News Rules Regarding Independent Contractors

Michigan workers compensation lawyer talks about the new rules that will determine whether a person is an independent contractor or employee.

Workers compensation insurance is required for most employers in the State of Michigan. This is to protect both the employer and the employee should a work accident occur. Lost wages and medical treatment must be paid regardless of who was at fault. In exchange for these guaranteed benefits, the employer receives protection from civil liability.

One of the biggest problems in the system is the misclassification of employees as independent contractors. This is done by unscrupulous employers who want to save money on insurance premiums. It is extremely short sighted as most uninsured employers end up paying more out-of-pocket when they get sued. These employers are also responsible for additional damages in a civil action.

Employee misclassification is a major problem because it reduces the total number of employers who buy into the system. This ends up increasing insurance premiums for good employers who follow Michigan law.

If workers compensation insurance is not available, it is unlikely that an injured employee will ever recover his or her full benefits. Many bad employers simply go out of business and try to hide assets. It also shifts the costs of work injuries to taxpayers who end up paying through government programs and assistance.

Confusion about who is an employee in Michigan

An employee is every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. MCL 418.161(n)

The Michigan Supreme Court recently caused even more confusion in Loos v J.B. Installed Sales, Inc. when it found that income tax records are directly relevant to the question of employee status.

We are now finding that more employers are intentionally paying wages as non-employee compensation (Form 1099) in order to avoid purchasing workers compensation insurance and paying benefits.

How the work comp law is changing in 2013

On and after January 1, 2013, services are employment if the services are performed by an individual whom the Michigan administrative hearing system determines to be in an employer-employee relationship using the 20-factor test announced by the internal revenue service of the United States department of treasury in revenue ruling 87-41.

IRS Revenue Ruling 87-41 can be located here. This is a big change in the law and seems to return us to the days of the economic reality test. It appears that employer control over an individual will now be a major factor in the determination of employment status. This change will hopefully reduce the number of employers who try to game the system.

Get help with these statutory changes

Employers would be wise to discuss their concerns with an insurance agent or legal counsel. Failure to carry workers compensation insurance is a serious matter.

If you are an employee who has been denied workers compensation benefits, call us toll free at (855) 221-2667. There is no charge to evaluate your case and you only pay a fee if benefits are recovered.

Alex Berman is the founder of Michigan Workers Comp Lawyers. He’s been representing injured and disabled workers exclusively for more than 35 years. Alex has helped countless people obtain workers compensation benefits and never charges a fee to evaluate a case.

Related information:

Help! My employer has no workers comp insurance in Michigan!

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