Thursday, December 18, 2014

Michigan Clarifies Independent Contractor Rules

The Michigan Supreme Court has clarified the criteria for when a worker is to be considered a true independent contractor rather than an employee. The Michigan Supremes ruled, in Auto-Owners Ins. Co. v. All Star Lawn Specialists Plus, Inc., that if just one of the three statutory criteria is met, the worker is an independent contractor.

The three statutory criteria are that the worker:
1.  maintain a separate business;
2. hold himself or herself out to and render service to the public;
3. be an employer subject to this act.

The Court of Appeals had earlier ruled that the worker had to meet all three criteria to be an independent contractor rather than an employee covered by Workers Comp of the entity using his or her services. The Supreme Court ruling overturned that, saying that meeting just one of the three standards is sufficient to make the worker an independent contractor.

In this particular case, the worker wanted to be an independent contractor, rather than an employee limited to the exclusive remedy of Workers Compensation benefits. But this sword should cut both ways--it also changes the standard for when an insurer can pick up payments to a 1099-type worker in Michigan for inclusion in the WC premiums of the party that purchases their services.

We shall see how carefully insurers observe this new standard.

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