Group's report highlights key issues in addressing independent contractors

State workers' compensation laws exempt independent contractors from purchasing coverage. However, coming up with a well-defined and enforceable set of rules to distinguish between an independent contractor and an employee is a daunting task, according to a recently published report.

In 2006, the International Association of Industrial Accident Boards and Commissions began a joint study with the National Association of Insurance Commissioners on how legally qualified independent contractors are established in U.S. jurisdictions. Researchers sought the input of numerous industry experts, and state insurance and workers' comp regulators.

"I think this is a very useful report to policymakers," said Alan McClain, CEO of the Arkansas Insurance Commission, who participated in the preparation of the report and cochairs the NAIC/IAIABC working group. McClain noted that many jurisdictions are struggling to find a better system to regulate the legal criteria on what constitutes an independent contractor. This report, he said, would be of great practical value in framing new regulations.

NFL seeks to seal the deal against players filing in California (04/19/12)
Washington: DLI looks to establish medical provider network (09/10/12)
Physician-owned surgery centers come under researchers' scrutiny (06/18/12)
Coalition disputes contentions in think tank's report on N.Y. assessments (04/19/12)
Report outlines effective strategies for successful self-insurance groups (06/18/12)

According to the report, workers' comp administrators are interested in several key issues when addressing independent contractors. Researchers said the legal criteria defining independent contractors must be clear and enforceable. If independent contractor status is not easily defined, the study concluded that the determination of compensability and awarding of benefits is often delayed. In addition, researchers said that from an insurance regulatory perspective, the determination of employment status is critical to determining claims exposures and collecting appropriate insurance premiums.

In the review of state criteria and their administration, the NAIC and IAIABC found a wide range of approaches. One of the paper's key findings is that "control" of work is a core principle that government programs use to determine employment over contracting. Yet, researchers said control is hard to measure and can easily be feigned. The study found that in seeking more certainty in the application of the law, states have developed an abundant range of other criteria and screens to more easily and clearly separate employees from contractors.

The paper discusses the ramifications of different laws and procedures. In addition, equity and economic freedom are considered. The paper stresses the impact of different screening systems on the administration of the workers' comp system.

Mona Carter, national policy executive for the National Council on Compensation Insurance, noted that the National Council of Insurance Legislators was awaiting finalization of the study. NCOIL workers' comp experts may be interested in developing model laws or rules based on elements of the report, she said.

According to NAIC officials, the organization will undertake its own internal review of the report and it will be brought before the Workers' Compensation Task Force at its winter meeting in December.

IAIABC elects new executive committee. The IAIABC also elected a new executive committee at its 94th annual convention in October. The executive committee is comprised of 10 executives from IAIABC member jurisdictions. The committee is the governing body of the association and monitors the association's finances and strategic initiatives. The 2008-09 executive committee will include Peter Federko, Frances Huntley-Cooper, Alan McClain, Mary Ahearn, Elizabeth A. Crum, Christine Baker, Matthew Bryant, Robert Malooly, Gary Thibault, and Richard Thomas.

December 2, 2008

Newsletter Sign-up