NCOIL DEFERS CONSIDERATION OF EMPLOYEE MISCLASSIFICATION WORKERS COMPENSATION COVERAGE MODEL ACT
On July 14, 2009, the National Conference of Insurance Legislators (NCOIL) met in Philadelphia, Pennsylvania for its 2009 NCOIL Summer Meeting. At the meeting, members of the Workers' Compensation Insurance Committee engaged in serious discussion and debate concerning the Employee Misclassification Workers' Compensation Coverage Model Act. Representative Charles Curtiss (TN)-who co-sponsored the model for discussion purposes-at the NCOIL Summer Meeting, said:
I believe that employee misclassification is the root cause of the workers' comp problems facing states, including increased medical, legal, and coverage costs. Most states exempt independent contractors from workers' compensation insurance coverage, creating a loophole for employers looking to avoid these mandates. This practice leaves injured workers vulnerable and shifts costs to our already overburdened health insurance system and the public.
In addition, co-sponsor Senator Ralph Hudgens (GA) said:
As a small business owner, I know firsthand how unfair it can be when employers recast their employees as independent contractors to avoid costs. This creates a competitive disadvantage for compliant employers vying for the same business. During the current economic downturn, our states have even greater concern about this issue, and I'm glad NCOIL is moving forward with this model. While this isn't cake yet, we need to keep cooking it.
The draft model-based on Florida and Wisconsin statutes-targets transparency, disclosure, and accountability in workers' compensation insurance. It would set up a strict nine-point test to clearly define an independent contractor and mandate workers' compensation coverage in the construction industry, with certain exceptions. It would create clear procedures for insurer application, disclosure, and auditing and provide civil and criminal penalties for employee misclassification and insurance fraud. It also would establish strict enforcement authority including, among other items, power to temporarily shut down job sites when employers don't comply.
The Subcommittee deferred consideration of the model and will review all comments and produce a revised discussion draft. The Subcommittee will also hold a series of conference calls to advance the model for consideration at the NCOIL Annual Meeting to be held from November 19 through 22 in New Orleans, Louisiana.