Watch out for bad employers who attempt to evade paying workers’ compensation by calling you an independent contractor and how to protect your legal rights.
The Detroit News has reported on a new enforcement unit created by Attorney General Dana Nessel to combat employee misclassification and payroll fraud. It will investigate employers who break the rules to avoid paying overtime, health benefits, and workers’ compensation. Employee misclassification takes advantage of employees, hurts legitimate businesses, and deprives the state of millions of dollars in tax revenue.
Employee misclassification happens when a business deliberately calls its employees independent contractors. They are paid wages with a 1099 tax form and no income withholding occurs. This is an important distinction because independent contractors are not covered under workers’ compensation. If a worker gets hurt on-the-job, he or she is on their own.
By deliberately misclassifying employees as independent contractors, bad employers avoid having to purchase required workers’ compensation insurance. This puts legitimate employers at a financial disincentive when operating their business.
Michigan law is specific on who is an employee for purposes of workers’ compensation. Services are considered “employment” when an individual meets the requirements of IRS revenue ruling 87-41. Some of the factors that must be examined include whether the individual has set-hours of work, must follow instructions, underwent training, was paid by the hour, could be fired, was furnished tools and materials, and shared in profits/losses.
Private employers who regularly have 3 or more employees at a time or employed 1 worker for 35 or more hours per week for 13 or more of the preceding 52 weeks, are required to purchase workers’ compensation insurance. Failure to comply is a crime that could result in civil penalties and/or jail time.
Employees who are hurt on-the-job are entitled to have all medical bills paid under workers’ compensation. Lost wages should also be covered if the employee is unable to work. These benefits are owed regardless of whether the business has workers’ compensation insurance. Officers and directors of the corporation can be found personally liable for payment. It is also possible to file a separate negligence action against the uninsured employer because the employer has lost protection of the exclusive remedy provision.
Do not blindly accept a denial without doing a proper investigation. Promises to pay workers’ compensation benefits under-the-table are rarely kept. We see employers take advantage of people who are in extreme financial distress. Medical bills do not get paid. Lost wages stop after a short-time. It is important to speak with an experienced workers’ compensation attorney if this occurs.
We want to congratulate Attorney General Dana Nessel for taking this important step forward. Employee misclassification is a big problem for many of our clients and it causes tremendous hardship when workers’ compensation benefits are unfairly denied. Holding bad employers accountable will also level the playing field for businesses who play by the rules.
Michigan Workers Comp Lawyers never charges a fee to evaluate a potential case. Our law firm has represented injured and disabled workers exclusively for more than 35 years. Call (844) 316-8033 for a free consultation today.
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