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Who Is Considered Statutory Employee Under Workers Compensation?


Statutory Employee – IRS Defines The Term Well

Who is a statutory employee under Workers Comp? I recently received a question on our post regarding the South Carolina employee being ruled an employee.

Vector Graphic Of Statutory Employee On Their Role

I rarely copy from another website, but this is very important and I do not want to change the language of the IRS.  There are cases (such as the previous post on SC) where statutory employees may look like subcontractors but are instead statutory employees.   I think it is best to assume that you will need a contractor subcontractor agreement that spells out the fact the worker is a subcontractor.   The following is an exact definition and not just examples.

Statutory EmployeesIRS Definition

If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employers compensation employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes, below.

  • Supreme Court Statutory Employee Emblem

    A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission

  • A full-time life insurance sales agent whose principal business activity is selling life insurance annuity contracts, or both, primarily for one life insurance company
  • An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name if you also furnish specifications for the work to be done.
  • A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.
Picture Of Statutory Employee Clapping Hands

One of the best examples of a statutory employee under Workers Comp is an employee who is hired to do the same work that the company employees regularly do may be considered a statutory employee. There was a famous Missouri Supreme Court decision that spells out a four-prong test to see if an employee is a statutory employee or not.  The case was Bass v. National Super Markets, Inc.

The four-prong test is centered on the activities of the possible statutory employee in question:

  1. Activities that are routinely done;
  2. On a regular and frequent schedule
  3. Contemplated in the agreement between the independent contractor and the statutory employer to be repeated over a relatively short period
  4. The performance of which would require the statutory employer to hire permanent employees absent the agreement. Principal business activity

I know that was not exciting reading.  However, it may keep a company from being sued under an unlimited liability policy versus under Workers Comp as the sole remedy.

Next Up – Contractor Subcontractor and The Ladder of Insurance Revisited

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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