructed on the work to be done and when to do it and could be fired at will. Based on these facts, the South Dakota Supreme Court determined that for purposes of workers’ compensation laws, the worker was an employee, not an independent contractor.

Unfortunately, contractors often misclassify laborers as independent contractors. To help avoid making that mistake, here are some additional factors that make it more likely that a laborer is an employee and not an independent contractor:

  • The worker is paid an hourly wage via weekly or biweekly checks.
  • The job/work performed does not require specific skills associated with a recognized profession.
  • The worker is not required to have any special training to perform the labor they are hired to perform.
  • The worker is not required to have any special education to perform the labor they are hired to perform.
  • The worker is not free from supervision and control (a supervisor, foreman, or team leader is keeping tabs on the worker’s work).
  • The contractor controls the start and end time for workdays (the worker is not free to do the work on their own time).
  • Withholding of taxes.
  • The contractor provides the worker with the tools/equipment the worker needs to perform the work.

Whether you are a contractor or worker, understanding the difference between the status as an employee or an independent contractor is essential for limiting liabilities and ensuring proper compensation is paid.

At Lynn Jackson our mission is to understand each client’s goals and provide innovative and practical counsel to achieve valued results. Let us know how we can help. Contact us at (605)342-2592.

Lynn Jackson Attorneys Successful in Two Recent Appeals

Lynn Jackson attorney, Cassidy Stalley, represented James Bruggeman in an action against Jennifer Ramos, James’s caretaker, alleging James was subject to vulnerable adult abuse. The circuit court granted the requested protection order against Ramos, who was found to have neglected James and financially exploited him. Ramos appealed the circuit court’s decision to the South Dakota Supreme Court, which affirmed in Bruggeman v. Ramos, 2022 S.D. 16, a decision dated March 23, 2022. The South Dakota Supreme Court agreed with Stalley’s argument that James was a vulnerable adult and was the victim of Ramos’s financial exploitation, and affirmed the circuit court. Lynn Jackson is proud of Cassidy for taking on the representation of a vulnerable adult and her success in doing so.

In another opinion from the South Dakota Supreme Court – Ehlebracht, v. Crowned Ridge Wind II,, 2022 S.D. 19 – Lynn Jackson attorneys, Miles Schumacher and Dana Van Beek Palmer, successfully represented their client Crowned Ridge Wind II in an appeal from the South Dakota Public Utilities Commission’s (“PUC”) issuance of a permit for Crowned Ridge to construct a wind energy system in Codington, Grant and Deuel Counties in northern South Dakota. The Court agreed with Schumacher and Palmer that the PUC legally conducted the hearing and legally granted the permit. The Court also found the challengers’ constitutional arguments had no merit. Congratulations to Miles and Dana on their success.

Lynn Jackson Welcomes Two New Attorneys to the Rapid City Office

Barbara Melber Vargo joined Lynn Jackson’s Rapid City office in August 2021. Barbara was a judicial clerk for the Seventh Circuit in South Dakota, as well as the United States Court of Appeals for the Eighth Circuit. As part of the firm’s Trusts, Estate and Probate group, Barbara assists clients with estate planning, wealth transfer planning, and estate and trust administration. She also assists fiduciaries with the administration of estates and trusts.

Madison Young is also an attorney in the Firm’s Rapid City office, having just completed a judicial clerkship with the Honorable Roberto Lange, United States District Court for the District of South Dakota.  Madison’s practice is all-encompassing, as she assists and advises clients in both litigation and business-related matters, as well as in estate planning and trust administrations.  

Lynn Jackson Hires Three New Attorneys

Attorney Mike Nadolski joined Lynn Jackson’s Sioux Falls office in August 2019.  Mike comes to us with significant experience representing elected and appointed county officials in a number of practice areas.  Mike is part of our litigation practice group and represents clients in a variety of practice areas, including commercial and construction litigation, personal injury, trust and probate litigation, and litigation involving planning and development. 

Jason Thomas is an attorney in our Spearfish office.  Jason previously clerked for two judges, gaining invaluable knowledge and experience in both state and federal courts.  Jason is also part of the Firm’s litigation practice group, assisting in commercial and construction litigation and personal injury cases.  Jason also represents clients in all areas of family law, including divorce, child custody and support, adoption, and premarital agreements. 

Our newest member of the Firm is Cesar Juarez, who previously clerked for the Second Circuit in Sioux Falls.  Cesar spent the last seven years in private practice, where he provided advice and representation to clients in both litigation and business.  Cesar is one of the few Spanish-speaking attorneys in Sioux Falls and assists our clients in all aspects of litigation, including commercial and construction litigation, personal injury, and trust and probate litigation. 

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