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Home » Archives for July 2019

Archives for July 2019

Workers Compensation Negativity Volcano Erupts On A Daily Basis

July 19, 2019 By JL Risk Management Consultants

Workers Compensation Negativity – What Happened To Positivity? 

Measuring Workers Comp Negativity remains one of the easiest tasks for bloggers and authors inside and outside of the industry.   

workers compensation negativity volcano picture

(c) Acealexa Corp.

One has to ask how many times has a reader read an article extolling the virtues of a system that has been in existence since ancient Sumeria.  

Yes, the original workers’ comp coverage was not invented by Wausau or mariners in the 1800’s.

What caused me to write this article began when I came across an article where a well-known blogger posted four negative articles in one post.  I found that amazing. 

One has to wonder what subject the blogger would cover if not finding the workers compensation negativity in the nooks and crannies of what is an admittedly imperfect system. 

Growing Plant Workers Compensation Negativity Volcano In The Ground

Wikimedia License – Mark Dixon

Mark Walls of Safety National wrote a very poignant response to ProPublica’s slamming of the Workers’ Compensation system a few years ago.   As published in Insurance Thought Leadership some of the positive developments he was working on included:

  • A paraplegic worker lived with his family in a dilapidated mobile home that was insufficient for his wheelchair. We were obligated to provide him with comparable housing, which would have been a new mobile home. Instead, we purchased a house that was large enough for him and his family, complete with all the necessary modifications needed to make the home handicap-accessible.
  • A paraplegic worker used to enjoy hunting with his family. We purchased an all-terrain wheelchair in addition to his regular wheelchair so he could continue to enjoy this activity with his family.
  • We recently purchased experimental motorized leg braces for a paraplegic worker. Because of these braces, he is able to walk again.
  • I have seen numerous injured workers whom we have assisted in recovering from an addiction to opioid pain medications. When these injured workers are free of this addiction, their quality of life and their relationship with their families is significantly improved. We have had both injured workers and their family members thank us for helping them overcome this addiction

In 2015, I wrote an article titled “In Defense of Workers’ Compensation” to the same type of vitriolic reporting covering workers’ compensation negativity.  

Even the bloggers and authors that deride the Workers’ Compensation system live off the same tree as the vendors and other service suppliers.  Without workeers’ negativity, what would they cover in their articles?  One has to wonder.

If a company or governmental entity invented a better system, where are they now?  Why has not workers’ compensation been replaced and in the rearview mirror for providing benefits to injured workers?

Even in other countries, such as China or the Philippines, the workers’ comp structure stays in place when paying benefits.   These two countries are monopolistic and pay the benefits as more of a governmental program.

The only benefit that I have seen that competes with Work Comp is the AFLAC wage benefit replacement.  I mentioned the AFLAC model when I analyzed the Affordable Care Act and its possible move into a 24-hour coverage benefit.  No such coverage was ever expanded for injured workers.  Why?  Because the structure in place still works today. 

The system does have its downfalls.  Mistakes were made along the way.   Many vendor companies such as Corvel, OneCall Medical and others have been chided for their earnings; conduct of business; and in other areas including forecasted earnings.   However, Corvel’s stock price can be seen on the chart below:

workers compensation negativity Corvel 5 year stock price graph

(c) Yahoo Finance Derived

I think they call that a “win’ in stock price evaluation.    The Five-year graph shows that CorVel remains very profitable for investors. 

OneCall Medical struggled recently.   I have talked to some of the capital providers in the industry.  Most analyzed the short-term struggles as a “bump-in-the-road’ of any rapidly growing company.  

The newest “sky-is-falling” workers comp negativity buzz may likely come from the recent Sedgwick purchase of York Risk Services.  One can see that York provides a few platforms that Sedgwick would require in the future.  Overall, one would have to wait and see what happens with York.  

Many of the large moves in the marketplace do not occur without hours and hours of analysis by very competent investment experts. 

Ok, so back to the workers’ compensation negativity after a little positivity.

©J&L Risk Management Inc Copyright Notice

Filed Under: Workers Comp System Tagged With: article extolling, experimental motorized, Medical struggled

IRS Publication 15A – Independent Contractor vs. Employee Examples

July 16, 2019 By JL Risk Management Consultants

Employee vs. Independent Contractor – Great Examples From IRS Publication 15A

The IRS Publication 15A – Titled – Employer’s Supplemental Tax Guide still provides many tips when hiring employees or subcontractors for a business.   You can download the publication here.

Title Page IRS Publication 15a

(c) internal Revenue Service

Every small employer that prepares to grow their business should read through the pages of IRS Publication 15A very carefully.    The IRS has painstakingly provided a large amount of very useful information in this publication.

One area I came across over the Independence Holiday consisted of examples (by industry) for employee and independent contractor determination.  I realize the list does not cover every state’s workers’ compensation laws and rules for making the determination.  Please use the following as more of a general guide from the Federal Government. 

Dynamex Decision

Many workers’ comp bloggers published a large number of articles on this “landmark decision” in California.   The decision was not that different than an IRS pamphlet already in existence.  Check out my earlier article on that IRS guide.

Industry Examples From IRS Publication 15A

The following examples may help you properly classify your workers.

Building and Construction

Industry Example 1.

Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. She didn’t advance funds to help him carry on the work. She makes direct payments to the suppliers for all necessary materials. She carries liability and workers’ compensation insurance covering Jerry and others that he engaged to assist him. She pays them an hourly rate and exercises almost constant supervision over the work. Jerry isn’t free to transfer his assistants to other jobs. He may not work on other jobs while working for Wilma. He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. He and his assistants perform personal services for hourly wages. Jerry Jones and his assistants are employees of Wilma White.

Example 2.
Mens Working irs publication 15a construction

Wikimedia – flickr Paul Keheler

Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. He uses his own tools and performs services in the order designated by the corporation and according to its specifications. The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers’ compensation insurance on him. He doesn’t have a place of business or hold himself out to perform similar services for others. Either party can end the services at any time. Milton Manning is an employee of the corporation.

Example 3.

Wallace Black agreed with the Sawdust Co. to supply the construction labor for a group of houses. The company agreed to pay all construction costs. However, he supplies all the tools and equipment. He performs personal services as a carpenter and mechanic for an hourly wage. He also acts as superintendent and foreman and engages other individuals to assist him. The company has the right to select, approve, or discharge any helper. A company representative makes frequent inspections.

When a house is finished, Wallace is paid a certain percentage of its costs. He isn’t responsible for faults, defects of construction, or wasteful operation. At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. The company gives him a check for that amount from which he pays the assistants, although he isn’t personally liable for their wages. Wallace Black and his assistants are employees of the Sawdust Co.

Example 4.
Picture of houses irs publication 15a in New York

Wikimedia – Matt H. Wade

Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. A signed contract established a flat amount for the services rendered by Bill Plum. Bill is a licensed roofer and carries workers’ compensation and liability insurance under the business name, Plum Roofing. He hires his own roofers who are treated as employees for federal employment tax purposes. If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Bill Plum, doing business as Plum Roofing, is an independent contractor.

Industry Example 5.

Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This isn’t considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies that she obtained through advertisements. Vera is an independent contractor.

Trucking Industry Example.

Picture of red triaxle dump truck outside

Wikimedia – Ky MacPherson

Rose Trucking contracts to deliver material for Forest, Inc., at $140 per ton. Rose Trucking isn’t paid for any articles that aren’t delivered. At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. All operating expenses, including insurance coverage, are paid by Jan Rose. All equipment is owned or rented by Jan and she is responsible for all maintenance. None of the drivers are provided by Forest, Inc. Jan Rose, operating as Rose Trucking, is an independent contractor.

Computer Industry Example.

Steve Smith, a computer programmer, is laid off when Megabyte, Inc., downsizes. Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. It isn’t clear how long that it will take to complete the project, and Steve isn’t guaranteed any minimum payment for the hours spent on the program. Megabyte provides Steve with no instructions beyond the specifications for the product itself. Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. Steve works at home and isn’t expected or allowed to attend meetings of the software development group. Steve is an independent contractor.

Automobile Industry

Industry Example 1.
Picture of old car irs publication 15a Pancho villa car

Wikimedia – Jacob Rus

Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. She works 6 days a week and is on duty in Bob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She is required to develop leads and report results to the sales manager.  Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Bob. Bob also pays the cost of health insurance and group-term life insurance for Donna. Donna is an employee of Bob Blue.

Example 2.

Sam Sparks performs auto repair services in the repair department of an auto sales company. He works regular hours and is paid on a percentage basis. He has no investment in the repair department. The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. Sam is an employee of the sales company.

Example 3.
Picture of auto sales irs outside the store

Wikimedia – Peter Facey

An auto sales agency furnishes space for Helen Bach to perform auto repair services. She provides her own tools, equipment, and supplies. She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. She hires and discharges her own helpers, determines her own and her helpers’ working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. Helen is an independent contractor and the helpers are her employees.

AttorneyExample.

Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. Donna has a part-time receptionist who also does the bookkeeping. She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. The bills include charges for long distance calls, online research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. Donna is an independent contractor.

Taxicab Driver Example.

Tom Spruce rents a cab from Taft Cab Co. for $150 per day. He pays the costs of maintaining and operating the cab. Tom Spruce keeps all fares that he receives from customers. Although he receives the benefit of Taft’s two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. Tom Spruce is an independent contractor.

Salesperson

–One of the most complicated determinations in IRS Publication 15A
Picture of Salesperson irs publication 15a Showing Tab Pad

Wikimedia – Public Domain

To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. If a salesperson who works for you doesn’t meet the tests for a common-law employee, discussed earlier in this section, you don’t have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). However, even if a salesperson isn’t an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee.To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she:

  1. Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person;
  2. Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works;
  3. Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments;
  4. Sells merchandise for resale, or supplies for use in the customer’s business;
  5. Agrees to do substantially all of this work personally;
  6. Has no substantial investment in the facilities used to do the work, other than in facilities for transportation;
  7. Maintains a continuing relationship with the person or company for which he or she works; and8.Isn’t an employee under common-law rules

Please note that the IRS examples above cover the very basics of a workers’ compensation determination between whether your new helper is an independent contractor or employee.   Please refer to your specific state’s workers’ comp laws and other publications besides IRS Publication 15A.

 

©J&L Risk Management Inc Copyright Notice

Filed Under: IRS Tagged With: Holiday consisted, Supplemental Tax, wasteful operation

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James J Moore
Raleigh, NC, United States

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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