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New MI Laws on Independent Contractors Now in Effect

January 2013

If your business regularly utilizes the services of a person who you have designated to be an Independent Contractor, you should be aware that there has been a change in the Michigan Workers’ Compensation law pertaining to whether your company would be considered the independent contractor’s employer and liable for his/her workers’ compensation benefits. As of January 1, 2013, the Michigan legislature enacted a 20- factor test to determine if an employer/employee relationship exists for workers’ compensation liability. The 20-factors are:

  1. INSTRUCTIONS: If your business requires the contractor comply with its instructions about when, where and how the service is to be done, the contractor could be considered an employee.
  2. TRAINING: If your business requires that the contractor perform the job in a particular manner then the contractor could be considered an employee. An independent contractor will use his/her own methods be complete the agreed upon service and should receive no training from your business.
  3. INTEGRATION: If the services performed by the contractor are an important part of your business operation then the contractor could be considered an employee. The integration of the two businesses indicates that the contractor is subject to your direction or control.
  4. SERVICES RENDERED PERSONALLY: If the contractor is required to perform the service Personally, it is an indication that the contractor is an employee since an independent contractor is free to assign work to his/her own employees, if necessary.
  5. HIRING, SUPERVISION AND PAYING ASSISTANTS: If the business allows the contractor to hire, supervise or pay assistants for the business, the contractor is likely to be deemed an employee unless the contract specifies that the contractor will hire and supervise other as part of the contract.

The above information and article was provided by Accident Fund Insurance Company of America.