Is My Worker an Independent Contractor?

Employers many times will take different paths to make sure that the services and products demanded by customers and clients are supplied an executed in a timely manner.  This includes hiring employees directly as well as using the services of other businesses, such as internet service providers, couriers, or food services.  In between these two falls the independent contractor.  While an employer is required to provide workers’ compensation insurance for all employees with few exceptions, an employer is not required to provide workers’ compensation insurance for independent contractors.  Penalties for failing to adhere to this provision are severe, so it is crucial that an employer have a firm understanding of the differences between an employee and an independent contractor.

 

California Labor Code section 3353 defines “independent contractor” as any person “who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.”  This statute essentially means that to be an independent contractor, the person has to have control over the way in which a job is accomplished.  Accordingly, if an employer is telling an independent contractor not only what the job is to be done but also how and when to do the job, it is very possible that the person is actually an employee.  The California Supreme Court also laid out a multi-factor test in S.G. Borgello & Sons, Inc. v. Dept. of Industrial Relations, which discusses a long list of other potential contributing inquiries.  These include such issues as whether the person performing the services is also engaged in another business that is separate from that of the employer, whether the service performed is part of the regular business of the employer, who supplies the work materials for the job, and whether the service rendered requires special skills.

 

There is an automatic presumption under Labor Code that a person is an employee.  If the employer disputes this, then it is up to the employer to prove that the person is an independent contractor.  The most straight-forward way to demonstrate that a person is an independent contractor is to have a written agreement between the business and the contractor that specifies this.  However, the employer must be aware that simply calling a person an independent contractor does not make it true, as a court will look beyond the agreement to what the parties actually did in order to make the final determination.

 

If you have questions about your business and making sure it is in compliance with rules regarding independent contractors, call us today at (714) 516-8188.  I have experience in helping my clients understand the rules and regulations for any business.

Controlling Costs in Workers’ Compensation

Every business owner knows that keeping costs down in any area possible is essential to the growth of his or her business.  Wasting money and resources is never a good business practice, and it is crucial that any business owner stay on the alert for ways to reduce waste and costs.  The area of workers’ compensation is no exception to this rule.  Clearly the employer should not be looking for ways to get out of paying appropriate workers’ compensation claims, but there are legitimate and important other methods to help keep the cost of workers’ compensation down.

First, a well-thought out safety plan and program will help keep the employees from sustaining work-related injuries at all.  Employers should make sure that the employees have a good understanding of all safety procedures and protocols in the work place.  Creating a safety committee and changing the safety procedures on a regular basis to reflect changes in the industry or in the work place will also help reduce these costs.

Second, in the event an employee does sustain work-related injuries, the employer should take any available action to help that employee return to work as soon as possible.  Even though it is possible to have others fill in for the injured employee or even hire a temporary worker to fill the injured employee’s position while he or she recovers, this ultimately will probably cost the employer more money.  The employee has the expertise and contacts necessary to complete his or her job in a more efficient and straight-forward manner than a temporary worker who will have to be trained.  An employer should stay in close contact with the medical professionals and its workers’ compensation insurance company during the flow of the workers’ compensation case to make sure that the employer is taking any available steps to help get the employee back to work.

Finally, an employer should be open and honest with the workers’ compensation insurance company.  Being less than honest about the number of employees or nature of the work performed may cut costs on the front end, but when the insurance company discovers the deception, it can cost the employer much more than the original cost of insurance would have been.  Moreover, if the employer has an open discussion with the insurer about safety measures that are being taken, there is sometimes a possibility that such programs could help lower workers’ compensation insurance costs.

Ensuring compliance with workers’ compensation standards is essential for any business, but it does not have to bankrupt the company. Contact me today at (714) 516-8188 to talk about your business and what needs to be done.

What is the Central Index Bureau and Can It Help My Business?

There are many ways that an employer can properly reduce the cost associated with workers’ compensation, such as properly reporting injuries and the number of employees to the employer’s workers’ compensation insurance company.  Another very important step to reducing costs is taking steps to recognize and curtail workers’ compensation fraud.  The Central Index Bureau is a tool used by workers’ compensation insurance companies to assist in spotting fraudulent workers’ compensation claims.

The Central Index Bureau is a division of the Insurance Services Office, which was formed as an organization for the purposes of advising and rating insurance industries in order to provide statistical services and help combat fraud.  The reports from the Central Index Bureau can also be called “an ISO” or a “claim index.”  The terminology will vary between insurance companies, and almost all insurance companies are members of the ISO Central Index Bureau.  These reports contain a record of every insurance claim filed by any individual, including workers’ compensation claims.  When an employee makes a workers’ compensation claim, a CIB report will be generated by the workers’ compensation insurance company.  This report contains the employee’s name, social security number, aliases, addresses, occupation, and other vital statistical information.  The report will also identify all past claims made by the employee, including the type of injury, the source of the injury (such as automobile accident, medical malpractice, etc.).  The report will also identify the employee’s medical providers for the past injuries and the names of any attorneys who may have represented the employee.

An insurance adjuster can use all of this information to help spot and stop workers’ compensation fraud.  The adjuster will examine this report for repeat injuries.  For example, if the employee has made many workers’ compensation claims, all stating that the employee has a soft-tissue injury, this could be a red flag for fraud, or at the very least indicates a potential pre-existing injury.  The adjuster will also be on the look-out for multiple doctor changes.  Employees who commit workers’ compensation fraud will often switch doctors with a high frequency.  This is so the new doctor will not be familiar with the employee’s history of injuries.

If you have questions about how to best protect your business from fraudulent claims, contact us today at (714) 516-8188.  We will discuss your business and how to stop fraud in the work place.

Do I Have Alternatives to Carrying Workers’ Compensation Insurance?

Workers’ Compensation is a vast and often complex system. The goal of the entire set of laws is to protect both the employees and the employer. When an employee sustains a work-related injury, the workers’ compensation system provides a method by which the employee may receive payments for medical treatment and for disability payments and also by which the employer may be insulated from a costly law suit. To make sure the employees receive the compensation that they need following such an injury, California law requires that employers carry workers’ compensation insurance. Some employers find this requirement burdensome, and frequently ask whether there are any alternatives to carrying workers’ compensation insurance. It is first essential to understand that the California requirement to carry insurance is strict, and failure to abide by its provisions can result in both civil and criminal penalties. That being said, there are some limited situations in which an employer may have some alternatives to carrying workers’ compensation insurance.
One alternative to using a traditional insurance company is for an employer to purchase insurance through the State Compensation Fund. This may be an appropriate and essential alternative for those employers engaged in a high-risk business. Such high-risk businesses may be turned away from traditional insurance agencies, or the premiums may simply be too high. For an employer with this problem, seeking options from the State Compensation Fund may be the answer. State Fund is required to offer coverage to any business, although the cost may be higher than an Employer would find with another Insurance Company.
Some employers may also choose the option of being self-insured. To become self-insured, an employer must first apply to the Office of Self-Insurance Plans for approval. The OSIP will evaluate the application and the business for financial strength and stability, the proposed benefit delivery system, and whether the business is suitable to participate in self-insurance. The financial requirements are that there must be $5 million in shareholder equity, an average net profit of $500,000 per year for each of the last five years, and certified, independently audited financial statements must be provided to verify these claims. If the company has affiliates or subsidiaries, each of those must file its own application to become self-insured.
There are some limited circumstances in which an employer may not have to cover certain workers under workers’ compensation insurance at all. These exceptions would apply to independent contractors or certain types of board members in closely held corporations. Before assuming that these exceptions apply to your business, however, you need to consult an attorney.
California requirements to carry workers’ compensation insurance are strict and the penalties are harsh. Before making these decisions for your business, you need to consult an experienced attorney. Contact me today at (714) 516-8188 to more thoroughly review the requirements for your business.

What is Workers’ Compensation Insurance What Does it Cover?

California law requires that employers carry workers’ compensation insurance. There are very few exceptions, and under new law coming into effect on January 1, 2017, these exceptions are shrinking. As insurance premiums can be significant, it can be helpful to understand exactly what workers’ compensation is designed to achieve, and what it may or may not cover.

Workers’ compensation insurance is designed to pay for any work-related injuries or illnesses sustained by your employees. As with any other insurance system, your monthly premiums will cover certain types of workers’ compensation claims from your employees. Your employees’ hospital and medical expenses that are necessary to treat or diagnose the injury are covered. The insurance will also pay for the rehabilitation and retraining of the employee. The insurance will also cover disability payments. There are several different types of potential disability that would be covered by insurance, including 1) temporary total disability, 2) temporary partial disability, 3) permanent total disability, and 4) permanent partial disability. A doctor will be required to diagnose which type of disability is sustained by the employee.

Perhaps even more important to understand is what is not covered by your workers’ compensation benefits. Of course, these situations may vary and it is important to review carefully the provisions of your individual policy. However, there are several situations that are generally not covered by workers’ compensation insurance. Most commonly, claims for discrimination under 132(a) are not covered by workers’ compensation insurance policies. This is part of why it is so important to avoid taking adverse action due to a workers’ compensation claim filed by an employee. Other injuries suffered by employees may also be excluded from coverage. These situations include intentional actions by an employee, such as if the employee is intoxicated, self-inflicts the injury, or if the employee starts a fight while on the job.  Of course, injuries suffered off the job are also excluded, although in some situations, off the job injuries that are aggravated or exacerbated by on the job actions or injuries may fall under coverage.

If you have questions about the purpose of workers’ compensation insurance or whether your business is required to cover it, call me today at (714) 516-8188. We can discuss your business and its requirement for workers’ compensation insurance coverage.

Who Can Be Excluded From Workers’ Compensation Insurance?

California law provides that businesses must carry workers’ compensation insurance for their employees, and there are sometimes severe criminal and civil penalties for failure to comply with this requirement. Moreover, workers’ compensation is designed to provide remuneration to those sustaining work-related injuries. However, there are some exceptions to both the requirement that all employees must be covered by workers’ compensation insurance and also that any worker sustaining a work-related injury is eligible for workers’ compensation benefits.

Some business owners may decide to exclude him or herself from coverage under their workers’ compensation insurance. As of January 1, 2017, in order to qualify, the excluded person must be an officer or member of the board of directors and own at least 15% of the outstanding stock of the corporation. In addition, it is also possible for general partners or managing members of a limited liability company to be excluded from coverage. It should be noted, however, that to be excluded, the excluded person must execute a particular type of affidavit.

It is also possible for employers to opt out of purchasing workers’ compensation insurance and instead be self-insured. The employer must be certain criteria in order to qualify for this option. Specifically, the employer must 1) have $5 million dollars of shareholder equity; 2) have an average net profit of at least $500,000 for each of the last five years; and 3) have certified, independently audited financial statements. If a company meets these benchmarks, it may apply to have be self-insured for workers’ compensation insurance instead of purchasing insurance. Each subsidiary of the company must independently apply.

Not every person who works for a company and sustains an injury is eligible for benefits under the workers’ compensation insurance of the employer, regardless of whether that employer is insured through a company or is self-insured. The most notable exception to this are workers who are actually independent contractors. Independent contractors are not covered by workers’ compensation insurance and even if they sustain an injury while performing a work-related task, they are not eligible for benefits. The test for whether a worker is an independent contractor is whether an employer has the right to direct and control how the work is performed, and the means by which it is accomplished. It is important to note that the employer’s classification is not controlling as to whether the employee is an independent contractor; the determination is made after examining the worker’s function and control over his or her work activities.

Other work-related injuries may also be excluded. If the injury was intentionally inflected by the employee, or was sustained while engaging in horseplay,  the injury may not be covered.

If you have questions about whether you are required to cover certain individuals on your workers’ compensation insurance or if certain injuries will be covered under workers’ compensation, contact me today at (714) 516-8188. We can review your business together to make sure it is in compliance and discuss any claims you could be facing.

Reducing Workers’ Compensation Costs

Recent years have seen definite drops in employee work-related injuries. This is a happy development, but, unfortunately, has not lead to corresponding drops in workers’ compensation insurance premiums to employers. Despite this, there are ways to help reduce the cost of your workers’ compensation.

The first way is the most obvious – continuing to reduce injuries. Continuing to keep up with the latest safety measures and technology to reduce work-related injury is an excellent way to ensure continuing drops to injuries. Making sure your machinery, work place, and equipment is in good repair is also vital.

Next, make sure your staff is receiving adequate training. Training manuals and videos are good tools for this, but it is also important to make sure that the employees are actually reading and absorbing this material. The material also needs to be up-to-date. For example, if you have implemented new safety procedures and new safety technology, it is imperative that manuals and training materials are updated accordingly.

Third, it can be beneficial to incentivize your employees. Set goals for meeting particular safety benchmarks, and make the benefits applicable to the entire workplace. This not only will compel each individual employee to try to maintain safety standards, but will also generate an atmosphere of cooperation and positive peer pressure to make sure that the safety procedures are appropriately utilized.

It should also go without saying that you need to be honest with your workers’ compensation insurance company. Make sure the company is aware of the safety procedures you have implemented and maintain an open dialogue to make sure that your premiums are set appropriately.

If a worker is injured on the job, contacting the appropriate medical personnel immediately is vital. This will help ensure that the worker does not sustain further injury.

If you have failed to maintain insurance, a worker gets injured, and the Uninsured Employers Benefits Trust Fund is seeking to place a lien against your business, another way to “after the fact” help reduce the cost is to seek assistance from a lawyer trained in workers’ compensation matters. That attorney may be able to help you negotiate payments or even reduce the final lien amount with the Trust Fund.

Businesses should take all available precautions to help reduce their workers’ compensation costs through training and procedure. If a lien or judgment is established, the business should contact an attorney to help negotiate that amount. I have significant experience and training in workers’ compensation, and can help you. Contact me today at 714-516-8188 to discuss your business and its liabilities.

Studies on Benefits and Costs of Workers’ Compensation

Over the past several years, workers’ compensation premiums have grown at fast rate, often far outstripping the benefits received. In fact, between 2010 and 2014, the cost of workers’ compensation grew much  more than the amount of benefits that were paid out. These costs include not only insurance premiums, but also administrative costs and reimbursement. In 2014, the ratio for benefits received to dollar paid in, was .68 to every dollar. This was down from 2010, when the benefits received were .81 to every dollar paid. In California, the amount paid by employers went up dramatically during that time, by approximately .32 on the dollar, placing California in second place for the increase.

The rising cost of medical care in the United States now represents the lion’s share of the use of the benefits paid out by workers’ compensation insurance. This cost has consistently risen, with the medical benefits representing 29% of the benefits paid out in 1980, whereas this was at 50% in 2014. For a more state specific view, in 32 states, medical costs represents a majority of the benefits paid by workers’ compensation insurance. In California, medical costs in workers’ compensation claims represented 57.7% of the benefits paid out.

This study looked to two potentially contributing factors to the decline in benefits received from workers’ compensation insurance. The study recognizes that there has been a decline in work-related injury, which is a trend which continues. Moreover, the study also specifically recognizes the changes in state specific workers’ compensation coverage requirements. Some states provide fewer protections for workers, which leads a reduction in the number of compensable claims, as well as a reduction in the number of claims filed over all.

Despite the increase of costs of insurance to employers, between 2010 and 2014, the number of employees covered by workers’ compensation benefits increased in California by 9.9%. In addition, the wages covered by the benefits also increased in California by 22.1%. Overall, the number of claims paid out in California rose between 2010 and 2014 by a significant enough amount to make California third in the nation for benefits paid during that time.

Regardless of perceived benefits or costs of workers’ compensation insurance and benefits to the employee, insurance is still required by California law. If you have questions about whether you are required to carry insurance and who needs to be covered, contact me to today at 714-516-8188 to discuss your business.

Department of Labor Wants Changes to Workers’ Compensation

Under the current workers’ compensation system, each state more or less makes its own set of laws. These laws vary wildly between states. For example, Texas allows companies to opt out of workers’ compensation insurance while our state of California provides harsh civil and criminal penalties for failure to carry the mandatory insurance. Meanwhile, the United States Department of Labor is weighing in.

The Department of Labor recently released a statement urging changes to the spotty, state specific approach currently in force for workers’ compensation insurance. The Department of Labor recognized that workers’ compensation is a key protection for employees. The statement called workers’ compensation insurance a “key component of the country’s social benefit structure” and expressed concern that it has no federal oversight and a lack of federally mandated minimum standards. The Department of Labor recognized that other social benefit programs have grown, citing the Affordable Care Act, Social Security, and Medicare, while the benefits provided to workers under workers’ compensation system have failed to keep pace, and have sometimes eroded.

The Department of Labor further expressed frustration  that the actual cost of a work-related injury is often borne in large part by the employee, and not by the actual employer. With high insurance premiums and constantly rising medical costs, this puts injured employees in very real danger of financial disaster and bankruptcy. Recent changes in workers’ compensation benefits were recognized, and that the result of these changes was often a diminished amount of benefits and security to a worker.Specifically noted were denial claims that were previously compensable, discouraging workers from filing a claim at all, and a decrease in the cash benefits awarded. Higher evidentiary bars, opt out systems, and exclusion of certain injuries also made the list of concerns.

Ultimately, the Department of Labor concluded that a dramatic overhaul is necessary in order to prevent the continued trend of erosion to benefits provided to workers. These changes would include increased benefits to the worker while decreasing costs to the employer. The Department of Labor also did not overlook the fact that the first step would be continuing efforts to reduce the incidence of work-related injuries in the first place. The Department of Labor goes on to explore whether the federal government should step in to provide more oversight, and whether it may be important to expand other social programs such as Medicare and social security.

In today’s political climate it is clear that change is imminent to many programs, including workers’ compensation. I can discuss with you what changes are likely to happen and how to make sure your business is ready for the future. Contact me today at 714-516-8188 for an appointment.

Workers’ Compensation Insurance Profits at Record High

Is the workers’ compensation industry disappearing?  Is there a nationwide movement to eliminate workers’ compensation insurance?  These questions are both important, and directly related to the fact that a recent study shows that workers’ compensation insurance profits recently were reported at a record high.

A recent study by Conning, Inc. revealed that workers’ compensation insurance profits experienced the lowest loss ratio seen since 1995. In addition, over the last six years, premiums for workers’ compensation insurance have been steadily rising. The study determined that these premiums were boosted by the improving and expanding economy. However, the study also determined that this growth was not sustainable and not likely to continue. In 2016, the rate of filings indicated a softening market. This was attributed to the rise in medical costs. The fact that 2016 was a banner year for workers’ compensation insurance companies came on the heels of 2015, which had also seen record growth and profits. In 2015, the combined ratio for workers’ compensation was 95.4, which was a significant improvement over the ratios demonstrated in 2011-2014, which ranged from 117.3 to 102.4. For example, in 2015, Travelers Companies was the top workers’ compensation writer with a direct written premium of $4.47 billion dollars and net written premiums of $3,96 billion.

Other studies and opinions provide harsh criticism to the rising costs. The California Applicants’ Attorneys’ Association released a statement in April 2016 indicating that the rising rate of premiums has not gone to improve care provided to workers injured on the jobs. Rather, they are concerned that the increased profits to the insurance companies have actually just resulted in lining the pockets of the insurance executives.

Mounting pressure on the insurance companies will likely lead to a dip in insurance premiums. Simply stated, the high insurance premiums cannot continue to be justified in the face of the reduction in the amount of work-related injuries and increased safety standards. Moreover, certain organizations are concerned that even in light of the higher insurance premiums and record profits, care for injured workers has dipped. Some are even citing a reduction of 70% in benefits for employees, and medical professionals dropping employees from their care in the face of frustrating road blocks thrown up by the workers’ compensation insurance companies.

If you have questions about the ever-changing workers’ compensation insurance market and how it can impact your business, contact me today at 714-516-8188. I look forward to talking with you about your business and workers’ compensation.

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