Independent Contractors and Workers Comp: Big Change

Independent Contractor
The definition of an Independent Contractor under workers comp in MA has been governed by a 2008 directive from the Attorney General. Under this definition, it states that

the individual must:

  • (1) Be free from control of the Employer
  • (2) Provide services outside the usual course of the employer’s business (3) Be engaged in an independent trade, occupation, profession or business.

If the employer cannot prove the independence of their contractors, they become employees for the purposes of workers comp.

Because of these strict guidlines, after an audit has been completed, payrolls of independent contractors are added to the employer’s workers compensation premium calculation – which could mean big increases.

The Camargo Ruling

The MA Supreme Judicial Court recently issued the Camargo ruling. Instead of a three-pronged criteria, there are now twelve prongs. A few new to note:

  • the skill required in the particular occupation
  • the length of time for which the person is employed
  • the tax treatment applied to payment (1099s do matter)
  • the right of the insured to terminate the relationship without liability

According to Renaissance Alliance’s Senior Workers Compensation Consultant Jon Coppleman; “Most important for insurance audit purposes, the burden of proof has been reversed: instead of the employer proving a sole proprietor/independent contractor is not an employee, sole proprietor/independent contractors must prove that they are employees. Absent a catastrophic loss, sole proprietors generally have no interest in trying to prove that they are employees; they take pride in their independence. In my reading, reversal of the burden of proof (as outlined in Judge Gants’s concurrence) may well end the practice of adding 1099 billings to the employer’s payrolls.”

If you have any questions on how this new ruling could affect your business or your policy, give us a call today.