September 22, 2019

Workers Compensation Coverage Not Optional

who is an employee for workers compensation purposesWhat would you do if your employer asked you to accept a higher salary in exchange for “opting out” of the workers’ compensation system.  What would you say if a prospective employer offered you a job, but insisted that you classify yourself as an independent (1099) contractor so that payroll taxes would not have to be withheld and workers’ compensation insurance would not have to be provided?

Unfortunately for employers like this, workers’ compensation is not an optional coverage.  Under Georgia law, any employer who employs three or more full or part time employees must carry workers’ compensation insurance 1.

Generally, if the person or company you work for controls the time, manner and method of completing a final work product, you are considered an employee for workers’ compensation purposes.  Note that questions of employee vs. independent contractor for cases that involve the jurisdiction of the Georgia State Board of Workers’ Compensation are not the same questions asked by the IRS when considering whether you would be subject to tax withholding (although there is some overlap). [Read more…]

  1. The State Board website offers this example: a regular part-time employee works regularly on a part time basis, such as employees who only work on weekends.

Independent Contractors and Workers’ Compensation

What is an independent contractor?

Any business, corporation, or individual that provides products or services to a business entity and is specified contractually or by verbal agreement is referred to as an “independent contractor.” According to the IRS tax codes, they are not defined or recognized as an employee of that business or corporation. They typically work as they are required to and are usually subject to what is called the Law of Agency.

Additionally, independent contractors (hereinafter referred to as IC’s) are responsible for paying their own federal and state taxes; this is not the responsibility of the business, corporation, or individual who has contractually procured the IC’s products or services. Compensation is normally made on a freelance basis and the IC may be working through a limited company which they own themselves or via what is called an “umbrella company,” a company that acts as the agent for the IC.

Does worker’s comp cover the independent contractor?

Under the worker’s compensation laws of the state of Georgia, independent contractors are not covered for any injury sustained while performing their work. However, the definition of an independent contractor under state statutes has very specific guidelines in order to determine if the individual is an employee or an IC. Employers do not always use this definition correctly or properly. Additionally, the IRS’ guidelines regarding IC’s are not followed by worker’s compensation law.

For these reasons, this is a very problematic area. However, it is extremely ironic that an individual who has opted for being an independent contractor and who engage in dangerous or high risk occupations are not covered by Worker’s Compensation Insurance based on their independence or freedom from an employer. But the fact that employers would love to classify employees as independent contractor is what leads some to cheat and do exactly that so they are not responsible for worker’s comp benefits.

The bottom line is that if a business owner or corporate entity has 3 or more individuals working for them and they require a method, manner, time, and the type of work that the individuals are expected perform, they cannot classify the individual as an IC. Any business owner who employs 3 or more individuals is required to carry Worker’s Compensation Insurance. It is not surprising then that some employers try to “cheat the system” in order to avoid purchasing this type of coverage.

If you would like more information regarding the independent contractor/worker’s compensation issue, please feel free to contact us at our website. We will be happy to answer any questions you may have and provide you with additional information.

Independent Contractors vs. Employees: Know what kind of worker you are

The economic downturn has led to an increase in companies that try to cut payroll costs by illegally classifying workers as independent contractors rather than employees. This practice costs the government billions in lost revenue and can leave workers with nothing when they are hurt on the job or are laid off. The Internal Revenue Service and 37 states are starting to crack down.

It can be a blurry line between employee and contractor status, but it is important to know which you fall into. These are some tips for determining your status to make sure you receive the benefits you deserve and to prevent yourself from being taken advantage of by companies engaging in unlawful practices.

Companies Worked For – A key indicator of independent contractor status is when the worker does the same work for multiple companies.

Expense Reimbursement – Independent contractors are more likely to have expenses that are not reimbursed. Employees are typically reimbursed for business-related expenses.

Workers’ Investment – Independent contractors most often have a significant investment in the services they use, most significantly an office or work space, and are not provided tools, equipment, or supplies by employers.

Pay Periods – Independent contractors are typically paid by the job, while employees are paid by the hour, week, or month.

Pay Rate – Independent contractors make a profit or loss on the job, while employees receive paychecks regardless of whether the company makes money.

Permanency – If a worker is hired with the expectation that the job will be permanent, or until further notice, they are generally an employee.

Benefits – Independent contractors are typically not provided benefits, while employees receive benefits such as insurance, pension plans, vacations, or sick days.

Have you been injured on the job and are not sure what category of worker you fall into? Feel free to use the Free Case Evaluation form on this website to discuss your particular circumstances with an experienced workers’ comp attorney.