Determining Independent Contractor status must include a review of the whole

Independent Contractors (employees who receive 1099s) are a topic that much is written about, but still there is a great deal of confusion in the workplace.

Part of the problem is that everyone would like a simple question or checklist that clearly states “this is an employee” or “this is an independent contractor.”  In fact, the Internal Revenue Service had such a test, commonly known as the “20-Factor Test” and most Human Resource departments and companies referred to this test to help make their decision of choosing employee or 1099 independent.

After years of arguments about use of the test, the Supreme Court has ruled that there is no definition that solves all problems relating to the employer-employee relationship under the Fair Labor Standards Act (FLSA).  The Court also said that determination of the relationship cannot be based upon isolated factors or a single characteristic, but depends upon the circumstances of the whole situation.

This didn’t make things any clearer, so under pressure from Congress and representatives of labor and business, the IRS has attempted to clarify and simplify the test.  The result is guidance based upon 11 main tests that are organized into three groups:  Behavioral Control, Financial Control, and the Type of Relationship between the parties.

Along with these guidelines, we have seen an increase in both investigation and enforcement of companies using Independent Contractors.

Below are brief summaries of the three groups and questions you should ask;

  • Behavioral Control –This includes instructions the business gives the worker.  Do you provide instructions about when, where or how to do the work?
  • Financial Control – How do you pay the worker?  Who sets the pay?  Are they reimbursed for expenses?  What is the extent of the worker’s investment?
  • Type of Relationship – What is the permanency of the relationship?  What is the extent to which services performed by the worker are a key aspect of the regular business of the company?  Are there contracts created by both parties?

A word of warning:  while researching this topic I have seen the following mentioned several times in IRS publications: “Do not underestimate the difficulty of applying these standards to specific individuals performing services.”

For more detail, including the complete tests with all questions, or if you have concerns about your use of Independent Contractors, contact BCN Services for an in-depth review and discussion.  Please contact us at 1-800-891-9911 or contact us by clicking here.

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Michigan’s Workers’ Compensation Law is Changing How Injuries are Handled

The 2011 changes in Michigan’s workers’ compensation law approved by Michigan Gov. Rick Snyder began to take hold in 2012.  These updates to the law were intended to bring clarity to the statute in several areas and attract and keep business in Michigan.  Let’s highlight just four substantial revisions here.

  1. Time extended for directing injured employee’s medical care: One significant change allows employers to direct the medical care of an injured employee during the first 28 days of an injury or disease.  Previously, the employer had 10 days to direct the care.  Directing post-injury care is vital to providing quality treatment and keeping costs reasonable.  Whenever possible, occupational medical facilities are the best choice for care and treatment of employees.  These facilities understand the dynamics of a work-related disability and prompt recovery.The key to putting the treatment on solid footing is ensuring a positive experience for the employee while offering needed treatment after an injury whether your employee receives a couple of stitches or strains a shoulder.  Although they provide vital medical care, emergency rooms, urgent care clinics and family physicians are not as adept in handling worker injuries and should not be a first choice unless the severity of the injury warrants it or no other alternative is available.
  2. Pre-existing medical condition definition clarified: Prior to the 2011 changes, a pre-existing medical condition often extended the duration of a worker’s compensation claim as it was difficult to distinguish between a work-related disability and the pre-existing condition itself.  A second change in the statutory language clarifies that a pre-existing condition is not payable under workers’ compensation unless there has been a change in the pathology of the pre-existing condition caused by a work injury.
  3. Such conditions must “significantly change” or are not covered: A degenerative arthritis located in the back area can be a pre-existing condition.  When a worker having degenerative arthritis sustains a back injury, that condition can complicate and extend treatment and recovery, keeping an employee off the job if not addressed early.  A third change in the statutory language specifies that degenerative arthritis is part of the aging process and would be considered work related if the injury aggravates or accelerates the degenerative arthritis in a significant manner. If the pre-existing condition has not changed in a significant manner, it is not workers’ comp.  Physicians should be asked more often and more proactively to medically distinguish between the “pre existing condition” and the worker’s injury.  This change is expected to limit the duration of many claims, particularly as our population ages.
  4. Mental disability language strengthened:  A fourth change brings further clarity and stability to the overall system regarding mental disabilities.  These are work related if they arise out of actual events of employment, not unfounded perceptions.  The new law states that the “the employee’s perception of actual events” must be “reasonably grounded in fact or reality.”

These are but a few of the statutory changes intended to modernize and provide greater efficiency in the workers’ compensation system in Michigan.  While the Dec.19, 2011 law signed by Gov. Snyder is barely one year old, the system is already experiencing greater discipline and proactive management when it comes to claims handling.

At BCN Services, we manage day-to-day items such as Workers’ Compensation claims and offer employers up-to-date advice about changes in the law.  Call us toll-free at 1-800-891-9911 or in southeast Michigan at 1-734-994-4100 or contact us here.  Let BCN handle that!

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Patrick Boeheim, Risk Manager

How will Michigan’s Right to Work laws affect the workplace?

Michigan’s new Right to Work legislation, consisting of two bills, was signed into law by Gov. Rick Snyder on Tuesday, Dec. 11, 2012, but will not take effect until late March or early April of 2013.

Michigan is the 24th state to enact such legislation.

Both new laws make it illegal for employees to be required to join or financially support a Union, even if there is a union currently representing employees in a workplace.  However, contracts or collective bargaining agreements already in effect will not be affected by the new laws until the contracts expire.

Contrary to what the name implies, neither law creates the right to a job for any employee, but rather makes it illegal for a union shop clause (forcing employees to pay union dues) to be a part of a bargaining contract.

Proponents of right-to-work laws argue that workers should be free to join unions or to refrain from doing so.  Opponents argue that right-to-work laws restrict freedom of association, and limit the sorts of agreements individuals acting collectively can make with their employer.

Not surprisingly, this decision has created a political divide and Democratic leaders have promised to attempt to block the Right to Work legislation by litigation and political activity including recall efforts against legislators who supported the laws.

We’ll continue to monitor the situation and keep you apprised.

If you need advice about these issues surrounding collective bargaining or other human resources matters in your business, contact the experts at BCN Services.

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Sue Kester, Manager, HR

What are my responsibilities as an employer under the updated ADAAA?

Title I of the Americans with Disabilities Act of 1990 (ADA) prohibits private employers, state and local governments, employment agencies and labor unions from discriminating against qualified individuals with disabilities in job applications, hiring, firing, advancement, compensation, job training, and in other terms, conditions, and privileges of employment.

The ADA covers employers with 15 or more employees, including state and local governments. It also applies to employment agencies and labor organizations.

Almost 4 years ago, Congress passed the Americans with Disabilities Act (ADAAA) in an effort to further protect the rights of individuals with disabilities.  The ADAAA expanded the definition of “disability” under the ADA and gave employers greater responsibility for providing reasonable accommodations to qualified individuals with disabilities.

In March 2011, the Equal Employment Opportunity Commission (EEOC) issued regulations interpreting the new ADAAA, which became effective in May 2011.  Under these regulations, it is more difficult for an employer to successfully assert that a physical or mental impairment is not a disability and employers must instead focus on requirements for making reasonable accommodations for disabled employees so that they may perform essential job functions. 

As recently as November 2012, the EEOC hosted a seminar where the Commission made clear that it will look at an employer’s failure to accommodate reasonable accommodation requests very closely in 2013 and beyond.

If you do not currently accommodate non-work related restrictions and require an employee to be released to return to work without restrictions following a leave, this practice will need to be re-evaluated. Your requirement may be considered a non-accommodation by the EEOC, which may determine that you are eliminating disabled persons from working or rejoining your workforce.

Based on this information, we have revised our system at BCN to ensure that we are not discriminating against disabled persons when they are rejoining the workforce from a Family Medical Leave (FMLA), or other personal/medical leaves. We now look more closely at persons who are ready to return to work, but have some restrictions, and how we can work with our clients on a case-by-case basis to accommodate those restrictions. We want to accommodate where appropriate, and what may have seemed an unreasonable accommodation in the past will need to be re-evaluated.

The Human Resources Department at BCN closely monitors legislation and pending litigation addressing these sorts of issues in the workplace, and how it may affect our clients and their business.  Call us at 800-891-9911 or contact us with questions or we can assist in a specific situation.

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Kate Douglass, SR. HR Generalist

Am I Considered a Large Employer Under the Affordable Care Act?

The big question on every employer’s mind these days is “how will my employees and my business be affected starting Jan. 1, 2014, when the majority of provisions of the Affordable Care Act come into play?”

For small employers, the impact will be nominal.  Read more