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Workers Compensation

15 Sep


Is an individual doing work for me an independent contractor or employee?

September 15, 2016 | By |

Several tests can be used to determine whether an individual qualifies as an independent contractor or employee for the purposes of state and federal laws. Fundamentally, all of these tests seek to answer the question, does the company control how the work will be performed (suggesting an employer-employee relationship) or does the company deal only with the results of this work (suggesting an independent contractor relationship)?

Five of the most common tests are:

  • IRS Factor Control Test (or 20 Factor Test): used in regard to IRS withholding, Immigration
  • Economic Reality Test: used in regard to Fair Labor Standards Act, Workers’ Compensation, Discrimination
  • Relative Nature of Work Test
  • ABC Test: used in regard to Unemployment benefits
  • Common Law Test (or Right to Control Test:) used in regard to Discrimination, ERISA, Worker Adjustment and Retraining Notification Act, National Labor Relations Act, Labor Management Relations Act

The test used depends upon the particular statutes or government agencies involved. Please not that these tests are only guidelines and are not applicable in every situation. Therefore, a worker may be considered an employee under one statute, but an independent contractor under another.

Misclassifying employees as independent contractors carries financial risks. In addition to penalties and fees, companies may also be charged with liabilities including back taxes and overtime. This may also open the company to lawsuits related to:

  • Denial of ERISA and other benefits
  • Denial of Workers’ Compensation
  • Denial of Family Medical Leave Act (FMLA)
  • Discrimination for failure to accommodate for a disability
  • Failure to include the individual in employee count which resulted in the company appearing not to be required to comply with Title VII, ADA, ADEA, FMLA, WARN Act, Affirmative Action, or other state or federal employment laws
  • Failure to retain proper tax forms for employees
  • Disputed ownership of rights to completed work

For more information and relevant forms, visit For more information on this and other insurance topics and coverage, please call our office.

01 Sep


What is Workers’ Compensation?

September 1, 2016 | By |

Workers’ compensation is a state-regulated program, and is required of certain employers by law in most states. It covers wage-loss benefits, medical treatment, and rehabilitation for employees who suffer a work-related injury or illness. Workers’ compensation also includes employer liability coverage, meaning that employees who receive these workers’ compensation benefits cannot file suit against their employer in connection with the work-related injury or accident, with few exceptions.

When an employee suffers a work-related injury or illness, the workers’ compensation policy covers the costs of the employee’s wages and medical care, and many workers’ compensation policies have programs which help to facilitate recovery and expedite return-to-work.

Premiums for workers’ compensation are determined by business classification and payroll. Classifications group businesses with like businesses, and these classification categories and determined by rating bureaus. Payroll is determined on an individual basis by a premium audit. A premium audit typically includes the insured submitting information about the business’s owners/officers, employee gross payroll, job descriptions, and subcontractors. When an audit is completed, the insured receives a statement that outlines the classifications, payroll amounts, rates, and other policy changes.

Cost Management

There are several ways an employer can manage the cost of workers’ compensation.

  • Choose your insurance agency carefully. Exclusive and captive agents are limited to offering only one carrier for workers compensation, while independent agents represent multiple insurance companies, and have the ability to compare policies for the best value.
  • Implement a formal safety program. Many employers who implement safety measures, such as written safety procedures, prompt claims reporting, and return-to-work programs, find that they are able to effectively reduce the costs of workers’ compensation.
  • Talk about safety with your employees. Provide training for injury prevention, and allow for meetings that address safety issues.

For more information on this and other insurance topics and coverage, please call our office.

23 Jun


Workers’ comp vs. Occ Acc: what’s the difference?

June 23, 2016 | By |

Workers’ compensation is a state-regulated program, and is required of employers who employ three or more employees at any one time, or employ one or more employees for 35+ hours per week for 13 or more weeks by law in most states. It may cover wage-loss benefits, medical treatment, and rehabilitation—related medical expenses—for employees who suffer a work-related injury or illness. Workers’ compensation also includes employer liability coverage, which may provide protection to an employer if an employee sues the employer in indirect relation to a workers’ compensation claim, often covering legal defense costs, up to the policy limits. Workers’ compensation doesn’t eliminate the issues of an unsafe workplace, however, and employers have a responsibility to maintain a safe working environment for their employees. Click here for specific answers to frequently asked questions about workers’ compensation.

Occupational accident insurance may provide medical, disability, and accidental death and dismemberment benefits, but it’s not workers’ compensation—it isn’t state-regulated or state statutory. Occupational accident policies may cover wage-loss benefits, medical treatments, and rehabilitation for employees or covered independent contractors, but only up to the policy limits. Employers are allowed to choose their coverage and deductible amounts, based upon the employer’s perceived risk.

While workers’ compensation policies typically involve a higher cost to the employer, they may offer more comprehensive coverage, particularly in terms of employer liability, which is not a component of occupational accident coverage. However, owner-operators and other drivers who qualify as independent contractors are not always covered under state workers’ compensation laws; while employee classification is determined by the federal government, workers’ compensation laws are determined by the state government. For these drivers, employers may want to consider occupational accident coverage.

For a useful infographic delineating the differences between workers’ compensation and occupational accident policies, click here. For more information on this and other insurance topics and coverage, please call our office.

06 Jun


Michigan Now Using 20-Factor Test to Identify Independent Contactors

June 6, 2013 | By |

Motor Carriers, and other companies, operating in Michigan please take note:  Effective January 2013 Michigan’s Workers’ Compensation Agency Department of Licensing and Regulatory Affairs began using the IRS’s “20-Factor Test” to determine if an individual is an independent contactor or an employee of an organization.

Employers must comply with state and federal employment and tax laws, including withholding certain taxes, contributing toward unemployment and providing workers compensation insurance for employees; requirements which would not apply to independent contractor’s whose services are being hired by the motor carrier.

It is vital that organizations who utilize the services of independent contractor’s familiarize themselves with the “20-Factor Test” and review any concerns with their attorney, accountant and insurance agent to ensure compliance.  States are and will continue to ramp up their efforts to identify those companies who are misclassifying workers, as they now have a greater financial incentive to do so.  When 2014 Fiscal Year budget was passed not only did it include continued funding to help states locate misclassified workers, but additional funds were made available to provide “high performance bonuses” for those states most successful at identifying and prosecuting employers who are misclassifying their employees.

A complete list and description of the “20-Factor Test” can be found here.  The 20 topics discussed include:

1.) Instructions

2.) Training

3.) Integration

4.) Services Rendered Personally

5.) Hiring, Supervising and Paying Assistants

6.) Continuing Relationship

7.) Set Hours of Work

8.) Full Time Required

9.) Doing Work on Employer’s Premises

10.) Order or Sequence Set

11.) Oral or Written Reports

12.) Payment by Hour, Week, Month

13.) Payment of Business and/or Traveling Expenses

14.) Furnishing of Tools and Materials

15.) Significant Investment

16.) Realization of Profit or Loss

17.) Working for More Than One Firm at a Time

18.) Making Service Available to General Public

19.) Right to Discharge

20.) Right to Terminate

Do you have questions concerning the classification of your employees or the handling of independent contractors?  Call us today at (800) 596-TRUCK (8782).  At the Navigator Truck Insurance Agency we work hard to be helpful, accessible and result oriented.

14 Dec


FAQs Regarding Workers’ Compensation Insurance

December 14, 2009 | By |

I have been receiving a number of questions regarding workers’ compensation lately.  I thought this month I would address some of the more frequently asked questions.  Please keep in mind that each trucking company’s situation will differ, as will state laws.  These answers are based on a trucking company operating in the state of Michigan only.


“Must I carry workers’ compensation?” 

The complete answer depends on a number of factors, but the short answer is yes if:

1.)    You are a Michigan sole proprietor who employs for 13 weeks or more one full-time employee (other than yourself) for 35 hours or more per week or three or more part-time employees.

2.)    You are a Michigan LLC, Corporation, or Partnership and for a period of 13 weeks or more any member or employee works full-time for 35 hours or more per week, or any three partners and/or employees are employed on a part-time basis.


“My guys are independent contractors.  I don’t need to provide them workers’ compensation, right?”

The law can be very confusing regarding whether an individual is truly an independent contractor or an employee.  We highly encourage you to discuss your specific situation with your Account Executive.  One “test” that can help you to answer this question is the “IRS 20-Factors Test.”  Information regarding this “test” can be obtained by calling our office at (800) 596-TRUCK (8782.)  It is very important that you can confidently state that the individuals you work with are independent contractors, as mislabeling employees as independent contractors can have far reaching impact, including increased workers’ compensation costs, exposure to workers’ compensation claims, and exposure to lawsuits related to a number of different employment issues such as:

1.) Denial of ERISA and other benefits

2.) Denial of Workers’ compensation

3.) Denial of the Family Medical Leave Act

4.) Discrimination for failure to accommodate for a disability

5.) Failure to include the individual in your employee count, resulting in your company appearing not to be required to company with Federal or State employment laws

6.) Failure to retain proper tax forms for employees, or

7.) Confusion as to who owns the rights to work completed. 


“I am the only employee of my company.  Can I purchase workers’ compensation for myself?” 

Not if you are a Michigan sole proprietor who has no employees.  If you are an LLC, Incorporation or Partnership and have employed yourself on a full-time basis (35 or more hours per week) for a period of 13 or more weeks, then you must purchase workers’ compensation and can elect whether to include or exclude yourself from coverage.     


“What does workers’ compensation cover anyway?”

There are two parts to the workers’ compensation policy.  Coverage A is workers’ compensation and Coverage B is employer liability.  Workers’ compensation provides lost waves and medical benefits to employees who suffer job-related injuries and illnesses.  Employer Liability indemnifies employers against liability claims stating that the employer’s workplace practices or conditions led to disease, death or injury to one or more employees. 


“My employee was recently diagnosed with cancer.  Will workers’ compensation provide coverage?” 

Not unless the cancer was found to be directly related to or caused by the work the employee completed for you.  Workers’ compensation is not intended to provide health insurance for your employee.  It only responds to injury, disease or death that is directly caused by the work the employee conducted or the environment the employee was exposed to while in your employ.


“My buddy says I’ll have to pay you more money once the policy expires.  Is that true?”

As a general rule, the only time you will be required to pay additional premium is if, during the year you hire additional employees or additional employee payrolls are found at the time of the premium audit (normally immediately after the workers’ compensation policy has expired.)  This is because if the employee(s) had been injured on the job during the policy period, the insurance company would have extended the workers’ compensation benefits to him or her.  The additional premium they seek to collect is legitimately owed, as the promise to provide the benefits was always there.  The best way to prevent this from happening is to inform your Account Executive of any newly hired employees so that the premiums can be modified mid-year.  Also, making certain that you do not mislabel employees as independent contractors can prevent surprises at audit.


At the Navigator Truck Insurance Agency we work hard at being helpful, accessible and result oriented.  Do you have questions regarding your workers’ compensation policy or whether the individuals who work with you are independent contractors or employees?  Give us a call today at (800) 596-TRUCK (8782) and we will be happy to discuss your situation with you.


Until next month,


Jeffery A. Moss, ARM