Workers Compensation in TN
August 8, 2013
A Few Notes About Workers’ Compensation Law In TN
Sometimes, I get asked about Workers’ Compensation, and, even though I am not a Workers’ Compensation law specialist, I try to stay informed enough about Workers’ Compensation law that I can answer basic questions. The one I get the most is, “Who has to carry workers’ compensation insurance on their employees?”
According to the TN Dept. of Labor and Workforce Development,
“Generally, Tennessee employers, not in the construction or coal mining industry, with five (5) or more full or part-time employees are required to carry workers’ compensation insurance on those employees. Corporate officers and family members meeting the definition of employee are included in the count towards the total, regardless of whether or not the officer(s) elects to decline coverage.”
I’m not going to get into issues pertaining to the mining industry in this article, because I have not personally dealt with any mining companies; I doubt there are many in Middle Tennessee, where the bulk of my practice is. I will say a few things about the construction industry, however, as I am more familiar with that. The construction industry has stringent guidelines they must follow.
“Any person engaged in the construction industry is required to carry workers’ compensation insurance on [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][all of] their employees [and themselves]. Effective March 28, 2011, construction employers in the contracting group designated by the National Council of Compensation Insurance (NCCI) must have workers’ compensation insurance on all of their employees and themselves (unless you are a sole proprietor or partners with no employees being paid directly by the property owner).”
Now, more than ever, it is important to properly classify your employees as such, and to properly classify genuine independent contractors as such. Misclassification is a serious offense, and can result in hefty fines. That’s right – you can be fined by the state if you misclassify employees as “independent contractors.” The penalty is “up to the greater of one thousand dollars ($1,000.00) or one and one half (1 1/2) times the average yearly workers’ compensation premium for such construction services provider based on the appropriate assigned risk plan advisory prospective loss cost and multiplier minus the premium dollars paid on the policy that was the object of the understatement or concealment.” Tenn. Code Ann. § 50-6-411 as modified by Public Chapter 424, passed April 18, signed into law May 16, effective July 1, 2013.
Public Chapter 424 (SB0833/HB0551) subjects any construction services provider who misclassifies employees to avoid proper classification for workers’ compensation insurance premium calculations by concealing any information pertinent to the computation and application of an experience rating modification factor to a civil penalty. The penalty will also apply to any construction services provider who materially understates or conceals: the amount of their payroll, the number of their employees, or any of the construction services provider’s employee’s duties. This does not affect a construction services provider’s or carrier’s duty to provide workers’ compensation benefits or any of the construction services provider’s or carrier’s rights and defenses under the workers’ compensation law. This bill became effective on July 1, 2013.
There are additional laws, rules and regulations that pertain to subcontractors and how they must be covered by a workers’ compensation insurance policy, but if you are interested in that, just email me, and I will send you that information.
So, who is an employee, and who is an independent contractor… really? The lines between those categories don’t always seem clear. If you hire a catering company to cater your company’s 4th of July barbecue, the catering company might be classified as an independent contractor, because even though you’re hiring them to do some work for your company, they are really just being paid to achieve a specific goal or result, and how they do it is mostly up to them. On the other hand, if you own a restaurant, and you hire additional temporary cooks, bus boys, waiters, dishwashers, etc. to work in your restaurant to prepare, cook, and serve food and to clean up after a meal in order to provide a nice 4th of July meal for your regular employees and their friends and family, the new workers you hired – even though they are temporary workers hired for a special occasion – are almost certainly not going to be able to be classified as “independent contractors.” They are employees of your business, and you must carry workers’ compensation insurance on them.
Here are a few general characteristics of employees and independent contractors given by the TN Dept. of Labor and Workforce Development (with a few tweaks I have made for the sake of clarity):
- Free from direction and control with respect to how a job is completed
- Has necessary skills and training to complete job
- Has a business location (can be a virtual office)
- Performs services for multiple customers
- Sets own hours (within acceptable parameters)
- Determines own price for contracted services
- Not eligible for employee benefits
- Provides equipment and tools used to complete job
- Supplies materials needed to do job
- Personally liable for errors and/or accidents
- Files self-employment taxes
- Has right to hire and fire workers
- Legally obligated to complete each contract
- Means and manner of work are (or can be) controlled by employer
- May be trained by employer to perform job
- May work at employer’s business location
- Works for one employer (in an industry), may serve that employer’s customers
- Hours set by employer
- Accepts wage, salary, or commission determined by (or negotiated with) the employer
- Employer may provide and control equipment and tools
- Employer may purchase materials and supplies
- Employer liable for employee errors and/or accidents
- Is hired and can be fired by employer
- May quit working for an employer at any time
- Employer may require specific attire to be worn while at work such as a uniform or shirts with company logo
Workers’ Compensation law can be confusing and expensive. Executive Legal Professionals, PLLC can help you comply with the laws and regulations pertaining to workers’ compensation law and a variety of other regulated areas of your business. If you do not have a business lawyer, call Executive Legal Professionals at 615.669.6566, and get started with essential legal services for a fair flat fee, today.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]