Farm and ranch laborers are now eligible to receive workers’ compensation benefits according to a recent ruling by the New Mexico Court of Appeals which will retroactively apply to claims going back to March 2012. The state’s Workers’ Compensation Administration said it will be enforcing the court’s decision.
The ruling stemmed from two separate cases in which workers injured while on the job at Brand West Dairy and M.A. & Sons Chili Products had their claims dismissed. They filed separate appeals challenging the constitutionality of the exclusion. The appellate court declared that a provision in the state law that excluded farm and ranch workers from workers compensation benefits is indeed unconstitutional.
Employers across the country’s states are usually tempted to misclassify their workers to avoid paying such business expenses as the employer’s share of Social Security and Medicare taxes, overtime pay, other employee benefits like vacation, holiday, and sick pay, the unemployment compensation tax, and of course workers compensation insurance. In most state jurisdictions, worker misclassification is defined as happening when an employer improperly classifies an employee as an “independent contractor” or “member” of a Limited Liability Company (LLC) in order to avoid the legal obligations that arise from an employer/employee relationship. Thirty states now have laws defining and penalizing worker misclassification.
Just this April, a federal investigation led to 16 Utah and Arizona business firms paying some $700,000 in back wages, damages, penalties and other fees for misclassifying construction workers as “company owners” rather than employees. The U.S. Department of Labor (DOL) found that these businesses had required their construction workers to become “member/owners” of limited liability companies to exempt the companies from complying with state and federal wage laws, as well as from providing workers compensation insurance for those workers.
In his July 15 blog post entitled, “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors,” DOL’s Wage and Hour Division administrator David Weil said that misclassification, in addition to denying workers statutory protections, “also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers.” The 15-page post gives a six-part “economic realities” test of the relationship between a worker and employee that should be used when classifying, to wit:
1. Is the Work an Integral Part of the Employer’s Business?
2. Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?
3. How Does the Worker’s Relative Investment Compare to the Employer’s Investment
4. Does the Work Performed Require Special Skill and Initiative?
5. Is the Relationship between the Worker and the Employer Permanent or Indefinite?
6. What is the Nature and Degree of the Employer’s Control?
If you still have some outsourced workers that should now be properly classified as regular employees under the new DOL guidelines, make sure that you also include them in your on-the-job-injury reporting protocols to prevent future legal complications.