IAIABC Announces An Overview Of Workers' Compensation Independent Contractor Regulatory Approaches


Vancouver, BC (CompNewsNetwork) - State workers compensation laws in the United States exempt "independent contractors" from purchasing workers' compensation insurance.  However, coming up with a well defined and enforceable set of rules to distinguish between an independent contractor and employee is a daunting task.

Two years ago, the International Association of Industrial Accident Boards and Commissions (IAIABC), in collaboration with the National Association of Insurance Commissioners (NAIC) began a joint study on how legally qualified independent contractors are established in US jurisdictions. The study enjoyed the input of numerous industry experts and state insurance and workers' compensation regulators.  The report was formally adopted by the joint committee at its meeting in Vancouver, BC on October 29, 2008, and referred to the IAIABC Executive Committee for acceptance as an IAIABC official report.

Alan McClain, CEO of the Arkansas Insurance Commission, participated in the preparation of the report and co-chairs the NAIC/IAIABC Working Group.  "I think this is a very useful report to policy makers.  As a member of the IAIABC Executive Committee I will move to have it adopted as an official report of the IAIABC," said McClain, after the report was declared final.   He noted that many jurisdictions are struggling to find a better system to regulate the legal criteria to on what constitutes an independent contractor.  This report, he offered, would be of great practical value in framing new regulations.

The National Association of Insurance Commissioners will undergo it own internal review of the report.  It will be brought before the Workers' Compensation Task Force of the P&C (C) Committee at its winter meeting in Grapevine, Texas in December 2008.

Workers' compensation administrators are interested in several key issues when addressing independent contractors. The legal criteria defining independent contractors must be clearly defined and enforceable. If independent contractor status is not easily defined the determination of compensability and awarding of benefits is often delayed. Also, from an insurance regulatory perspective, the determination of employment status is critical to determining claims exposures and collecting appropriate insurance premiums.

In the review of state criteria and their administration, the NAIC and IAIABC found a wide range of approaches. One of the paper's key findings is that "control" of work is a core principle that government programs use to determine employment over contracting. Yet, control is hard to measure and can be easily feigned.  Seeking more certainty in the application of the law, states have developed an abundant range of other criteria and screens to more easily and clearly separate employees from contractors. 

The paper discusses the ramifications of different laws and procedures.  Equity and economic freedom are considered.  The paper stresses the impact of different screening systems on the administration of the workers' compensation system. 

Mona Carter, National Policy Executive for the NCCI, was a frequent commenter on the report.  She noted that the National Council of Insurance Legislators was awaiting finalization of the report.  NCOIL workers' compensation experts may be interested in developing model laws or rules based on elements of the report.

Greg Krohm, IAIABC Executive Director, was one of the principle authors of the paper.  He offered his special thanks to Alan Wickman, Nebraska Insurance Commission, and Bob Wake, Maine Insurance Commission. He also acknowledged the help of many members of the joint committee, Bob Card from the NAIC staff, and other experts who commented on the draft report.  Questions may be directed to Mr. Krohm at: gkrohm@iaiabc.org.  

The report is available online, free of charge, to IAIABC members at:     http://www.iaiabc.org/i4a/pages/index.cfm?pageid=3382

About the IAIABC

The International Association of Industrial Accident Boards and Commissions is a not-for-profit association representing most of the government agencies charged with the administration of workers' compensation systems throughout the United States, Canada, and other nations and territories as well as other workers' compensation professionals in the private sector. Its mission is to advance the administration of workers' compensation systems throughout the world through education, research, and information sharing. It is governed by an Executive Committee of jurisdictional agency leaders, and maintains a staff headquarters in Madison, Wisconsin, USA.

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