do you know? · 2019-10-25 · 1 do you know …addressing certain problem issues in w/c with your...

Do You Know?How to address certain problem

issues in Workers’ Comp. with your client

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1

Do You Know …Addressing certain problem issues in

W/C with your client

with

Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CPIWVice President of Technical Affairs

Massachusetts Association of Insurance Agents

This program is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

With special thanks to the Insurance Services Office, Inc. for advance information, continued support, and permission to use their forms and information.

WHY ….

Must

I

Buy

Workers Compensation Insurance?

INDEPENDENT CONTRACTORS AND W/C

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It’s the law …M.G.L. 152Self insurance or purchase of insurance ….

Chapter 152: Section 25A Purchase of insurance; self-insurance; reinsurance; deductibles

Section 25A. In order to promote the health, safety and welfare of employees, every employer shall provide for the payment to his employees of the compensation provided for by this chapter in the following manner:

(1) By insurance with an insurer or by membership in a workers' compensation self-insurance group………


Who is an “employer” per MGL 152???????

(5) ""Employer'', an individual, partnership, association, corporation or other legal entity, or any two or more of the foregoing engaged in a joint enterprise, and including the legal representatives of a deceased employer, or the receiver or trustee of an individual, partnership, association, corporation or other legal entity, employing employees subject to this chapter;

– Individual– Partnership– Association– Corporation – Other legal entities


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Who is NOT an “employer” Per MGL 152?…that the owner of a dwelling house having not more than three apartments and who resides therein, or the occupant of a dwelling house of another who employs persons to do maintenance, construction or repair work on such dwelling house or on the grounds….

The word ""employer'' shall not include nonprofit entities, as defined by the Internal Revenue Code, that are exclusively staffed by volunteers.

• 1,2,3 family dwelling owner hiring for maintenance …

• Non-profit entities staffed by volunteers…ONLY


Who is an employee per MGL 152?

Employee'', every person in the service of another under any contract of hire, express or implied, oral or written, excepting …….

For the purpose of this chapter, a sole proprietor at his option or a partnership at its option shall be an employee. A sole proprietor or partnership may elect coverage by securing insurance with a carrier.


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BROAD definition … every person in service of another under ANY contract of hire ….

Sole proprietors and partners can ELECT to be covered

(need endorsement WC 00 03 10…

and a lot of $$$$$)


Who is NOT an employee per MGL 152?(to find complete MGL 152… just “Google” it ….)

1. Masters and seaman

2. Professional athletes if contract require disability insurance to be purchased and respond when playing


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Who is NOT an employee per MGL 152?(to find complete MGL 152… just “Google” it ….)

3. Real Estate Brokers (paid on commission only)

4. Other salespeople – commission only –written contract stating not employee for Fed. Inc. Tax–

“outside sales” – “Mary Kay” type situation


Who is NOT an “employee” …continued…5. Independent taxicab operators even if lease

cab – contract stating not employee for Fed. Inc. Tax

6. Foreign or interstate commerce and protected

by federal laws

7. Someone who is not in the usual course of employment, trade or occupation of his employer (dentist hires painter to paint office)


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Those seven listed situations are work relationships that are NOT deemed to be employee/employer per MGL 152 … but …

are these exceptions useable after July 2004????????


Situations when providing coverage for an employeeIs optional ….

The provisions of this chapter shall remain elective as to employers of seasonal or casual or part-time domestic servants. For the purpose of this paragraph, a part-time domestic servant is one who works in the employ of the employer less than sixteen hours per week.

1.Seasonal employees

2. Part-time domestic employees (less than 16 hours per week)


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Situations where an employee can elect OUT ofcoverage ….

This chapter shall be elective for an officer or director of a corporation who owns at least 25 per cent of the issued and outstanding stock of the corporation.

Corporate officers or directors can elect out if:1) own a MINIMUM of 25% of issued stock

2) File Form 153 Affidavit of Exemption for certain Corporate Officers or Directors

(found on DIA website http://www.mass.gov/dia/)


When does an employee RECEIVE compensation… or when is coverage triggered?

If an employee ………..receives a personal injuryarising out of and in the course of his employment, or arising out of an ordinary risk of the street while actually engaged, with his employer's authorization, in the business affairs or undertakings of his employer, and whether within or without the commonwealth, he shall be paid compensation by the insurer or self-insurer ………


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Compensated claims/injuries per MGL 152

1. Injured during course of “usual” employment (accidental bodily injury – employee slips on wet office floor)

2. Injured outside usual course of employment if under employer’s orders (employee performing errand off premises)

3. Frostbite, heat exhaustion, sunstroke if suffered while in course of employment


What else can be a compensationinjury/claim?

(7A) "Personal injury'' includes infectious or contagious diseases if the nature of the employment is such that the hazard of contracting such diseases by an employee is inherent in the employment. …..

Personal injuries shall include mental or emotional disabilities only where the predominant contributing cause of such disability is an event or series of events occurring within any employment.


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What else can be a W/C compensation injury/claim?

1) Contagious disease contracted during certain employments (nurse contracts aids from patient)

2) Mental/emotional disabilities if employment is predominate cause (heartattacks due to job stress of being police or fire person)


Who is an “employee”- revisited – an issue greaterthan the definition found in the state W/C law

Guidelines or criteria vary by state …but the general concepts looked at are:

1) Who controls the work

2) Who has the right to hire/fire

3) Who provides the tools and supplies


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What criteria does MA use to determine whether someone is an employee or an independent contractor?

1. MA USED to use the 20 point IRS test…and possibly some W/C carriers still do ….

2. M.G.L. chapter 149, Section 148B revised in 2004 changes the “test” of independent contractor v. employee


20 Point IRS test

1. Degree of Control The organization should not have the right to control the method or manner of the job to be performed

2. Right to Discharge The organization cannot terminate the contractor as long as he or she meets his/her obligations under the contract.

3. Right to Delegate Work The contractor can bring in whomever he/she wants to accomplish the purpose of the contract

4. Hiring Practices The contractor should have the right to hire and fire assistants that he/she uses in performing the contract.


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5. Payment Practices An independent contractor should be paid by the job as opposed to by the hour, week or month.

6. Furnish Training The organization should not provide any type of training of inexperienced workers.

7. Skilled Independent Contractors are generally viewed as skilled workers.

8. Duration of Relationship the contractor should be hired for a specified time period. Continuous work implies an employee relationship.


9. Control Over Hours of Work An independent contractor should be allowed to set his/her own hours.

10. Independent Trade The contractor should be free to work for any number of persons or firms simultaneously.

11. Furnishing of Tools The contractor should be able to provide his/her own tools.

12. Place of Work If possible, the independent contractor should perform his/her job off the organization’s premises.


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13. Profit and Loss The contractor should have the opportunity for profit or loss.

14. Intent of Parties The parties’ intent to create an independent contractor relationship should be documented.

15. Principal in Business The contractor should be principal in his/her own business.

16. Sequence of Work The contractor should be able to determine the sequence of the work performed outside of the organizations control.


17. Reports Required The contractor should not be required to submit regular oral or written reports or to attend organization’s meetings.

18. Same Work as Regular Employees The organization should not have the independent contractor do the same type of work as its regular employees.

19. Integration The organization should not engage an independent contractor to do something that is a part of the day-to-day operations of the company.

20. Industry Customs The industry should have a definite custom regarding worker classification.


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As you can see … the 20 point test still leaves ambiguity …

how many points are necessary to create independent contractor status?


July 19, 2004 Governor Romney signed a bill that creates a PREUMPTION under MA law that workers are EMPLOYEES ….NOT independent contractors.

We affectionately call this law the Independent Contractor Law MGL 149 s 148B


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MGL 149 s. 148B defines employee v. independent contractor for purpose of wages:

(1) The individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and

(2) The service is performed outside the usual course of the business of the employer; and,

(3) The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.


MGL 149 s. 148B also states….

The failure to withhold federal or state income taxesor to pay unemployment compensation contributions or workers compensation premiumswith respect to an individual's wages shall NOT beconsidered in making a determination under this section.

An individual's exercise of the option to secure workers' compensation insurance with a carrier as a sole proprietor or partnership pursuant to subsection (4) of section 1 of chapter 152 shall NOT be considered in making a determinationunder this section.


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MGL 149 S.148B requires ALL three points to be met in order to be considered an independent contractor….

1.Individual is free from control and direction…. (no set hours, no providing of tools, )

2.Service performed is OUTSIDE usual course of hirer’s business activities (insurance agent hires roofer)

3. Individual actually has his/her own business where he/she works for various other entities (comes and goes to various job sites as desires)


Even if individual purchases his/her own W/C insurance AND elects him/herself in …

does NOT “guarantee” that this person is an independent contractor …

so says MGL 149 S. 148B…..


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Per MGL 149 .. when determining whether someone is an independent contractor NONE of the following criteria matter:

1. Employer’s failure to withhold taxes

2. Employer’s failure to contribute to unemploymentcompensation

3. Employer’s failure to provide workers compensation

Or .. A “1099” does NOT an independent contractor make!!!!!


The DIA website states that it will use MGL 149 to determine just who an employee is ..

How does the DIA classify an independent contractor and must they be covered under a workers compensation policy?

Please refer to the 2008 Attorney General’s Advisory on Ch. 192 of the Acts of 2004 Amendments to Massachusetts Independent Contractor Law, M.G.L. c. 149, 148.


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Remember ….

The Independent Contractor Law creates a PRESUMPTION that workers are:

EMPLOYEES ….

NOT

Independent contractors ….


Athol Daily News v. Board of Review of the Division of Employment and Training April 2003

Just PRIOR to the enactment of the Independent ContractorLaw a court case also looked at what constitutes an employee

MA court case that tried to determine whether someone was or was not an employee …. NOT through W/C statute MGL152…but through MGL 151A – Unemployment insurance….


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In this case …the Court considered a person was an independent contractor if:

1. Free from control and direction when perform services

2. Service performed was outside usual course of business of whom perform it for

3. Individual is customarily engaged in an independentlyestablished trade, occupation, profession or business of the same nature as that involved in the service performed


The findings in the court case

and

the criteria for determining what an “independent contractor” is in MGL 149 s 148B ….

look hauntingly familiar!!!

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So …

if a court case could determine just who is an employee ..or is not ….

couldn’t Labor and Industries MGL 149 S. 148B be used to offset our W/C law MGL 152 …

for the determination of just WHO is an independent contractor????

An advisory from the Attorney General’s Office regarding this new law ….

On July 19, 2004, "An Act Further Regulating Public Construction in the Commonwealth" ("The Act") was signed into law. Chapter 193 of the Acts of 2004. Because the bill contained an emergency preamble, it became effective immediately. The Act replaces the existing law regulating the use of independent contractors. G.L. c. 149, § 148B.


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Theoretically, MGL c.149 s. 148B

SUPERCEDES

ALL OTHER LAWS


The change in law was NOT due to a workers compensation dilemma ….

It was due:

…..to unfair bidding on public contracts

.… a loss of state revenue

….reduction in benefits for the individual workersthemselves

….and possibly that 2003 court case ….


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What do some other states doabout independent contractors?


New Hampshire - Defines independent contractor in their W/C law RSA 281

Allows a written agreement between entity hiring andindependent contractor


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New Hampshire - Defines independent contractor in their W/C law RSA 281

Allows a written agreement between entity hiring andindependent contractor



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Maine Title 39-A defines independent contractor

“shortened” version of IRS 20 points


MAINEprocess where Maine W/C board pre-determines if employee orindependent contractor


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Vermont Title 21 Chapter 9 defines independent contractor

Defines independent contractor - mini version of IRS 20 points


VermontINDEPENDENT CONTRACTORS AND W/C

Too many responses where employer controls then you have “Employee”

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Rhode Island

Chapter 28-29-17.1 defines independent contractor as someone who files proper form


Rhode IslandDWC-11-1C Notice as Designation as Independent Contractor


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Remember … the truth will set you free …

and lying will

1) “Adversely affect one’s audit premium”

2) Possibly get someone a criminal conviction and and/or a hefty fine per MGL 152 s 14(3)


Auditing …help and independent contractor

When hiring sole proprietors …

one is best to require that sole proprietor ELECTS into coverage …

So not have to “fight” the independent contractor distinction …

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New audit guidelines

Created by WCRIB

Not in outline

Audit procedures

I have an insured based in mass, he and his employee live in Massachusetts but they do some work in CT, NY, NJ,& RI.

Since they live in MA and are paid from MA do we need to worry about WC in other states?

This is an assigned risk WC policy.

Performing Work in Other States … is the MA W/C policy sufficient?

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The answer is ...it depends.

What type of work?


Is there any long term contract ... .such as landscaping ...where they go month after month ...in which case the Limited other states endorsement won't work.

And ...even if the limited other states endorsement COULD work ...


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your CLIENT needs to know if the particular state laws will ALLOW this way of responding.

Some states require that coverage be purchased IN the state if a certain amount of hours are worked.



WCRIB states intent of new endorsement is to more clearly state the intent of endorsement within endorsement …

And not through “non policy language” circulars

Endorsement clearer as to what is or is not covered

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Part Three of policy does NOT apply

Only provide other states benefits if MassachusettsEmployee injured


A Massachusetts employee is someone whoseContract of hire made in MAOrWhose work for you PRIMARILY Conducted in MA

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NOT pay other states benefits if:1) Have W/C

part 1 benefits in that state

2) You were REQUIRED by law to provide Part 1 benefits in that state


If you hire employeesin another state neither theMA W/C nor the LOS endorsement will apply

And does NOT satisfy state law for Part 1 benefits

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The WCRIB Special Bulletin No 06-13 states

Endorsement NOTsatisfy other state W/C law

pay benefits to non-MA employees

employees where insured required to buy other state W/C coverage

Safest Way to handle this exposure?

1. Voluntary carrier that allows multiple statesto be named in item 3A of the information page

(this is the section that activates the W/Cbenefits under Part 1)


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Safest Way to handle this exposure?

2. In item 3C state something broad like:All states except North Dakota, Ohio, Washington, Wyoming, Puerto Rico, USVirgin Islands and those listed in 3A on the Information Page


PART THREEOTHER STATES INSURANCE

A. How This Insurance Applies 1. This other states insurance applies only if

one or more states are shown in Item 3.C. of the Information Page.

2. If you begin work in any one of those states after the effective date of this policy and are not insured or are not self-insured for such

work, all provisions of the policy will apply as though that state were listed in Item 3.A. of

the Information Page.


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PART THREEOTHER STATES INSURANCE

3. We will reimburse you for the benefits required by the workers compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them.

4. If you have work on the effective date of this policy in any state not listed in Item 3.A. of the Information Page, coverage will not be afforded for that state unless we are notified within thirty days.

B. Notice Tell us at once if you begin work in any state listed in Item 3.C. of the Information Page.


Is there a difference between temporary worker and leased worker and do your insured’s understand the difference?

An agent sent me a copy of the following article regarding a “temporary worker” injury … or so the insured thought.

Temporary workers …who covers them … or not

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A temporary worker is the employee of the service providing them. In this case Carrabassett Trading Company received various temporary workers from Venturi Staffing Agency.

Venturi Staffing is considered the employer in the case of temporary workers.


Raul Torres, a “temporary worker”, was injured while at Carrabassett Trading Company.

Since Torres was not an employee of Carrabassett the Carrabassett W/C policy did not respond and Torres then knew that he could sue …as there was no “sole remedy” relationship between he and Carrabassett.


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Scottsdale provided CGL coverage to Carrabassett. Scottsdale denied claim stating that Torres was a leased worker due to the long term relationship. As we all know the CGL excludes BI to an employee which includes a leased worker. US District Court found for Scottsdale.

What was the problem here …how could Carrabassett have had coverage?


Article discussing this issue of no coverage for hirer of “temporary worker”…

from either the W/C or the CGL policy

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1) Modify CGL policy with Leased worker endorsement

Most carriers will NOT do this


2) Modify the Temporary staffing W/C policywith the Alternative Employment endorsement…in situations where the temporary could be in“question”


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WC 00 03 01 AIssued February 15, 1989

ALTERNATE EMPLOYER ENDORSEMENT

This endorsement applies only with respect to bodily injury to your employees while in the course of special or temporary employment by the alternate employer in the state named in Item 2 of the Schedule. Part One (Workers Compensation Insurance) and Part Two (Employers Liability Insurance) will apply as though the alternate employer is insured. If an entry is shown in Item 3 of the Schedule the insurance afforded by this endorsement applies only to work you perform under the contract or at the project named in the Schedule.

Under Part One (Workers Compensation Insurance) we will reimburse the alternate employer for the benefits required by the workers compensation law if we are not permitted to pay the benefits directly to the persons entitled to them.

The insurance afforded by this endorsement is not intended to satisfy the alternate employer's duty to secure its obligations under the workers compensation law. We will not file evidence of this insurance on behalf of the alternate employer with any government agency.

We will not ask any other insurer of the alternate employer to share with us a loss covered by this endorsement.

Premium will be charged for your employees while in the course of special or temporary employment by the alternate employer.

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WC 00 03 01 A

The policy may be canceled according to its terms without sending notice to the alternate employer.

Part Four (Your Duties If Injury Occurs) applies to you and the alternate employer. The alternate employer will recognize our right to defend under Parts One and Two and our right to inspect under Part Six.

SCHEDULE

1. Alternate Employer Address

2. State of Special or Temporary Employment

3. Contract or Project


This would have helped Carrabassett as it would have been an insured under the W/C and Employers liability coverage of Venturi Staffing.


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The WCRIB requires the following to be completed by the temporary worker provider to make sure that it provides temporary workers and not leased workers


The temporary placement service should be aware of such problems.

If they really act in the capacity of a leasing firm too …then they must conform to our regulation regarding leasing company.

In MA a leasing company must purchase the workers compensation coverage for the client

WCRIB has helpful information to make sure policies are issued correctly.


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Employee Leasing Arrangements (WCRIB info online)

An 'Employee Leasing Arrangement' is defined as an arrangement whereby one business entity provides workers to another business entity under a contract that retains for the lessor a substantial portion of personnel management functions, such as payroll, direction and control of workers, and the right to hire and fire these workers provided by such lessor; provided, however, that the leasing arrangement is long term and not an arrangement to provide the lessee temporary help services during seasonal or unusual conditions, such as temporary skill shortages or temporary special assignments and projects.


Employee Leasing Arrangements (WCRIB info online)

The entity providing employee leasing services is referred to as an "employee leasing company". The entity receiving the services is referred to as a "client company".

* The employee leasing company shall purchase and maintain a separate policy providing standard workers'

compensation and employers liability insurance for each client company.


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*Each policy written to cover leased employees shall be issued with the employee leasing company as the named insured. Coverage under the policy shall be limited to the named insured's employees leased to the client company. The client company shall be identified by attaching to the policy the Massachusetts EmployeeLeasing Endorsement, WC200304, naming the client.

* The experience of all of the employees leased to a client company shall be combined with the experience of the employees of the client company for purposes of calculating an experience modification. The experience modification, so calculated, shall be applied to the client company's policy and all policies maintained for it by a

leasing company or leasing companies.


•The employee leasing company shall purchase and maintain a separate policy providing standard workers' compensation and employers liability insurance for its own non-leased employees.This policy, restricting coverage to the employee leasingcompany's own non-leased employees, shall have attached the Massachusetts Exclusion of Coverage for Leased Employees Endorsement, WC200305.

* If the client company has its own non-leased employees, the client company must have a separate policy providing workers‘ compensation and employers liability for these employees, with the name of the client

company as the named insured.


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The MA WC Bureau, in their 9/18/06 Circular Letter No 2030, clarified the intended use of the Voluntary Compensation endorsement WC000311A.

This endorsement cannot/should not be used to attempt to cover volunteers.

Does this mean that a business, specifically a non-profit, cannot cover volunteers for WC benefits here in MA?

Covering volunteers under a W/C policy…or not

A non-profit can find MP for a volunteer under the CGL/BOP as the exclusion for MP to an “insured” does NOT apply to a “volunteer”.

And ..I hear that many carriers allow more than the $5,000 MP limit.

2. ExclusionsWe will not pay expenses for "bodily injury":a. Any InsuredTo any insured, except "volunteer workers".


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The intent of the Voluntary Compensation endorsement in ANY state is for those employment situations that are not subject to the state’s compulsory W/C law … for situations where coverage is “elective”.

MGL 152 defines who an employee is and if one is an employee Thenthe employer MUST purchase W/C coverage in the state of MA


(4) “Employee”, every person in the service of another under any contract of hire, express or implied, oral or written, excepting (a) masters of and seamen on vessels engaged in interstate or foreign commerce, (b) persons employed to participate in organized professional athletics, while so employed, if their contracts of hire provide for the payment of wages during the period of any disability resulting from such employment, (c) a salesperson affiliated with a real estate broker pursuant to an agreement which specifically provides for compensation only in the form of commissions earned from the sale or rental of real property, (d) a salesperson who is a direct seller of consumer products on a buy-sell or deposit-commission basis other than in a retail establishment, all of whose remuneration is directly related to sales rather than amount of time worked and whose services are performed pursuant to a written contract providing that the direct seller will not be treated as an employee for Federal tax purposes, (e) a person who operates a taxicab vehicle which is leased by such person from a taxicab company pursuant to an independent contract which specifically provides for a rental fee or other payment to the owner of such taxicab vehicle which is in no way related to the taxicab fares collected by such person; and provided, further, that such person is not treated as an employee for Federal tax purposes, (f) persons employed by an employer engaged in interstate or foreign commerce but only so far as the laws of the United States provide for compensation or liability for their injury or death, and (g) a person whose employment is not in the usual course of the trade, business, profession or occupation of his employer, but not excepting a person conclusively presumed


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The provisions of this chapter shall remain elective as to employers of seasonal or casual or part-time domestic servants. For the purpose of this paragraph, a part-time domestic servant is one who works in the employ of the employer less than sixteen hours per week.


A volunteer is not an employee and therefore the organization is not responsible for providing W/C benefits.

If you can convince a company to provide it in this situation ....then you can do it ...but after this circular ..it might be much harder to do so.


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Voluntary Compensation Endorsement

Voluntary Compensation Endorsement

Page 2 of 2

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Addressing certain problem issues in your client’s W/C

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