Dive Brief:
- An increase in legal action forcing employers to reclassify contract workers as full-time employees could drive up labor costs significantly and heighten scrutiny on applications for workers’ compensation insurance, according to an article at Insurance Business America.
- Early court decisions are finding that many of these workers are misclassified and are due full employment benefits, including healthcare, training programs, travel reimbursements and workers’ compensation, reports the online trade magazine.
- Such lawsuits and the additional expenses attached to reclassification could increase the cost of labor by 20% to 40%, a Wall Street Journal report estimated this week.
Dive Insight:
According to the Insurance Business America article, the heightened scrutiny means additional pressure for brokers to help employers correctly classify employees -- something many employers and agents overlook while submitting workers’ compensation applications, said La’Troya McKinney, commercial lines account manager with Abram Interstate Insurance Services.
“One thing I always tell people is that 1099 is not an employment status,” McKinney said. “If an employer is scheduling their time, telling them who to see or where to go, they are an employee under the labor code and they can be fined up to $150 per day per employee for not having comp in place.”
McKinney added that though these stipulations apply primarily in California – where 1099 status is under strictest review – it doesn’t hurt for agents or employers across the country to adopt a similar no-risk attitude. “I tell people that if they base their decisions off regulations in what is one of the most rigid states, they can’t go wrong,” she said.
