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PIA Advises NCOIL on Different Approach to Independent Contractors

PIA filed comments on August 21, 2009 with the National Conference of Insurance Legislators (NCOIL) regarding NCOIL's efforts to create a model law to better...
August 31, 2009

PIA filed comments on August 21, 2009 with the National Conference of Insurance Legislators (NCOIL) regarding NCOIL's efforts to create a model law to better define what is or is not an "independent contractor" for purposes of workers compensation classification. NCOIL is formulating the "Workers' Compensation Coverage and Employee Misclassification Model Act."

"Despite best efforts, PIA National still finds the NCOIL draft's definitions unclear, too often in direct conflict with a large number of state W/C current requirements in this area, and applied inconsistently through the functional portion of the model," our letter notes. The PIA National Business Issues Committee Technical Working Group strongly suggests that NCOIL take a different approach, with states issuing formal notice to all employers in their states reminding them what the current W/C laws require of them, and the potential penalties that they will experience for noncompliance. This approach is much more streamlined, more efficient and addresses the problem in a targeted manner, as opposed to promulgating a model law and getting it adopted in all states.

What It Means to Agents:  There is no avoiding the fact that states are and will continue to firmly crack down on the suspected massive misreporting of workers as independent contractors,  rather than their true status as employees. Understandably, W/C insurers share this concern because of both dollars they lose in W/C premiums charged - and monies paid out when so-called independent contractors are injured and subsequently labeled as employees by W/C administrative judges. 

Going forward, a proper balance must be struck. There must be assurances that employers are properly reporting the true status of independent contractors and employees. At the same time, both W/C insurers and boards must respect and maintain the existing, legally valid W/C system opt-outs to legitimate independent contractors and certain others, such as active business owners, officers and directors.