OK I left of last time proclaiming that I would write more about the f***ed up Workers Comp system in Mass., and here we are.
#1 don't get me wrong, for an injured worker, WC is a very good thing. And, we have to admit that much fraud goes on. For example, contractors who succeed in passing off employees as "independent contractors" simply to avoid paying their fair share of taxes and benefits for the employees. In one memorable case, the employees of the King Arthur's Lounge (exotic dancers) in Boston filed a class action suit. They were being classified as independent contractors by the greedy owners, and they felt they were really employees, and entitled to better working conditions and more benefits. They won.
But, nothing here should indicate that I support the type of bottom-feeder behavior like that of the owners of King Arthur's Lounge, because I don't. I'm just saying that there is a place for both: the employees of the King Arthur's Lounge, and the independent contractors of the paperhanging fraternity.
And by the way, these morons that think that independent contractors avoid taxes should look at the amount of SE that I and most others in the Guild fork over every year to the Federal govt. before they accuse independents of skipping out on taxes. Believe! $$$$!!
What I object to is the way that in this state (and, I suspect, others) the good guys, namely, people like me, are lumped in with the bad guys. The way the laws are unofficially enforced, right now, penalize the legitimate independent contractor and I'm fed up with it. To wit, this is the way the unofficial system works here:
at audit time, general contractors are told by the insurance agent that they must produce WC certificates for each and every contractor they hire during the year. no exceptions. they are told that if they don't, they will be: a) penalized by having that contractor's pay added to their payroll, thus adding more premiums, which are then backcharged (payable immediately). also, they're told that they will: b) get put into a higher ratings category because of this, so that from now on, they will automatically pay more each year.
one can imagine the effect these threats have on the general contractor. almost invariably, they start crying and fold like a cheap suitcase. they then demand a WC certificate from each and every contractor that works for them. those that do not get a new WC policy do not get future work. a rather crude system, but it works, and the insurance agent is happy.
only one problem. this unofficial system, as engaged in by the insurance companies and their agents, does not follow Mass. General Laws, and for that reason their behavior constitutes fraud. if you look up the law and apply it to what's going on, it doesn't fit.
there are legitimate exceptions from the WC laws for the independent contrator under Mass. law. however, these exceptions are being overidden by the insurance audit system, which does not give the exception a chance to work.
the way it's supposed to work: at audit time, agents asks for all certificates, liability as well as WC. auditors can ask questions about those sub-contractors that are not covered by WC. they can ask the general contractor to explain the type of work done, and how it was done and so forth, and if the independent contractor is indeed a legitimate contractor, end of story. the WC certificate is not a requirement for a legitimate independent subcontractor in the state of Mass. on the other hand, if the general contractor can't prove that the independent is an independent, then, yes, an additional premium would apply, because the pay of the now-proven employee would be added to the general contractor's payroll. but, like I said, that's not the way it works, because the stage whereby the general contractor either proves or disproves the nature of the sub-contractor's work is never reached.
the reason why no one complains about this can be imagined. it's financial blackmail. would YOU like to irritate your insurance agency when they're doing an audit, and at the same time announcing that they have the power to backcharge you and raise your rates?
likewise, the reasons why no one goes to court over this can also be imagined. No one knows for sure how a case would be decided, so the tendency is to play it safe. This has disastrous effects for independents, who wind up being more or less forced to buy expensive coverage that does essentially nothing. however, this keeps the insurance companies happy, who naturally prefer overlapping coverage. To them, redundant coverage is a good thing since it cuts down on their exposure.
but here's the problem, do you really think that I or anyone else is going to take on a lengthy and expensive court case, just to prove a point? actually I might, if I were independently wealthy. but, it is a fact of life that few, least of all independent contractors, can afford to be tilting at windmills. you have to pick your fights very carefully in this life. still, that doesn't make this system right, so let's look at it closer.
the insurance industry says that if the 3-prong test for "Who Is An Employee?" is applied to independent contractors, that all of them would flunk. incredible as it may seem, that is what their position boils down to. I know because I spent time on the phone with these morons. Here is the 3-prong test:
(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
(2) the service is performed outside the usual course of the business of the employer; and,
(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
like I said, according to the insurance industry, no contractor working for another could pass this test, therefore they are all employees. they actually say this! the law tends to help their position because even if only one part of the prongs is true, then, the contractor flunks the test. but wait, lets look closer.
here is how I see these 3 prongs, and why I think they would never apply to a true independent:
_____
(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact
The first prong is easily proven because specialty contractors like paperhangers, tile guys, sheetrockers, etc. have their own tools and trade methods and are not ordinarily told what to do and how to do it by the contractor or homeowner hiring them for the work. Although come to think of it, I can remember a few homeowners who tried.
Example: Big John Contracting hires me to hang grasscloth. Neither Big John nor any of his merry men tell me how to cut seams or hang liner, or whether I should use liner. They hire me as a paperhanger, and I'm a paperhanger, and do what paperhangers do.
In the King Arthur's case, the management trained the women as exotic dancers (previously they had no experience); dancers were not permitted to negotiate their fees to perform, they were assigned 15 minute performance slots, and basically told what to do and how to do it. All of this is quite different from and does not apply to the way that independent contractors such as paperhangers are treated.
(2) the service is performed outside the usual course of the business of the employer
The second prong is often misinterpreted. It's often taken to mean that one painter cannot hire another, because they are in the same line of work. This places the emphasis on the type of work. I think the actual meaning is what it says, the "course of business", in other words, the way the business is operated.
For example, it is not the usual course of business of Big John Contracting to sheetrock or to set tile 52 weeks of the year. Nor would Big John Contracting have handscreens, grasscloth or other specialty wallcoverings hung all year round. Big John would only use such specialty contractors in certain situations. For example, when the type of work is too specialized, or over his head, or when it's advantageous to hire another pair of hands (due to a tight schedule), and this occasional use is clearly not his normal operating mode, or, the "usual course of the business". If it were his "usual course of business", I reason, then he would be doing it. Instead, he's hiring someone else. This places it outside of his "usual course of business".
In the King Arthur's case, the dancers proved that their work formed "...a regular and continuing part of the employer's business....." and this is one of the reasons they convinced the court that they were employees. but, that is not the case when an independent paperhanger does an occasional job for a general contractor, because it is not regular and continuing.
(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
The third prong is easily proven because I am not somebody new to the trade who depends on Big John Contracting for work. on the contrary, I work for many different people in many different situations. And every specialty contractor (independent contractor) can say the same.
In the King Arthur's case, the dancers had no other employment, not even other clubs. They were dependent on King Arthur's lounge for their work 52 weeks out of the year.
The defense rests.
helo, I am me.
ReplyDelete