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Types of Misclassification – One Bad and One Just Needs Repairing

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Types of Misclassification  = Employee Status – Not Same As Wrong Class Codes

Two types of misclassification of employee status- and they are not the same whatsoever.

We have received emails over the last few weeks concerning various Departments of Insurance pursuing employers for misclassifying employees in their Workers Comp policies. This is not to be confused with the misclassifying of employees as subcontractors.

Vector Graphic of Four Man Types of Misclassification Employees
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The recent press releases about employers being fined large amounts of money for misclassifying employees are not the same as an employer questioning how their employees are classified. The states are pursuing employers that classify an employee as a subcontractor.

The IRS has a list of rules that differentiate an employee from a subcontractor on their website. You may also use the search box in this blog and search for IRS. The link to the IRS article is in one of my prior blogs.

Your company always retains the right to dispute (Within 3 years of policy expiration except CA) how your employees are classified in your Workers Comp policy. This means your company can dispute the premium audit that the premium auditor has prepared. Once again, disputing the premium audit or questioning the premium auditor’s work will never result in the Department of Insurance investigating your business practices.

Picture Hand Presenting Types of Misclassification Codes
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In fact, your Workers Comp policies have included in them the right to dispute anything in the policy or audit. If you read the final pages of your policy it is in there. In fact, all states require the insurance carrier to include in the policy the dispute procedure in detail.

State Departments of Insurance are beginning to heavily pursue the misclassification of employees as subcontractors. Why? The employees are being removed from the Workers Compensation Insurance system and the tax system.

A company needs to make sure they avoid the two types of misclassification.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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