Do You Use Independent Contractors?

If your business regularly utilizes the services of a person who you have designated to be an Independent Contractor, you should be aware that there has been a change in the Workers’ Compensation law pertaining to whether your company would be considered the  independent  contractor’s  employer  and  liable  for  his/her  workers’  compensation benefits.  As of January 1, 2013, the legislature enacted a 20-factor test to determine if an employer/employee  relationship  exists  for  workers’  compensation  liability. The 20- factors are:


1.  INSTRUCTIONS:     If  your business  requires  the contractor comply with its instructions about when, where and how the service is to be done, the contractor could be considered an employee.

2.  TRAINING:  If your business requires that the contractor perform the job in a particular  manner then  the contractor could be considered an  employee.   An independent contractor will use his/her own methods to be complete the service and should receive no training from your business.

3.  INTEGRATION:  If the services performed by the contractor are an important part  of  your  business  operation  then  the  contractor  could  be  considered  an employee.  The integration of the two businesses indicates that the contractor is subject to your direction or control.

4.  SERVICES  RENDERED  PERSONALLY:      If  the contractor is  required  to perform the service personally is an indication that contractor is an employee since an independent contractor is free to assign work to his/her own employees if necessary.

5.  HIRING,  SUPERVISION  AND  PAYING  ASSISTANTS:       If  the  business allows the contractor to hire, supervise or pay assistants for the business, the contractor is likely to be deemed an employee unless the contract specifies that the contractor will hire and supervise other as part of the contract.

6.  CONTINUING  RELATIONSHIP:      If  the  business  and  contractor  have  an ongoing relationship for the service provided, the contractor could be considered an employee.  The IRS has held that even irregular recurring jobs would qualify as an employment relationship.

7.  SET HOURS OF WORK:  If the business requires the contractor to work a set number  of  hours,  the  contractor  could  be  considered  an  employee  since  an independent contractor sets his/her own schedule.

8.  FULL TIME REQUIRED:      If the business requires the contractor to work substantially full time to the business, the contractor will likely be considered an employee since an independent contractor is free to work when and for whom he or she chooses.

9.  WORK DONE ON PREMISES:  If the business requires that the services being performed  are  completed  on  the  business’  premises,  the  contractor  could  be considered an employee, especially if the service could be performed elsewhere.

10. ORDER OR SEQUENCE TEST:   If the business requires that the service be performed in a  certain order, the contractor could be considered an employee since  the  independent  contractor  can  perform  the  services  in  whatever  order he/she deems appropriate.

11. ORAL OR WRITTEN REPORTS: The contractor is required to submit regular reports would suggest an employee relationship since it is a method of controlling the contractor.

12. PAYMENTS BY THE HOUR, WEEK OR MONTH:  Payment of wages by a set  schedule   would  suggest  an  employment  relationship  since  independent contractors are traditionally paid by the job and/or commission.

13. PAYMENT  OF  BUSINESS  AND/OR  TRAVELING  EXPENSES:       If  the business pays the contractor’s expenses, the contractor would be considered an employee.

14. FURNISHING TOOLS AND MATERIAL:  If the business provides the tools and material necessary for the contractor to complete the service, the contractor would likely be considered an employee.

15. SIGNIFICANT INVESTMENT:  If the contractor maintains his or her own office, no employment relationship would be presumed.

16. PROFIT OR LOSS:  If the contractor can realize a profit or loss by his or her services, then no employment relationship would be presumed.

17. WORKING FOR MORE THAN ONE FIRM AT A TIME:  If the contractor performs more than de minims services for other businesses then no employment relationship would be presumed.

18. MAKING SERVICE AVAILABLE TO THE GENERAL PUBLIC:       If the contractor  makes  his  or  her  services  available  to  the  public  on  a  regular  or consistent basis then no employment relationship would be presumed.

19. RIGHT  TO  DISCHARGE:     If  the  business  has  the  right  to  discharge  the contractor, then an employment relationship could be established.   A business’ right to end the relationship with an independent contractor is typically controlled by the terms of the contract.

20. RIGHT TO TERMINATE:     If the contractor has the right to terminate the relationship with the business without incurring liability, then an employment relationship could be established.


These factors  are fairly general  and  some will  likely apply to  your business relationship  with  an  independent  contractor.   The  legislature  has  implemented  a process  where  a  business  can  request  a  hearing  to  determine  if  the  contractor performing services is covered with an employment relationship but this request for a hearing will likely take too long for the services to be relevant.

It should be noted that the workers’ compensation liability for injuries sustained by an  independent contractor or his/her employees will only revert back to your business “if” the contractor does not have workers’ compensation insurance of his/her own.  As such, if your business needs to hire an independent contractor to perform services, it is wise to request a copy of the  contractor’s certificate of insurance for workers’ compensation and even follow up with a call to the agent to ensure that the insurance coverage is still in effect.   If your independent contractor did not  have workers’  compensation  coverage  and  a  claim  is  filed  against  your  workers’ compensation carrier, your insurance carrier has the right to audit your records and raise your premium for those uninsured contractors.

If you have any questions about this article or workers’ compensation in general, please   feel    free    to   contact    Charfoos   Reiter    Hébert   at    248-626-7300    or firm@micompdefense.com and one of our attorneys will get back to you as quickly as possible.