With the rise of the so-called “gig economy,” an increasing number of businesses farm out work to independent contractors. One survey by NPR/Marist Poll revealed 1 in 5 U.S. workers were employed under contract.
While machines may complete basic tasks, temporary workers and independent contractors allow businesses to handle flexibility. There are sometimes even options for more specialized workers such as computer programming or even freelance lawyers. While this may allow workers some of the freedom they desire, for others it’s the only kind of semi-regular work they can find. Particularly for those in high-risk jobs, like construction, manufacturing and other trades, an independent contracting or temp job can mean no guarantee of certain rights – including the right to workers’ compensation benefits if they are injured on-the-job.
However, the Wisconsin workers’ compensation attorneys at Lein Law Offices in Hayward and Winter want injured workers to understand one critical point: Just because the company labels you an independent contractor does NOT mean that you are – even if that phrase is written in your employment agreement.
Beginning Jan. 1, 1990, the Wisconsin legislature’s updated Workers’ Compensation Act went into effect, which in turn held that every independent contractor who is injured on-the-job is to be considered an “employee” of the person for whom he or she performs work. The only time there can be an exception is when the worker meets all nine “tests” as spelled out in Wis. Stat. § 102.07(08). All elements of the test must be met or else the worker is entitled to workers’ compensation.
The nine-point test asks whether the worker in question:
- Maintains a separate business;
- Has obtained a Federal Employee Identification number from the IRS or have filed business/ self-employment income tax returns based on the work/ service in the last year. (Social Security Numbers aren’t substitutable by a FEIN);
- Operates specifically under contracts;
- Is responsible for their operating expenses under those contracts;
- Is responsible for satisfactory performance under those work contracts;
- Is paid on a contract per job, competitive bid or through commission;
- Is subject to direct profit or loss through those contracts;
- Has recurring business liabilities and obligations under the contract;
- May personally succeed or fail depending on business expenses vs. income.
A more detailed explanation of each of these points is spelled out by the Wisconsin Division of Workforce Development.
Note that decisions in these cases are handled on a case-by-case basis, depending on the circumstances and facts in existence at the time of one’s injury. Further it should be noted that a bona fide independent contractor relationship can eventually evolve into an employee relationship. This type of issue can arise when an independent contractor asserts things like:
- Performing work beyond the scope of the contract;
- Completing service unrelated to his or her independent business;
- Acting under the direction/ control of the contractor – as an employee, not an independent contractor.
Case law on this is very clear: even a minor deviation from this nine-point test could impact the status of an employment relationship under the state Workers’ Compensation Act, resulting in the relationship evolving to employer/ employee.
It should also be noted that someone who works for a temporary agency and files a claim for workers’ compensation benefits against the temp firm cannot also pursue a claim for benefits against the company for whom they were working.
Conceding to an independent contractor status when you need work injury insurance coverage should never be done without first discussing your options with a Wisconsin workers’ compensation attorney. However, if you are certain of your status or have already reviewed it with an attorney, you may have a couple options.
If you own your own business – sole proprietorship, partnership or limited liability company – you aren’t required by Wisconsin law to purchase workers’ compensation coverage for yourself (any employees you have ARE covered by the Act). However, you can choose to buy workers’ compensation insurance to protect yourself in the event of a work injury. Policies typically automatically exclude owners of these firms, unless specifically endorsed to cover them. If an independent contractor already has employees covered under the act, they can ask about extending that coverage to themselves with an endorsement for additional premiums (to be set based on payroll).
Call Lein Law Offices — Winter and Hayward workers’ compensation attorneys in Wisconsin toll-free at 1-800-944-3949.
You can also reach us by using our online contact form.