There have been changes to how Workers Compensation carriers will handle Independent Contractors. The policy will follow standard NCCI workers' compensation policy language, premium basis includes remuneration paid to all persons engaged in work that could make the carrier liable to pay workers' compensation claims. They will no longer accept an Approved Exemption for Workers Compensation issued by the West Virginia Insurance Commissioner. An exemption certificate is insufficient to determine whether the individual is an independent contractor because the certificate is advisory only and the certificate does not trump the Commissioner's rules. Independent Contractor
According to the rules of the Insurance Commissioner, "All individuals performing services for compensation paid by an employer are presumed to be employees and required to be covered by a West Virginia workers' compensation insurance policy unless and until it is shown that the worker is an independent contractor. The burden of proving that an individual is an independent contractor is at all times, on the party asserting independent contractor status." The Insurance Commissioner provides a number of tests, each of which must be passed, in order to overcome the presumption of employment. Failure of the policyholder to provide proof of independent contractor status results in an increase in payroll in the amount paid for the services provided in accordance with NCCI rules.
An exemption certificate is insufficient to determine whether the individual is an independent contractor because the certificate is advisory only and the certificate does not trump the
Commissioner's rules.
A policyholder's failure to prove an individual is an independent contractor allows an individual to file a worker's compensation claim directly against the policyholder. When the policyholder becomes liable for the claim of the individual, the policyholder's carrier covers the workers' compensation benefits associated with the claim and the claim experience is charged to the policy. A policyholder, at audit, is charged premium for payroll attributable to those individuals for whom independent contractor status cannot be proved regardless of whether a claim has or has not been filed. Each of the following five tests must be met by a policyholder to prove that an individual performing services for the policyholder is not an employee when working in a hazardous industry (including but not limited to construction, transportation, extraction of natural resources, and explosives, gases and/or harmful chemicals).
- The individual holds himself or herself out to be in business for himself or herself, supported by:
- The individual has valid business permit/license.
- The individual regularly contracts out his or her services.
- The individual has the right under your contract to continue to contract his services to others.
- The individual controls when he or she performs the work; work schedule is not dictated by the policyholder.
- The individual is given a description and expectation of the work, and supervision only extends to the extent of monitoring compliance with federal or state laws related to safety.
- Unless expressly required by law, the individual is not required to work exclusively for the policyholder.
- The individual provides most significant equipment required to perform the job, when specific types of equipment are needed. For example:
- Truck, delivery, or other contracted drivers use their own vehicles.
- Commercial window washers use their own scaffolding/ladders.
- Independently contracted timbering worker must use his or her own timbering equipment.
Each of the following three tests must be met by a policyholder to prove that an individual performing services for the policyholder is not an employee when working in a non-hazardous industry.
- The individual has a valid business license, permit or other certification.
- There is a written contract stating the individual is an independent contractor, not an employee, and the individual will not be provided workers' compensation coverage by the policyholder.
- The individual maintains control over the time, means and manner of the work to be done. The policyholder cannot dictate the day-to-day schedule of the individual, although the policyholder may specify what the project is, the quality desired, and the time frame in which it is to be completed.
Prime Contractor
WV statutes make a prime contractor responsible for the injuries of an uninsured subcontractor's employees. The law specifically states that prime contractors, rather than the Uninsured Employer Fund, should be responsible for the payment of workers' compensation benefits for the injured workers of uninsured subcontractors.
The statute is applicable to contractors who regularly subcontract with other employers for the performance of services arising from or as a result of the prime contractor's own contract.
Receipt of a copy of the subcontractor's workers' compensation insurance policy/policies or the subcontractor's certificate of workers' compensation insurance covering the period when work was performed for the prime contractor is sufficient for the prime to avoid premium liability. This requirement includes proof of current and/or renewal or replacement coverage. Acord Form 25, "Certificate of Liability Insurance," is the standard certificate for the industry. An exemption certificate is insufficient to determine whether the subcontractor is an independent contractor because the certificate is advisory only and the certificate does not trump the statutory provisions.
According to the rules of the National Council on Compensation Insurance (NCCI), unless the prime contractor can show proof of workers' compensation coverage for the subcontractor, a carrier is required to charge premium to a prime for a subcontractor's employees. Note: This rule is applicable regardless of whether or not the subcontractor's employees have filed any claims.