The question of whether or not an employee/independent contractor is a “covered employee” has presented itself more frequently than usual in the past few weeks. As such, below please find a brief answer to this questions. The following list is a representative example of those who are covered by workerman’s compensation and is not an exhaustive list. If you were injured at work and have any questions regarding eligiblity or how you should move forward, do not hestitate to contact Tabak Law for a risk free consulation at (414) 351-4400.
Who Is Covered?
Family members who work at the business are considered and counted as employees and covered by the Act. With the exception of farmers, an employee’s relationship to the owner has no bearing on the requirement to carry worker’s compensation insurance.
Minors are considered and counted as employees and covered by the Act.
Part-time employees are considered and counted as employees and covered by the Act. Whether an employee works part-time or full-time has no bearing on the requirement to carry worker’s compensation insurance.
Partnership or Small Business
The employees of partnerships, sole proprietorships, limited liability companies and corporations are covered by the Act. The partners, sole proprietors, and members of limited liability companies are exempt by the Act but may opt-in for coverage on themselves.
All worker’s compensation policies exclude the sole proprietor, partners, and members of limited liability companies unless specifically endorsed to include them.
Sole proprietors, partners, and members of limited liability companies may voluntarily purchase worker’s compensation insurance to cover their own work-related injuries and illnesses.Employers who have an existing worker’s compensation insurance policy may add themselves to that policy by notifying their agent and paying the additional premiums. It is necessary to have the policy endorsed to name the sole proprietor, partners, or members of limited liability companies for them to be covered.
Self-Employed Individuals/Sole Proprietors
A business that is neither a partnership nor a corporation but is owned by one person is called a “sole proprietorship.” The owner of that business is “selfemployed.” The employees of a sole proprietorship are covered by the Act, but the sole proprietor (the person who owns the business) is “self-employed.” He or she is not an employee of anyone and accordingly is not covered by the Act unless he or she chooses to be. A sole proprietor who has no employees is not required to carry a worker’s compensation insurance policy. Worker’s compensation is recommended even for sole proprietors who are not required to provide it by law. If you don’t have worker’s compensation for yourself by opting-in, it is important to understand the coverage exclusions of your health insurance policy that pertain to work-related injuries and illnesses. Most health insurance policies exclude “any workrelated injury or illness,” and as a result your healthinsurance policy will not cover work-related injuries and illnesses.
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. 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. A person is not an independent contractor for worker’s compensation purposes just because they say they are, or because the contractor over them says so, or they both say so, or even if other regulators say so.
The Act contains specific statutory conditions that must be met before a worker in the service of another person is not considered to be an employee for worker’s compensation. 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 Act (and who is not an employer himself or herself) is an employee of any employer they are working under in Wisconsin.
Under s. 102.07 (8), Wis. Stat., a person is required to meet and maintain all nine of the following requirements:
1. Maintain a separate business.
2. Hold or have applied for a federal employer identification number with the federal internal revenue service or have filed business or selfemployment 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.