IRS revenue ruling 87-41 and the factors used to determine employment status under workers’ compensation in Michigan.
It seems like the issue of employment status comes up on a regular basis. Many of our clients get called independent contractors when they are in fact employees. This can make all the difference when claiming workers’ compensation benefits.
Employee misclassification is a big problem in Michigan. Some businesses intentionally pay wages as non-employee compensation (Form 1099) to avoid purchasing workers’ compensation insurance.
Amendments to Michigan’s Workers Disability Compensation Act in 2011 changed who is considered an employee. On and after January 1, 2013, services are employment if the services are performed by an individual whom the Michigan Administrative Hearing System (MAHS) determines to be in an employer-employee relationship using IRS revenue ruling 87-41.
This is a departure from the old test that looked at whether a person maintained a separate business, held themselves out to the general public, and was an employer subject to the act.
We have noticed some confusion on this issue. The United States Court of Appeals found the amendatory language did not necessarily replace the older test. Its opinion seems to permit a hybrid analysis.
A recent decision from the Board of Magistrates found the amendatory language clear and unambiguous simply requiring application. It provided a good summary of the factors and showed how they apply.
Here is a list of the 20 factors contained in IRS revenue ruling 87-41: (1) Instructions; (2) Training; (3) Integration; (4) Services Rendered Personally; (5) Hiring, Supervising, and Paying Assistants; (6) Continuing Relationship; (7) Set Hours of Work; (8) Full Time Required; (9) Doing Work on Employer’s Premises; (10) Order of Sequence Set; (11) Oral or Written Reports; (12) Payment by Hour, Week, Month; (13) Payment of Business and/or Traveling Expenses; (14) Furnishing of Tools and Materials; (15) Significant Investment; (16) Realization of Profit or Loss; (17) Working for More Than One Firm at a Time; (18) Making Service Available to General Public; (19) Right to Discharge; (20) Right to Terminate.
We recommend speaking with an experienced attorney if workers’ compensation benefits have been denied based upon your employment status.
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 (855) 221-2667 for a free consultation today.
Photo courtesy of Creative Commons, by Valerie Everett.