Workers Compensation Insurance

Did you know?

Worker's compensation is a system of no fault insurance that provides wage replacement and medical benefits to employees for accidental injuries or diseases related to the employee's work. Wisconsin law requires that an employer with employees working in Wisconsin must have a worker's compensation insurance policy with an insurance company licensed to write worker's compensation insurance in Wisconsin.

An employer subject to the Wisconsin Worker's Compensation Act may not withhold or collect any money from employees or any other person, including independent contractors and sub-contractors, to pay for worker's compensation insurance. To do so is illegal. Also, no agreement by an employee waiving rights to compensation is valid.

All workers compensation policies exclude the sole proprietor or partners; but they may opt for coverage on themselves. Corporate officers are considered and counted as employees and are covered by the Act. In a closely held corporation no more than 2 corporate officers may elect not to be subject to the Workers Compensation Act, but must have coverage for any employees.

Note: Workers Compensation policies are usually placed with the Wisconsin Compensation Rating Bureau who assigns it to an A rated Insurance Carrier. Coverage cannot be bound until the WCR has the completed application and premium payment in their office.

Independent Contractors

If one company hires another company to come in and do some work for it, the second company is ordinarily an "Independent Contractor" and not an employee of the first company. A person is not an independent contractor for workers compensation purposes just because they say they are, or because the contractor over them says so, or they both say so. There are specific statutory conditions that must be met before a worker under another person is considered not to be an employee. Any owner/operator or independent contractor must meet all of the nine specific tests of independence in the Wisconsin law. Any subcontractor or independent contractor who does not meet and maintain all of the nine specific tests of independence in the Wisconsin law and who is not an employer himself, is an employee of the employer he is working under in Wisconsin. Independent contractors who have no employees or who are not required to be insured may buy a policy to cover themselves. Sometimes, however, a company hires one person to come in and perform a specific job and disputes arise as to whether or not that person is an employee or an independent contractor.

There are nine conditions that establish whether independent contractors are employees. Any owner/operator or independent contractor who does not meet and maintain all of the nine specific tests of independence in the Wisconsin law (and who is not an employer himself or herself) is an employee of any employer they are working under in Wisconsin.

Wisconsin 9 Point Test for Independent Contractors

Under s. 102.07 (8), Wis. Stat., a person is required to meet a nine-part test before a person can be considered an independent contractor rather than an employee. To be considered an independent contractor and not an employee, an individual must meet and maintain all nine of the following requirements:

1. maintain a separate business
2. holds or has applied for a federal employer identification number with the federal internal revenue service or has filed business or self-employment income tax returns with the federal internal revenue service based on that work or service in the previous year; [Note: When requesting a Federal Identification Number (FEIN) from the IRS, you must inform the IRS that you are required by Wisconsin Worker's Compensation law to obtain a FEIN. A social security number cannot be substituted for a FEIN and does not meet the legal burden of s. 102.07 (8), Wis. Stat.
3. operate under specific contracts
4. be responsible for operating expenses under the contracts
5. be responsible for satisfactory performance of the work under the contracts
6. be paid per contract, per job, by commission, or by competitive bid
7. be subject to profit or loss in performing the work under the contracts
8. have recurring business liabilities or obligations
9. be in a position to succeed or fail if business expense exceeds income

Independent contractors who have no employees or who are not required to be insured may buy a policy to cover themselves.

Source: State of Wisconsin Office of the Commissioner of Insurance

Premium

An Independent Contractor (Owner-Operator) as sole proprietor of his business with no employees may exclude himself from coverage. The worker's compensation policy would provide coverage for any employee he may hire. This policy is auditable and a minimum premium applies. If at the time of audit, the insurance company finds no payroll or employees the entire premium less the Expense Constant will be returned. The Expense Constant is a premium charge that applies to every policy. It covers expenses such as those for issuing, recording and auditing, which are common to all worker's compensation policies regardless of premium size.

If the Owner-Operator elects to be covered on his workers compensation policy, the estimated payroll is based on a minimum payroll.

All Worker's Compensation policies are auditable; at year-end the premium would be adjusted to match the exact payroll. Note: audits are not completed until after the expiration of the policy. Failure to respond to the audit will result in additional premium.

The Wisconsin Compensation Rating Bureau sets the premium rate and minimums for each class with the approval of the Commissioner of Insurance.

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