Workers Compensation classification for contractors

By: The HR Specialist (Business Management Daily) October 2015

Employers are nervous about the changing nature of the employment relationship. The Department of Labor now presumes that almost all workers are employees, not independent contractors. The National Labor Relations Board now views temp workers to be essentially the same as regular employees.

The effects of these changes—and the associated costs—have yet to be tallied.

Prepare to add another problem that has flown under most employers’ radar: The risk is that they will be slapped with a huge bill from their workers’ compensation insurers, demanding payment for workers’ comp coverage for all those independent contractors.

Recent case: Max Trucking has a staff of six dispatchers at its headquarters in Michigan. The dispatchers locate shipping assignments on various websites. Then they contact one of the 76 truck drivers nationwide who haul freight for Max Trucking and offer the load to that driver.

At any given time, 16 to 18 drivers have been classified as independent contractors because they lease their vehicles through Max Trucking under a lease-to-purchase program. The arrangement came about when the company decided to transition to owner/operator drivers after an employee/driver was in an accident that sent workers’ compensation premiums sky high.

The company determined that it wanted drivers to own their trucks and helped by providing the lease program.

Then Max Trucking’s workers’ compensation insurer sent a bill for over $100,000 to provide coverage to all the company’s drivers.

Max Trucking sued, asking the court to declare their drivers independent contractors.

Instead, the court said they were employees, as did the 6th Circuit Court of Appeals. Simply calling drivers independent and giving them a lease doesn’t change their status. It will have to pay the bill as if the drivers were employees. (Max Trucking v. Liberty Mutual, No. 14-2115, 6th Cir., 2015)

Business Management Daily