Montana Independent Contractor Laws

1
Montana Independent Contractor Laws

• Presented by Sandy Bay
• Montana Unemployment Insurance Contributions
  Bureau
• [phone]
• e-mail sabay_at_mt.gov

2
Montana IC Laws

• Background on Montana IC Definition and Law
  Changes
• Supreme Court Case
• IC Study SB108
• Concerns and Benefits of New Law
• Recommendations Reference Site

3
IC Law Changes

• 1986 and prior ABC test
• 1987 AB Test
• 1991 AB Test recognize Workers Comp
  Independent Contractor Exemption
• 1993 Resolved waiver of rights conformity
  issue.
• 1995 IC Central Unit Created

4
Independent Contractor Exemption

• Original IC Exemption (effect 1984) intent
• to allow an IC to opt out of Workers Comp
  coverage
• Individual completes affidavit, provides proof of
  IC status and pays 25
• conclusive proof that person is an IC
• 1991 - IC exemption recognized by UI
• 1995 - IC Affidavit simplified 17 fee

5
Supreme Court Case

• Kelly Wild v. Fregein Construction (2003)
• Workers Comp Court ruled in favor of insurer
• Montana Supreme Court reversed decision and held
  in favor of Wild
• if it looks like a duck, walks like a duck
  and quacks like a duck, it must be a duck. We
  would only add that it must be a duck even if it
  is holding a piece of paper that says it is a
  chicken.

6
SB270 - IC Study Committee

• 2003 Legislature established Interim Advisory
  Committee comprised of
• Members of business and community
• Members representing Workers Comp insurers
• Members representing building contractors
• Members representing labor organizations
• A representative from Department of Labor
  Industry
• Commissioned Report on IC Best Practices
• Recommended maintaining IC Exemption by restoring
  conclusive nature of IC exemption through
  legislation

7
2005 Senate Bill 108 Intent

• Reverse Wild decision
• Restore conclusive presumption person working
  under an Independent Contractor (IC) Exemption
  Certificate is an Independent Contractor
• Allow employer to pay persons with an IC
  exemption at a higher rate than paid to
  employees
• Allow person with an IC exemption certificate to
  work for only one employing unit without being
  held an employee and to waive their rights to
  Workers Comp benefits

8
2005 - SB 108 Highlights

• UI definition of Independent Contractor changed
  from AB Test to one working under an IC
  exemption certificate
• Only those who perform services outside of their
  own fixed business location need an IC exemption
  certificate
• Endorsements required for licensure does not
  constitute control.

9
2005 - SB 108 Highlights

• Requires sworn acknowledgement that applicant
• is free from control and direction and
• has independently established business
• Must provide proof and meet 15 point criteria
  developed by administrative rule
• Applicant completes affidavit pays 125
• Waives rights to Workers Comp benefits

10
2005 - SB 108 Highlights

• IC Exemption Certificate valid for two years
• IC Exemption Certificate can be revoked or
  suspended
• Penalties extend to the worker and employer
• Increased application fee to 125

11
UI Concerns with SB108

• Elimination of AB Test presents issues
• Person works out of own fixed business location
  may not need exemption
• Person met old AB Test but has not obtained an
  IC exemption certificate.
• ICCU makes decisions based on existence of IC
  exemption - not AB test

12
UI Concerns with SB108

• Person can work exclusively for one hiring agent
  and be considered an IC
• Reliability of IC exemption certificate
• Relative ease in meeting 15 point criteria
• Department cant pre-determine if control is (or
  will be) exercised

13
UI Concerns with SB108

• Suspension and revocation cannot be retroactive
• UI impact if workers exemption is revoked or
  suspended and is then laid off
• No wage credits for establishing UI benefit claim
  
• If claimant appeals wages are added, no UI tax
  assessed on those wages.
• Revocation can only occur due to fraud or
  misrepresentation

14
Benefits of SB108

• Employers/hiring agents have conclusive proof
  that individual is an independent contractor
• IC is not mandated to obtain workers comp
  insurance
• Point criteria less subjective than AB test
• New IC exemption resulted in fewer IC exemption
  renewals.

15
Recommendations

• IF considering IC exemption for UI
• Have a strong UI voice on committee / drafting
  legislation rules
• Maintain your IC definition (i.e. ABC test) in
  statute
• Carefully consider retroactive vs. prospective
  revocation/suspension of IC exemption
• Be cautious of expanding IC eligibility to
  appease industry or others

16
Montana IC Web Sites

• Link to Montana ICCU SB 108, IC Exemption
  Information, IC study committee, IC Application
  Form, 15 point test, administrative rules, court
  case, etc
• http//erd.dli.mt.gov/wcregs/iccu.asp