Dispute Workers' Compensation Audit In Michigan.
If you believe your business received a workers' compensation audit with errors, it's important to know what your company should dispute and when you should file a dispute. If you're in shock over your workers' compensation audit and feel like you've been punched in the gut, you're far from alone. There are many reasons why a workers' compensation audit ruined your day. Two of the most common issues business owners have with audits include:
Change of classification of a sub-contractor to an employee
Change of an employee's class code from one code to another resulting from a substantial and unexpected increase in the cost of workers' comp per hour. As with most insurance policies, especially commercial insurance, there are many factors and components that come together to create a final premium amount. A workers' compensation audit is designed to reconcile the differences between the start of the insurance policy and the actual realized business and employment results.
In an ideal world, how the policy is setup is the same as the findings by the insurance auditor at the end of the workers' comp policy term, and when it's not, mid-year policy changes are performed so as to remove any unexpected and unpleasant surprises. However, errors made during the initial underwriting and/or changes in the business can change what was initially correct, and if not corrected during the policy long before the expiration date, can leave a business owner in frustration.
This is why it's so important for business owners to rely on an agent who fully understands the nuances of commercial insurance, and especially workers' comp insurance. Otherwise, both the agent and the business owner are being set up for potential failure that's unnecessary. Most of the problems I see when talking to business owners with workers' comp stems from their previous agent either not understanding the rules and nuances of workers comp, or not taking the time to fully understand the business they're working with. Often, and sadly, it appears the business owner's frustration is a combination of both ignorance and effort.
Navigating Workers' compensation is like most things, you need to know the rules of the game if you intend to find success. If your dispute involves an issue of if someone is an employee or subcontractor, you will find that Michigan appears to receive guidance from a 20-factor test. Keep in mind, that the presumption by Michigan and the federal government is any given person is an employee UNLESS it's shown that they are not. In other words, you're not starting on equal footing trying to push the person over to the subcontractor side. Rather, you have to move the person from firmly within the employee side all the way over to the subcontractor side, leaving little or no ambiguity. That can be a challenge for many occupations and situations.
Here's a link to the 20 factors which include:
- Instructions
- Training
- Integration
- Services Rendered Personally
- Hiring, Supervising and Paying Assistants
- Continuing Relationship
- Set Hours of Work
- Full Time Required
- Doing Work on Employer's Premises
- Order or Sequence Set
- Oral or Written Reports
- Payment by Hour, Week, Month
- Payment of Business and/or Traveling Expenses
- Furnishing of Tools and Materials
- Significant Investment
- Realization of Profit or Loss
- Working for More Than One Firm at a Time
- Making Service Available to General Public
- Right to Discharge
- Right to Terminate
From another (that is additionally downloadable from this page or from the state of Michigan's website) "required reading" for any Michigan business that hires subcontractors titled "Employer Insurance Requirements… Subcontractors, General Contractors, freelance Contractors" place out by the Michigan Department of Licensing and regulative Affairs, Workers' Compensation Agency….
Who is an independent contractor?
A freelance contractor is one United Nations agency that maintains a separate business and holds himself or herself intent on and renders service to the general public. Generally, an individual cannot become Associate in Nursing freelance contractor simply because he or she needs to be, or as a result of Associate in Nursing leader needs the person to be Associate in Nursing freelance contractor. it's not enough that the worker and also the leader agrees. If an individual solely works for one business and is directed and controlled by that business, the person in all probability is Associate in Nursing worker Associate in Nursingd, not a freelance contractor. The “20-factor test” proclaimed by the federal agency in Revenue Ruling 87-41, 1 C.B.296 any defines the employee-employer relationship. you'll want to consult your lawyer for any clarification. Question thirteen discusses some key components of Associate in a Nursing freelance contractor relationship
A general contractor employs a contractor that may be a sole proprietary with no workers. will the nondepository financial institution auditor charge the final contractor premium on cash paid to the subcontractor? No, however, it's the responsibility of the final contractor to supply affordable proof to his or her nondepository financial institution that the contractor may be a sole proprietary with no workers. the subsequent proofs are also used. for added proofs, see Bulletin 89-03 on page seven of this leaflet.
a. The Federal number of the only owner.
b. a duplicate of the written contract between the only ownership and also the general contractor.
c. a listing of alternative general contractors for whom the only ownership has worked recently and/or is presently operating for.
d. a duplicate of the false name certificate that the only ownership has on file with the county.
e. Proof that the only ownership is paid by the task Associate in Nursingd a federal agency 1099 type is given to the only ownership by the final contractor at the top of the year.
f. A sworn statement from the only owner that he or she has no workers.
g. an ad that shows the only ownership is offered to figure for others.
(my bold highlights) If the insurance auditor does not accept the reasonable proof, the general contractor should request in writing another payroll audit from the insurance company. If the premium is not waived after the re-audit, the general contractor may appeal to the Department of Insurance and Financial Services and request a hearing to resolve the premium dispute.
Can a general contractor require a certificate of workers’ compensation insurance from its subcontractor?
If the contractor may be sole ownership with no staff, the Act doesn't need a certificate of workers’ compensation insurance. However, the final contractor might on a written agreement basis need a certificate of workers’ compensation be provided. this is often a written agreement issue not regulated by the Agency. If the contractor may be a sole owner and has one or a lot of staff, or if the contractor may be a partnership, corporation, or indebtedness company, the final contractor ought to need a certificate of workers’ compensation insurance or a duplicate of a properly dead exclusion kind.
If a subcontractor doesn’t carry workers’ compensation insurance and does not have an exclusion form on file with the Agency, any work-related claim filed by the uninsured subcontractor’s employee may become the responsibility of the general contractor.
Michigan law allows the workers’ compensation liability to transfer from an uninsured subcontractor to the general contractor. In this situation, the general contractor retains the right to sue the uninsured subcontractor for reimbursement of all compensation paid to the uninsured subcontractor’s employee.
If you understand that Auditors are trying to make sure a workers' comp policy is "correct", and by correct, that includes the class codes and that anyone who may collect from the policy is listed on the policy for calculating premium It's understandable, or at least it should be, that insurance companies will lose money if they have to pay out for injuries from people that weren't, albeit should have been on the policy, to begin with. Knowing that many policies have mistakes and many employers haven't taken the time to fully understand the worker's comp insurance system (and I think it can be argued that they shouldn't have to because they should be able to rely on their agent), auditors attempt to remain diligent in their efforts.
It makes sense from the standpoint they will look like the village idiot if they miss something/someone and that person winds up collecting on the policy. If you have more questions, please give us a call and myself or another qualified licensed agent will discuss your business workers' comp policy. If you're just starting out with your first policy, we're happy to assist you as well.
Just so you know, Michigan began it's a move to what is essentially and largely an employer/employee "no-fault" system in 1912. Before 1912, employees injured on the job were required to seek a remedy in court, akin to anyone else injured, and must prove employer negligence in order to secure a judgment. That meant it was much more difficult for an employee to receive money, albeit, for the employer who may believe that's a perfect world, it came at a cost.
A jury could award virtually any amount it felt was warranted. As most business owners know or will at some point learn, juries are highly unpredictable and there's always a chance a jury could award much more than a defendant feels is warranted. Michigan's workers' compensation law removes most of the unpredictability and replaces it with a set amount that we have today.
