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In Michigan, the process of identifying and classifying workers versus independent contractors has been specified through a structured approach, facilitated by the Michigan Workers’ Compensation Placement Facility (MWCPF) Independent Contractor Worksheet. This document, detailed in a circular letter dated October 3, 2008, outlines a shift from the previous practice which allowed sole proprietors without employees to be automatically considered as independent contractors upon presenting a Certificate of Insurance (COI). Starting July 1, 2009, this automatic designation ceased for the residual market concerning new and renewal policies, requiring the completion of the Independent Contractor Worksheet for consideration of independent contractor status during a workers' compensation audit. The form requires specific information from the contractor, including the nature of their business operations, whether they hire employees or subcontractors, if they have general liability coverage, and their client list over the past twelve months to substantiate their claim of independence. This meticulous approach aims to accurately ascertain an individual’s working status, ensuring that workers' compensation exposure is correctly identified and allocated during policy audits. By mandating the completion of this worksheet, both the MWCPF and businesses engaging contractors can confidently navigate the complexities of workers’ compensation obligations.

Preview - Michigan Workers Independent Contractor Worksheet Form

MICHIGAN WORKERS’ COMPENSATION PLACEMENT FACILITY

P.O. Box 3337 Livonia, MI 48151-3337

(734) 462-9600 Fax (734) 462-9721

Internet WEB Site: www.caom.com E-Mail: caom@caom.com

October 3, 2008

CIRCULAR LETTER #222

MICHIGAN WORKERS’ COMPENSATION PLACEMENT FACILITY (MWCPF)

INDEPENDENT CONTRACTOR WORKSHEET

It has been an accepted practice in the residual market to consider a sole proprietor without employees as an independent contractor, if a Certificate of Insurance (COI) for the individual is presented. Effective July, 1, 2009, this practice will cease in the residual market (on new and renewal policies as of that date). In order for a sole proprietor without employees to be considered for independent contractor status, the MWCPF Independent Contractor Worksheet must be completely filled out and supplied to the entity undergoing a workers compensation audit.

Attached is a copy of the worksheet. As indicated on the worksheet, additional information may be requested to determine independent contractor status.

Sincerely,

Gary L. Thompson

MICHIGAN WORKERS’ COMPENSATION PLACEMENT FACILITY

INDEPENDENT CONTRACTOR WORKSHEET

TO BE COMPLETED BY THE INDEPENDENT CONTRACTOR

Policyholder Name form is being filled out for:

Subcontractor Name:

Doing Business As (DBA):

 

 

If DBA is filed, attach a copy.

 

1. I operate as a :

Sole Proprietor

Partnership

Corporation

Limited Liability Company

Note: If indicating

Partnership, Corporation or Limited Liability Company, a Certificate of Workers’

Compensation Insurance or a properly filed Form BWC-337 must be submitted.

 

2.The type of work I perform can be described as:

3.I hire employees or casual laborers to complete work for the named policyholder:

Yes

 

Number hired (Attach Certificate of Workers’ Compensation Insurance)

No

Form 1040 SCHEDULE C (Profit or Loss from Business) may be provided as verification.

4. I hire subcontractors to complete work for the named policyholder: Yes No If yes, additional information may be required.

5. I have General Liability coverage: Yes No

If yes, a Certificate of General Liability Insurance is required.

6.To validate my standing as an independent contractor, I state that I do not exclusively depend upon the payments of the named policyholder and have worked for the following general contractors or clients during the past twelve months.

NAME

CITY

TELEPHONE

1.

2.

3.

I acknowledge that as a sole proprietor, I am by law not covered by or subject to the Workers’ Disability Compensation Act.

I certify the above represents a true and complete statement of my status as an Independent Contractor. I understand a company representative may verify this statement at any time. If requested, I agree to provide documentation to verify my status as a sole proprietor.

Signed:

 

 

 

 

Date:

 

 

 

(Independent Contractor)

Phone Number:

 

Email Address :

 

(Required)

This form is utilized as a test of the above individual’s independent status. By completing this form, it does not automatically remove the above individual’s exposure from the audit of the policy period in question. Additional information may be required. If independent status is proven, the exposure will not be charged.

ICW08

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Form Characteristics

Fact Name Description
Form Introduction The Michigan Workers’ Compensation Placement Facility (MWCPF) Independent Contractor Worksheet came into effect on July 1, 2009.
Purpose The form is used to categorize a sole proprietor without employees as an independent contractor for workers' compensation audit purposes.
Requirement Change Prior to this policy, a Certificate of Insurance (COI) was sufficient for this classification; now, the worksheet must be filled out.
Entity Use The form is required by entities undergoing a workers compensation audit to examine the independent contractor status of sole proprietors.
Content of Worksheet It gathers information on the type of business entity, the nature of work, use of employees or subcontractors, and general liability coverage.
Documentation for Status Aside from the worksheet, additional documentation such as a Certificate of Workers' Compensation Insurance or Form BWC-337 may be necessary.
Additional Verification The form allows the MWCPF to request more information to verify the independent contractor status.
Legal Acknowledgement Sole proprietors acknowledge that by law, they are not covered by or subject to the Workers’ Disability Compensation Act through signing the form.

Guidelines on Utilizing Michigan Workers Independent Contractor Worksheet

Completing the Michigan Workers Independent Contractor Worksheet is a structured process, designed to accurately assess and verify an independent contractor's status for workers' compensation purposes. This form aids in determining whether a sole proprietor without employees can be classified as an independent contractor under the new regulations effective from July 1, 2009. Every detail filled in this worksheet plays a critical role in ensuring that all information is accurately represented to avoid misclassification during a workers' compensation audit. While completing the form, pay close attention to the requirements for attachments, as failure to provide necessary documentation may delay the audit process.

  1. Gather required documents: Before starting, collect all necessary documents including your Certificate of Insurance (if applicable), Form 1040 Schedule C, and any General Liability coverage certificates.
  2. Fill in policyholder information: Start by entering the name of the policyholder the form is being filled out for.
  3. Enter your business information: Provide your Subcontractor Name and, if applicable, the Doing Business As (DBA) name. If you have filed a DBA, attach a copy of the filing document.
  4. Business structure: Indicate your business structure by selecting Sole Proprietor, Partnership, Corporation, or Limited Liability Company. If you select anything other than Sole Proprietor, attach the required Certificate of Workers’ Compensation Insurance or the properly filed Form BWC-337.
  5. Describe the work: Clearly describe the type of work you perform in the field provided.
  6. Employees and laborers: Indicate whether you hire employees or casual laborers to complete work for the named policyholder. If yes, specify the number hired and attach the Certificate of Workers’ Compensation Insurance. If no, you may provide Form 1040 Schedule C for verification.
  7. Subcontractors: If you hire subcontractors to complete the work, select Yes and be prepared to provide additional information if requested.
  8. General Liability coverage: Indicate whether you have General Liability coverage by selecting Yes or No. Attach the Certificate of General Liability Insurance if you have coverage.
  9. Independent contractor validation: List names, cities, and telephone numbers of general contractors or clients you have worked with over the past twelve months to validate your independent status.
  10. Acknowledgement and certification: Acknowledge your understanding that, as a sole proprietor, you're not covered by the Workers’ Disability Compensation Act. Certify the information on the form as true and complete to the best of your knowledge.
  11. Signature and contact information: Sign and date the form. Also, provide your phone number and email address to complete the documentation process.

Once the worksheet is fully completed and all necessary documentation is attached, submit the documents to the specified address or via the provided email or fax number. It's crucial to understand that simply filling out this form does not guarantee immediate removal of the individual’s exposure from the policy audit. The submitted information will undergo verification, and additional documentation may be requested to conclusively prove independent contractor status. If verified successfully, the reported exposure will not be charged against the audit period in question.

Crucial Points on This Form

What is the purpose of the Michigan Workers Independent Contractor Worksheet?

The Michigan Workers Independent Contractor Worksheet is designed to assess the status of a sole proprietor to determine if they are considered an independent contractor for the purposes of worker's compensation. By filling out this worksheet and providing the required documentation, it becomes possible to discern if an individual's work classification should exempt them from certain policy audits related to worker’s compensation insurance in the residual market. This distinction is important for the accurate administration of worker’s compensation policies and premiums.

Who needs to fill out this form?

This form must be completed by sole proprietors who do not have employees and wish to be considered as independent contractors under Michigan's Workers’ Compensation Placement Facility criteria. It is especially relevant during the workers compensation audit process for a policyholder with whom the sole proprietor has worked.

What changed in the policy regarding sole proprietors as of July 1, 2009?

Before July 1, 2009, sole proprietors without employees could be considered independent contractors in the residual market by simply providing a Certificate of Insurance (COI). Starting from July 1, 2009, this approach changed. Now, to be evaluated as an independent contractor, a sole proprietor must completely fill out the Michigan Workers Independent Contractor Worksheet and may need to supply additional documentation during a worker's compensation audit.

What documents are required in addition to the worksheet for different business structures?

  • Sole Proprietor: May need to provide Form 1040 Schedule C (Profit or Loss from Business) for verification.
  • Partnership, Corporation, or Limited Liability Company: Must submit a Certificate of Workers’ Compensation Insurance or a properly filed Form BWC-337.

Is General Liability coverage required for independent contractors?

Yes, if an independent contractor has General Liability coverage, they are required to submit a Certificate of General Liability Insurance along with the Independent Contractor Worksheet. This ensures that the contractor has the necessary insurance coverage that could affect their status as an independent worker.

How does one prove they do not exclusively depend on payments from the named policyholder?

To validate independent contractor status and prove that they do not rely solely on payments from the named policyholder, the individual must list other general contractors or clients they have worked with in the past twelve months. This information includes the names, cities, and telephone numbers of these contractors or clients, providing a broader view of the contractor's client base and work engagements.

Does completing the Independent Contractor Worksheet automatically exempt an individual from the policyholder's workers’ compensation audit?

No, completing the Independent Contractor Worksheet does not automatically exempt the individual from the policyholder's workers’ compensation audit. The worksheet is utilized as one of the tests of the individual’s independent status, but additional information may be required. If the independent status is proven, the individual's exposure as determined in the audit could potentially not be charged. However, verification processes may include further documentation or checks.

Common mistakes

Filling out the Michigan Workers Independent Contractor Worksheet is a crucial step for sole proprietors and other business entities looking to establish their independence in workers' compensation issues. However, a common mistake made is not attaching a copy of the Doing Business As (DBA) if one is filed. This oversight can delay the review process, as the DBA provides necessary legal information about the business name under which they operate.

Another critical error is neglecting to submit the required Certificate of Workers’ Compensation Insurance or the properly filed Form BWC-337, especially for partnerships, corporations, or limited liability companies. This documentation is fundamental in verifying that the entity has the necessary workers’ compensation coverage, essential for safeguarding against potential liabilities.

Some individuals incorrectly assume that stating they do not hire employees or casual laborers exempts them from providing further documentation. Even if no workers are hired, the form suggests that a Form 1040 SCHEDULE C (Profit or Loss from Business) may be provided as verification of the independent contractor’s business operations and income, which is an essential aspect of the review process.

Failure to provide evidence of General Liability coverage when the answer is 'Yes' to having such coverage is another mistake. The request for a Certificate of General Liability Insurance is not arbitrary; it is a necessary step to ensure that the independent contractor has appropriate coverage that can protect them from various liabilities.

Last but not least, individuals often overlook the importance of thoroughly completing the section that asks for evidence of not exclusively depending on payments from the named policyholder. This requires listing general contractors or clients worked for in the past twelve months. Simply listing names without providing contact information, or not listing any at all, fails to substantiate the claim of independence. The instruction clearly indicates the need for names, cities, and telephone numbers, emphasizing the necessity of this information for verification purposes.

Documents used along the form

When dealing with the intricacies of independent contractor status in Michigan, the Michigan Workers Independent Contractor Worksheet is a pivotal document. However, to comprehensively establish an independent contractor's status and fulfill legal requirements, additional forms and documents often accompany this worksheet. The following list delineates several of these supplementary documents, each serving a crucial role in the verification and documentation process.

  • Certificate of Insurance (COI): This document is essential for demonstrating that the independent contractor has the necessary workers' compensation insurance. It reassures the hiring entity that the contractor is covered in the event of a work-related injury, which is a primary concern for classification as an independent contractor.
  • Form 1040 Schedule C (Profit or Loss from Business): Utilized to show the financial aspects of the contractor's business, this tax document offers insight into the nature and scale of the business operations. It helps in verifying that the contractor is indeed operating a business entity, potentially supporting their claim of independent contractor status.
  • Certificate of General Liability Insurance: This certificate is proof that the contractor has general liability coverage, safeguarding against claims of property damage or personal injury caused during the course of business activities. It is a critical document that further establishes the contractor's business independence.
  • Form BWC-337 (Application for Exclusion of Officers and Stockholders): For corporations or LLCs, this form can be submitted when certain officers or stockholders wish to be excluded from workers' compensation coverage. It's relevant when verifying the organization structure and operational nuances of the business that is asserting independence.

The combination of these documents with the Michigan Workers Independent Contractor Worksheet provides a thorough framework for determining independent contractor status. By compiling these documents, individuals and businesses can substantiate their claims and ensure compliance with Michigan's workers' compensation regulations. It's important for contractors and hiring entities alike to understand the importance of each document in affirming the independent operational status and fulfilling legal obligations.

Similar forms

  • IRS Form W-9, Request for Taxpayer Identification Number and Certification: Similar to the Michigan Workers Independent Contractor Worksheet, the IRS Form W-9 is used to collect tax information and verify the identity of workers operating as independent contractors, rather than employees. Both forms help classify the worker’s status for tax and legal purposes.

  • IRS Form 1099-MISC, Miscellaneous Income: This document, like the Independent Contractor Worksheet, is utilized in the context of reporting payments made to independent contractors. Although the Form 1099-MISC is specifically for reporting income paid, both it and the Worksheet help in defining the relationship between a company and a contractor.

  • State-specific Workers' Compensation Waiver Forms: Some states have specific forms independent contractors can use to waive workers' compensation coverage. These forms, like Michigan's Worksheet, cater to situations where individuals need to clarify their status as independent contractors to exclude themselves from certain employer-provided benefits or requirements.

  • IRS Schedule C, Profit or Loss from Business (Sole Proprietorship): Schedule C is mentioned within the Michigan Workers Independent Contractor Worksheet as a document to provide proof of operation. Both documents are instrumental in demonstrating that an individual is operating a business as an independent contractor.

  • Certificate of Insurance (COI): The Worksheet requests a COI just like many other legal and business forms, indicating proof of insurance. The Certificate of Insurance serves as evidence of general liability coverage or workers' compensation insurance, important for establishing the contractor’s independence and compliance with certain legal requirements.

  • Business License or Registration Documents: The Independent Contractor Worksheet asks for a Doing Business As (DBA) if applicable, which is similar to other business registration or licensing documents. These documents are significant for confirming an entity’s legal operation status, much like the Worksheet seeks to ascertain the independent contractor status.

  • Subcontractor Agreement Forms: Subcontractor agreements, like the Independent Contractor Worksheet, delineate the nature of the work, responsibilities, and the relationship between the contractor and the employing entity. Both are used to establish expectations and clarify the contractor’s independent status, avoiding the implications of being considered an employee.

Dos and Don'ts

When filling out the Michigan Workers Independent Contractor Worksheet, navigating the process with accuracy and thoroughness is paramount. Below are key dos and don'ts to guide you through the submission process proficiently:

  • Do ensure you have all the relevant documentation on hand before you start filling out the form. This includes any Certificates of Insurance (COI), Form 1040 Schedule C, or documents that prove you have General Liability coverage if applicable.
  • Do clearly indicate the nature of your business structure in the section provided – whether you are a sole proprietor, in a partnership, a corporation, or a limited liability company. This choice influences the documentation you need to submit.
  • Do be transparent and accurate when listing clients or general contractors you've worked with over the past twelve months to establish your independence.
  • Do sign and date the form. An unsigned or undated form may be considered incomplete and can lead to delays or rejection.
  • Don't overlook the requirement to attach additional documentation if you're indicating that you've hired employees or subcontractors, or if you're operating under a DBA (Doing Business As). This information is vital for completing your profile accurately.
  • Don't forget to provide your phone number and email address where indicated. Failing to provide contact information can prevent timely communication regarding the status of your worksheet or request for further documentation.
  • Don't submit the worksheet without thoroughly reviewing all your responses and the completeness of your attachments. This reduces the risk of errors and further requests for information, which can delay the determination of your independent contractor status.

Completing the Michigan Workers Independent Contractor Worksheet with diligence not only demonstrates your commitment to maintaining compliance but also helps streamline the process for all parties involved. By following these guidelines, you can ensure that your submission is both accurate and complete, thereby facilitating a smoother review process.

Misconceptions

There are several misconceptions about the Michigan Workers Independent Contractor Worksheet form that need clarification. Understanding these misunderstandings can help individuals and businesses navigate workers' compensation requirements more effectively:

  • Misconception: Sole proprietors don't need to complete the Independent Contractor Worksheet. Some believe that if they operate as sole proprietors, they automatically qualify as independent contractors and don't need to complete the worksheet. However, regardless of being a sole proprietor without employees, one must fill out and submit the MWCPF Independent Contractor Worksheet for consideration of independent contractor status.

  • Misconception: Having a Certificate of Insurance (COI) is enough for independent contractor status. Before July 1, 2009, presenting a COI was sufficient to be considered an independent contractor. This practice has ceased, and now the Independent Contractor Worksheet must be completed fully in addition to possibly needing to submit a COI.

  • Misconception: All information requested on the worksheet is mandatory for submission. While the worksheet needs to be completed, additional documentation may not always be necessary unless specifically requested by the entity completing a workers' compensation audit.

  • Misconception: Completing the Independent Contractor Worksheet guarantees exclusion from audits. Completing this worksheet does not automatically remove an individual’s exposure from audit consideration during the policy period in question. Additional verification of independent contractor status may be required.

  • Misconception: Only sole proprietors need to worry about this form. The worksheet must also be filled out by partnerships, corporations, and limited liability companies. However, these entities need to submit different documentation, such as a Certificate of Workers’ Compensation Insurance or a properly filed Form BWC-337, depending on their structure.

  • Misconception: Providing information on hiring practices is not necessary unless employees are permanent. Regardless of whether workers are hired on a permanent, casual, or subcontractor basis, the Independent Contractor Worksheet asks for details about hiring practices to determine the nature of the working relationship and the applicable workers’ compensation coverage.

Taking the time to accurately complete and understand the Michigan Workers Independent Contractor Worksheet can help ensure that businesses and individuals accurately comply with workers' compensation laws and regulations.

Key takeaways

Understanding the requirements for filling out the Michigan Workers Independent Contractor Worksheet is crucial for sole proprietors in Michigan aiming to establish their status as independent contractors. This form plays a significant role in differentiating between an independent contractor and an employee, especially in the context of workers' compensation insurance. Here are seven key takeaways about this process:

  • Change in Practice: It's important to note that the historical practice of recognizing a sole proprietor without employees as an independent contractor, solely based on a Certificate of Insurance (COI), was discontinued as of July 1, 2009. Since then, filling out the Independent Contractor Worksheet has become a necessity.
  • Filling out the Worksheet: The worksheet requires detailed information about the contractor’s business, including the nature of the work performed, the use of employees or subcontractors, and evidence of General Liability coverage.
  • Documentation of Business Structure: Sole proprietors, partnerships, corporations, and limited liability companies must appropriately document their business structure. Specifically, those indicating a structure other than sole proprietorship need to submit a Certificate of Workers’ Compensation Insurance or the properly filed Form BWC-337.
  • Evidence of Independence: The worksheet asks for proof that the contractor does not exclusively depend on a single policyholder for income, including listing clients worked for in the past twelve months. This is vital in validating independent contractor status.
  • General Liability Coverage: If a contractor has General Liability coverage, proof must be supplied via a Certificate of General Liability Insurance. This underscores the requirement for independent contractors to maintain adequate insurance coverage.
  • Verification and Documentation: By signing the worksheet, the contractor acknowledges the possibility of an audit and agrees to furnish further documentation to verify their status as an independent contractor if requested. This highlights their agreement to comply with the verification process.
  • Impact on Workers’ Compensation Audit: Completing this worksheet does not automatically exclude an individual’s exposure from an audit regarding the policy period in question. However, if independent status is confirmed, the contractor’s exposure will not be charged, underscoring the importance of accurately completing and providing any requested documentation for the form.

Taking the time to understand and accurately complete the Michigan Workers Independent Contractor Worksheet is essential for sole proprietors in Michigan. It not only helps establish their status as independent contractors but also ensures compliance with workers' compensation insurance requirements. This process underscores the importance of thoroughness and accuracy in documenting and verifying one's business operations and relationship with clients.

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