Michigan workers’ comp lawyer offers strong warning to employers who try to game the system by paying employees with IRS Form 1099 and calling them independent contractors.
We have blogged about employee misclassification on many occasions. It is a problem that causes unnecessary suffering for employees who get hurt on-the-job. Workers’ comp gets automatically disputed based upon them being called an independent contractor. It is important to know that 1099 employees need workers’ comp insurance coverage if they meet certain requirements outlined by the IRS.
Employee misclassification is when a business improperly calls a person an independent contractor. They are paid wages with an IRS Form 1099 and no income withholding occurs. In Michigan, 1099 employees need workers’ comp insurance coverage if they are considered an employee.
Michigan law is specific about who is considered an employee for purposes of workers’ comp. Services are considered “employment” when a person meets the requirements of IRS Revenue Ruling 87-41. This test looks primarily at factors involving control and how the job is to be performed.
Additional factors that can be used to determine whether a person is an employee include whether they maintained a separate business, held themselves out and rendered service to the public, and were an employer themselves subject to the Act.
Do 1099 employees need workers’ comp in Michigan?
In Michigan, 1099 employees need workers’ comp insurance coverage if they meet certain requirements outlined by the IRS. Generally, all private employers are generally required to have workers’ comp insurance. It does not matter whether a person is called an “independent contractor” and paid with an IRS Form 1099. Michigan law is specific about whom is an employee and whether they should be covered. IRS Revenue Ruling 87-41 lays out the factors.
IRS Revenue Ruling 87-41 lays out factors to use when determining if 1099 employees should be considered an employee for purposes of Michigan workers’ comp. This includes whether the individual has set hours of work, must follow instructions, underwent training to perform the job, was paid by the hour, can be fired, was furnished tools and materials, and shared in profits/losses.
Private employers who have 3 or more employees at a time or employed 1 employee for 35 or more hours for 13 or more of the preceding 52 weeks, are required to purchase workers’ comp insurance. Failing to comply is a crime punishable by up to 6 months jail time and civil penalties of up to $1,000.
Employee misclassification is a dangerous game for employers. Businesses without mandatory workers’ comp insurance lose the protection of the exclusive remedy provision. They can be sued for pain and suffering damages if negligent. Officers and directors of the corporation can also be found personally liable for payment of workers’ comp benefits even if no insurance exists.
Need help with your claim? Call our attorneys now!
If you are injured on the job in Michigan and you are a 1099 employee and need help with your workers’ comp claim, call now or fill out our contact form for a free consultation to discuss retirement and settlement. There is no fee unless you receive additional money. Don’t leave money on the table or jeopardize future health insurance benefits by failing to get answers beforehand.
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) 201-9497 for a free consultation today.