Hiring Independent Contractors is Not Risk-Free

Ask the Workers’ Comp Expert: Hiring Independent Contractors is Not Risk-Free
by Robert G. Jones, Vice President, PMC Insurance Group

In today’s challenging economy, business owners have turned to hiring independent contractors in lieu of adding traditional employees. Advantages might include: completion of specific, short-term assignments; obtaining unique, project specific skill sets; reduced costs for administration; and the avoidance of benefits, taxes and legal issues surrounding the hiring and firing of traditional employees.

However, there are risks associated with this practice. Legitimately hired contractors might win disability, workers’ compensation and medical insurance benefits if they were misclassified to avoid paying such benefits. A business owner could also be held responsible for paying all withholding taxes, plus interest, if the Internal Revenue Service finds employees have been misclassified as independent contractors. And, the IRS and other governmental agencies could impose additional financial penalties.

The number of worker class action lawsuits that claim employers misclassified employees as independent contractors rose 50 percent in 2010 to a record 300 or so, according to Garry Mathiason of Littler Mendelson, one of the nation’s largest employment and labor law firms. One reason is that using independent contractors has become common practice in construction, trucking and home health care.

The IRS created a list of 20 common law factors to determine whether a contractor is actually an employee. Under common law, a worker is an employee if the business owner (person for whom services are preformed) has the right to control and direct the way they work including when, where and how the work is done. It is important to understand the difference between the IRS definition of employee versus the definition under statutory workers’ compensation protection.

PMC Insurance Group’s only business is workers’ compensation. Our insurance professionals have extensive experience helping IIABNY members expand their marketing capabilities by providing workers’ compensation solutions for their clients, including appropriate insurance protection when hiring independent contractors.

Operating in the Continental US!

Phone: 1-877-PMC-COMP | (781)-449-7744

Email PMC | Visit our website

MANAGEMENT TOOLS: THE ADVANTAGES OF OSHA

MANAGEMENT TOOLS: THE ADVANTAGES OF OSHA

Business owners swap horror stories about many government agencies, unreasonable regulations and the high cost of compliance. Certainly the Occupational Safety and Health Administration (OSHA) has been viewed as a tough taskmaster. Worker safety, however, is serious business; and OSHA offers valuable services to small businesses.

Workplace safety benefits your bottom line as well as the health of your employees. OSHA offers many services to small businesses including reactive management services, proactive services, and training and educational services. Just like your employees, these services must be properly managed for your profit. Read more on the PMC Newsletter.

Operating in the Continental US!

Phone: 1-877-PMC-COMP | (781)-449-7744

Email PMC | Visit our website

CURBING WORKPLACE DRUG AND ALCOHOL ABUSE

Managing your business’ risk:

$100,000,000,000 a year.

That’s how much the federal government estimates that drug and alcohol abuse costs American businesses. If you think your organization is immune, bear in mind that nearly three in four of adult abusers are employed — some of them perhaps by you. You might know these people by their absentee records: They’re likely to be gone at 2.5 times the rate of the average employee — or perhaps by their Workers Comp claims: Three to five times those of non-abusers.

If nothing else, you’ll know them by how much they cost your health plan: 300% higher than non-abusers (not to mention the far greater human costs to co-workers, families — and the abusers themselves).

Despite the highly publicized war on drugs, there’s no overall federal drug-free workplace law for the private sector. Although a few states require drug-free workplaces, others take the voluntary approach. For example, some 13 states reduce Workers Comp premiums for businesses with a drug-free workplace program.

If you create such a program, observe these guidelines:

• Create a policy. Be sure to ban illegal drugs and abuse of alcohol expressly; to state specifically which drugs and related acts are banned; to explain the steps you will take to back these edicts; and to detail the consequences for their violation.
• Develop a testing program. Decide whom to test, when to test (e.g. pre-employment, random, regular, reasonable suspicion, incident-related), who will do the test (preferably a certified independent lab, with at least two tests showing positive), and what will happen after a positive finding.
• Decide what to do with abusers. Although some organizations simply discipline or terminate them, others see abusers as valued employees with a problem, who are well worth saving. For this reason, many companies create Employee Assistance Programs (EAPs) to deal with drug and alcohol issues off site. Establishing an EAP shows respect for your employees and offers an alternative to dismissal.
• Define the role of your supervisors. As the management level closest to employees, supervisors will probably be the first to notice the signs of abuse. They need tutoring on what to look for, and how to document and deal with it. Most important is what supervisors should not do — attempt to diagnose what are essentially medical issues, or to counsel abusers. Their role is to report behavior and support what abuse experts decide are appropriate responses to individual situations.
• Communicate to employees the details of your program, the effects of abuse, and the importance of understanding the problem and reacting in a supportive way.