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2008: An Independent Contractor Odyssey

2008: An Independent Contractor Odyssey . Ronald W. Cooper, CWCP President. Duane M. Schroeder, CPCU Vice President. 2008: An Independent Contractor Odyssey . Ronald W. Cooper, CWCP President Duane M. Schroeder, CPCU Vice President. Mission ready. Destination: Contractor Constellation.

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2008: An Independent Contractor Odyssey

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  1. 2008: An Independent Contractor Odyssey • Ronald W. Cooper, CWCP • President • Duane M. Schroeder, CPCU • Vice President

  2. 2008: An Independent Contractor Odyssey • Ronald W. Cooper, CWCP • President • Duane M. Schroeder, CPCU • Vice President

  3. Mission ready • Destination: Contractor Constellation

  4. Computer that was the brain and nerve system of the Discovery space ship now fits into this laptop Because programmed by humans, HAL is not perfect Assisted by hal 9000 computer Thank you HAL, but it’s morning and Dave’s not here. HAL can you read me? HAL?

  5. WC Theory - trade risk for certainty The goal of workers compensation programs is to provide prompt, adequate benefits to injured workers while at the same time limiting employers’ liabilities. Workers compensation has become a substantial component of the U.S. social insurance system and a significant element of the overall cost of employment. Open the next slide please, HAL

  6. WC Theory - trade risk for certainty • Employer • No fault • Not sued • Employee • No fault (some exceptions) • Money • Medical care & rehab

  7. Employers may try to evade the system by calling their employees independent contractors. Problem

  8. Contractor supplied his own (first) tools. No employer/employee relationships were yet established. All workers were part of family economic unit. First independent contractor

  9. Conflicting Goals • Employers assumption of financial responsibility for all work-related injuries vs. • Self-employed persons’ freedom to make a living HAL, what’s your take on the confliction? Are you OK HAL? I’m a bit concerned.

  10. Creates an uneven playing field for those who follow the law • Undue burden for the true independent contractor to please others’ insurance requirements • Contentious premium audits and related dispute resolution proceedings • Reduced credibility of the ratemaking database consequences

  11. "Employee means every person, including a minor, in the service of another, under any contract of hire or apprenticeship, written or implied, except one whose employment is both casual and not in the usual course of the trade, business, occupation, or profession of the employer.” Reference IC §22-3-6-1 (b) Employee Definition

  12. Waiver of WC By employee Statute says "...no agreement by an employee or his dependents to waive his rights under IC 22-3-2 through IC 22-3-6 shall be valid...“ IC § 22-3-2-15

  13. "A person is an independent contractor in the construction trades and not an employee under IC §22-3-2 through IC §22-3-6 if the person is an independent contractor under the guidelines of the United States Internal Revenue Service.” Reference IC §22-3-6-1 (b) (7) and IC §22-3-7-9 (b) (5) Independent Contractor Definition

  14. "Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding" • 46 Questions and these categories: • Behavioral Control • Financial Control • Relationship of the Worker and Firm • Service Providers or Salespersons • Issue determination or information letter IRS Form SS-8 Your analysis on completing this form please HAL

  15. WC Board • Indiana Courts • When? • After workplace accident • Relationship at time of injury Who Decides Who’s Who?

  16. Space travelers – what would the courts say?

  17. Indiana court of Appeals decisions In two cases, Court of Appeals applied ten-factor test:1) Extent of control over work details 2) Worker engaged in a distinct occupation 3) Work done under the direction of the employer or by a specialist without supervision 4) Skill required 5) Who supplies tools and place of work 6) Length of time worker employed 7) Method of payment: by time or job (1099 not enough) 8) Work part of regular business of employer 9) If parties believe they created master/servant relation 10) If the principal is or is not in business Play in middle of discussion: Hal “Just a moment.” Hal, “are you sure?”

  18. In construction trades • Certifies person is an independent contractor • Certifies person has WC insurance or is a qualified self-insurer • Person desires to be exempt • Foregoes the right of recovery from anyone for whom this person works as an independent contractor • Holds harmless any person and their carrier contracting with the named person (as an independent contractor) Independent Contractor “Clearance Certificate” State Form 45899

  19. Valid for 1 year • $20 fee: $5 DOR & $15 WC Board • Effective 7 days after stamped by Board • Contractor who assists employees in filing a false statement for independent contractor status commits a Class D felony. Independent Contractor “Clearance Certificate” Trivia Incoming message

  20. “Clearance Certificate” form

  21. Railroad employees • Employees in federal commerce • Real estate professionals • Independent contractors • Independent contractors in the building and construction trades • Athletes on scholarship • Inmates of penal institutions • Volunteers • Youth coaches Statutory exemptions

  22. Moon construction workers Statutory exemptions - future

  23. Carriers right to charge a premium • Premium basis includes • payroll and • all other remuneration payable during policy for: • 1. All officers and employees • 2. All other persons engaged in work that could make us liable under Part One (Workers Compensation Insurance) of this policy. If you do not have payroll records for these persons, the contract price for their services and materials may be used as the premium basis. This paragraph 2 will not apply if you give us proof that the employers of these persons lawfully secured their workers compensation obligations.

  24. Uninsured First recorded instance of sitting down on the job First Sub-contracting crew

  25. If Uninsured Subcontractor, • General Contractor Pays... • Full contract price, or • Part that represents payroll, at least: • 50% L&M contract • 90% Labor only • 33% Vehicle contract What? No Coverage! We’ve covered a lot of information just now. How is it going HAL?

  26. Certificate of insurance • Certificate of exemption (if in construction trades) • Payroll amounts of a contractor • Contract price • Confirm status with carrier at inception What do I do? Incoming message

  27. Employee misclassification • White Papers: • GAO “Employee Misclassification” 5/8/2007 • NAIC White Paper • State initiatives: NY, ME, NH, PA, IL • Indiana - SB 345 (died 2008 session) • Proposed new IC 22 -2 14 titled “Employee Classification Act” by Rep. Niezgodski • Employee Misclassification Prevention Act See article titled Employee vs. Independent Contractor on our website www.icrb.net

  28. Employee misclassification Prevention Act • H.R. 6111 introduced 5/21/08 • S. 3648 introduced 9/29/08 • Kennedy, Kerry, Obama • Amends Fair Labor Standards Act • Max of $10k per violation for employer who “repeatedly or willfully” failed to accurately classify a worker

  29. Independent & Enlightened! Let’s continue please, HAL

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