Thursday, March 17, 2011

Worker’s Compensation – Model Act Approved/Important Caveats

The National Conference of Insurance Legislators (NCOIL) recently finalized their Trucking and Courier Industries Worker’s Compensation Model Act.  The final model legislation provides six criteria for determining independent contractor status as well as outlines penalties and enforcement. It will now be sent to state legislators, regulators, and Governors as official NCOIL policy.

NCOIL consists of state legislators who work on insurance issues from across the country. These legislators share information and debate ideas which are then taken back to their home state legislatures. The NCOIL Workers’ Compensation Insurance Committee has been working on the Trucking and Messenger Courier Industries Workers’ Compensation Model Act for over the last year.

As you can see on the attachment, NCOIL’s final Trucking and Messenger Courier Industries Workers’ Compensation Model Act is not perfect but is far better than what is currently in place in a lot of states. Organizations such as FedEx, MCAA and the American Trucking Association have been working closely with NCOIL to educate the policymakers on the importance of the independent contractor business model.

There is an important problem with the legislation which appears in Section 3(1).  This provision would eliminate a safe harbor for any owner-operator who holds a bona fide lease to the equipment pursuant to “any lease arrangement, loan or loan guarantee with the hiring entity or any affiliate of the hiring entity.”  This language appears to exclude from independent contractor status individuals who lease older equipment from a carrier under typical lease-to-own agreements or from carrier affiliates.  It also would appear to call into question loan guarantees by the carrier to leasing companies to facilitate the purchase by the independent contractor of used equipment.

Obviously, clients who have built a business model on helping independent contractors acquire equipment should beware to ensure that this otherwise helpful legislation is not enacted in any state without redaction of this language.

Henry E. Seaton, Esq.

WC Model Act

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