Independent Contractors may be Employees and Entitled to Minnesota Workers’ Compensation Benefits
Independent Contractors | MN Work Injury Lawyers
One way that employers try to save money by reducing their exposure for taxes and workers’ compensation premiums is to classify their employees as independent contractors. Often times, they attempt to entice the workers to be independent contractors on the basis that they would earn more money and would pay fewer taxes. While this sounds great initially, this ends up being arouse as the worker ultimately has to establish their own business and faces a significant risk as often times they are not covered by workers’ compensation. While employers classify these workers as independent contractors when in reality many independent contractors would be classified as an employee by the Minnesota Department of Economic Security or the IRS if audits were conducted. Another reason by employers at times attempt to avoid these situations so as to avoid paying payroll tax penalties, wage and hour law violations, and employee benefits plans.
Employers/contractors should be cognizant of the risk associated with designating someone as an independent contractor when they could be deemed to be an employee.
Under the law, a general contractor is liable for all workers’ compensation benefits due to the injured employee of a subcontractor if that subcontractor does not have workers’ compensation insurance. If a contractor has inappropriately classified an employee, the contractor may be determined to be the individual’s employer and found to be liable for workers’ compensation benefits.
Typically, a nine-factor test is used to determine whether a worker is an independent contractor. These include:
- Maintains a separate business with the individual’s own office, equipment, materials or other facilities.
- Holds or has applied for a Federal Employer Identification Number or has filed business or self-employment income tax returns.
- Is operating under contract to perform the specific services for the person for specific amounts of money and under which the individual controls the means of performing the services.
- Is incurring the main expenses related to the services that the individual is performing for the person under the contract.
- Is responsible for the satisfactory completion of the services that the individual is contracted to perform for the person and is liable for failure to complete the services.
- Receives compensation from the person for the services performed under the contract on a commission or per job or competitive bid basis and not on any other basis.
- May realize a profit or suffer a loss under the contract performed services for the person.
- Has continuing or recurring business liabilities or obligations.
- The success or failure of the individual’s business depends on the relationship of the business receipts to expenditures.
Even if a worker has been designated as an independent contractor but is truly an employee under the law, they would be entitled to workers’ compensation benefits their injury arises out of and in the course and scope of their employment. It is important to know your rights under the Workers’ Compensation Act. Talk with an experienced Minnesota workers’ compensation attorney today by calling 855-354-2667 to schedule a free no-hassle consultation.
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