Independant Contractor Unemployment Insurance

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					Montana Independent
  Contractor Laws
     Presented by: Sandy Bay
  Montana Unemployment Insurance
        Contributions Bureau
           (406) 444-3302
         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
        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
      Independent Contractor
• Original IC Exemption (effect 1984) intent:
  – to allow an IC to opt out of Workers’ Comp
  – 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
        Supreme Court Case
• Kelly Wild v. Fregein Construction (2003)
  – Worker’s 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.”
  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
  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 Worker’s
    Comp benefits
     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.
     2005 - SB 108 Highlights
• Requires sworn acknowledgement that
     • 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
     2005 - SB 108 Highlights
• IC Exemption Certificate valid for two
• IC Exemption Certificate can be revoked
  or suspended
• Penalties extend to the worker and
• Increased application fee to $125
     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”
     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 can’t pre-determine if control is
    (or will be) exercised
     UI Concerns with SB108
• Suspension and revocation cannot be
  – UI impact if worker’s 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
         Benefits of SB108
• Employers/hiring agents have “conclusive
  proof” that individual is an independent
• IC is not mandated to obtain workers’
  comp insurance;
• Point criteria less subjective than “AB
• New IC exemption resulted in fewer IC
  exemption renewals.
• 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
  – Carefully consider retroactive vs. prospective
    revocation/suspension of IC exemption
  – Be cautious of expanding IC eligibility to
    appease industry or others
   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:

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