Reid Murtaugh, Workers Comp Attorney; Lafayette, IN Withered Burns, LLP

Independent Contractors in the Construction Trades

Independent contractors in the building and/or construction trades are required to become certified with the Workers Compensation Board if they meet the guidelines of the U.S. Internal Revenue Service. Ind. Code 22-3-2-14.5(a); 22-3-6-1(b)(7). The necessary form is available from the Workers Compensation Board. The certificate is not available to persons who are incorporated unless it is a limited liability corporation (LLC). In order to become a certified independent contractor for workers compensation purposes, the contractor fills out an application that is filed with the Indiana Department of Revenue (DOR) along with a twenty-dollar ($20.00) filing fee. DOR will do a search on each application to ensure that the contractor has paid the appropriate taxes. If they have not, the application will be denied until the tax liability is satisfied. If all taxes have been paid, DOR prints the certificate and sends it to the Board. The certificate is kept by the Board for seven days and then mailed to the contractor. IRS Publication 937 lists the twenty factors applied by the IRS in determining whether a worker is an employee or an independent contractor. IRS Form SS-8 may be filed with the IRS for a determination (for tax purposes only) as to a workers status. Registrants filing the Independent Contractor Affidavit must certify a desire to be exempt from being able to recover under the workers compensation policy or selfinsurance of a person for whom the independent contractor will perform work only as an independent contractor. Ind. Code 22-3-2-14.5(h)(2). Injuries occurring while working as an independent contractor will NOT be covered by workers compensation. However, injuries occurring while working as an employee might be covered. If an injury occurs, the worker has the right to file a Request for Assistance with the Ombudsman Division or to file an Application for Adjustment of Claim asserting the existence of a covered Indiana employer-employee relationship. If the person filing the Independent Contractor Clearance Certificate has employees, the contractor must certify that he/she has workers compensation coverage for those employees. Ind. Code 22-3-2-14.5(h)(1). Ind. Code 22-3-2-14.5(I) requires the Board to validate all signed clearance certificates, but provides the Board with no investigative power to determine whether or not the affiant is in fact an independent contractor and not an employee. The wavier is merely a persons written declaration of facts, which must be made voluntarily in order to be valid. Thus, contractors/employers procuring a validated wavier cannot rely on a Board determination of the workers status. Contractors who require workers to procure a validated wavier while in fact engaged in an employment relationship run the risk of incurring uninsured losses, in addition to the penalties provided by the Act for failure to carry insurance. Furthermore, under Ind. Code 222-2-15(a), no employer can, by written or oral contract or agreement, rule, or other

device, escape the requirement that all employees be covered by workers compensation insurance. The independent contractor affidavit is no substitute for a thorough evaluation of the workers compensation risk incurred by an employer/contractor. The independent contractor registration process should not be used in an attempt to mask an employer-employee relationship which should be covered by workers compensation insurance. An employer who procures independent contractor wavier from workers who are, in fact, employees may not be held harmless in a workers compensation action and may be found responsible for additional penalties and costs due to bad faith or fraud.
Note: The material is copied from the Indiana Guide to Workers Compensation produced by the Governors office, which can be found free at http://www.in.gov/wcb/handbook/HANDBK2007.htm.