| |
|
|
| Governmental Regulations |
| Independent Contractors: The Workers' Compensation Act |
Who determines the nature of an employment relationship?
The law presumes that a person is an employee if they provide services for another person or for a business. That presumption will apply unless someone proves otherwise. However, the Workers' Compensation Act states that if the employer and the person providing services sign a written agreement that includes certain important terms, there will be a presumption that the person is NOT an employee.
The agreement must accurately describe how the services are provided. A business cannot avoid being an employer by merely saying that a person providing services is a subcontractor or an independent contractor.
Who is an independent contractor?
A person providing services is an independent contractor if the employer does not have the right to control them and they have their own business. The Workers' Compensation Act sets out the following criteria that must be met to show that the employer does not have the right to control the person providing services:
- The individual is not required to work exclusively for the employer;
- The employer has not established a quality standard for the person providing services except for plans and specifications;
- The employer does not pay the service provider on an hourly basis or provide a salary instead of a fixed or contract rate;
- The employer cannot terminate the individual performing services during the contract period unless the service provider violates the terms of a contract or fails to produce a specified result;
- The employer does not provide more than minimal training;
- The employer does not provide tools or benefits to the service provider except for materials and equipment
- The employer does not dictate the time of performance except for a completion schedule and to negotiate mutually agreeable hours;
- The employer does not pay the service provider personally but instead makes payment to a trade or business name;
If the employer combines their business with the person providing services, that person cannot be considered an independent contractor. Independent contractors usually conduct business under a trade name and may have a profit or a loss in their business. They also usually have their own offices, equipment and materials and they hold themselves out to provide services to the public.
Do independent contractors need to carry workers compensation insurance?
Sole proprietors, general partners, corporate officers and LLC members who own more than 10% of a business are not required to be covered under the Act. However, if those independent contractors/subcontractors don't have workers compensation insurance, and if they have an employee who is injured, the general contractor (employer) is considered the "statutory employer" and its workers' compensation carrier must pay the benefits to the injured worker, if the claim is deemed compensable.
| |
|
|
 |
