Column: Common misperceptions about workers’ compensation

Published 12:00 am Monday, January 28, 2002

Toni Harvey

The Minnesota Workers’ Compensation Law states that all employers are required to purchase workers’ compensation insurance or become self-insured.

Monday, January 28, 2002

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The Minnesota Workers’ Compensation Law states that all employers are required to purchase workers’ compensation insurance or become self-insured. Employers are generally defined as those who hire others to perform services. Employees are generally defined as people performing services for another, for hire, including minors and workers who are not citizens.

As one might anticipate, there are always exceptions to the rule. Some employers are exempt and these exemptions are specified in Minnesota Statutes. However, there are common misperceptions that need clarification about who needs coverage and who does not.

Family businesses

Many people assume if they hire &uot;family&uot; to work for them, those family members are exempt. This is not always true. Immediate family members, such as parents, spouse and child, are exempt under certain types of business structures. Many business owners believe this applies when hiring sisters, brothers, daughter-in-laws, mother-in-laws and other close relatives. In general, when a non-immediate family member is hired, insurance is required, unless your business structure is such that a written election to request exclusion would be appropriate (see Minnesota Statutes &167;176.041 subd. 1 (o) and (t)). A person who is automatically excluded may elect coverage (see M.S. &167;176.041 subd. 1a). Contact the Customer Assistance unit at the Minnesota Department of Labor and Industry for further instruction about filing the election.

Family farm

Some family farm owners may believe that if they have a farm liability policy, they are not required to have workers’ compensation coverage. This may be true, if the family farm is paying total wages (including the value of room and board if applicable) that are less than the statewide average annual wage and are maintaining a farm liability policy for $300,000 in total liability and $5,000 in medical insurance coverage for injuries to farm laborers. For example, if your policy provides only $1,000 in medical insurance coverage, it does not meet this threshold (see M.S. &167;176.011 subd. 11a (a)(2)).

Nannies and caretakers

Many parents in the State of Minnesota hire a nanny to take care of their children; adult children hire caretakers for elderly parents. Recently, an adult son from Iowa provided around-the-clock caretakers for his elderly mother, who resides in Minnesota, to avoid a nursing home situation. Neither the parents nor the adult son had any idea they needed workers’ compensation insurance if they paid more than $1,000 cash during a three-month period to a household worker (see M.S. &167;176.041 subd. 1(n)). There are some federal and state exemptions under nanny or baby-sitting services provided by foreign student exchange programs where a student provides baby-sitting services in exchange for room, board and a stipend.

Part-time coverage

A balloon-shop owner hired a part-time employee and assumed that since the employee was working part-time, she didn’t need workers’ compensation coverage. There is no minimum number of employees an employer must have before insurance is required. A minimum number of hours worked by a single employee does not exclude an employer from purchasing a policy (see M.S.&167;176.181 subd. 2).

Clubs and associations

Several community associations or clubs are involved in pull tabs or other events. Many assume they do not need workers’ compensation coverage, because they are a nonprofit association raising money for a good cause. In these instances, the law requires a nonprofit organization to provide workers’ compensation coverage if it pays more than $1,000 in salary or wages in a year (see M.S.&167;176.041 subd. 1 (p)).

Construction industry

Some construction-business owners are able to bid lower on jobs if they classify their workers as independent contractors. This business practice &uot;lightens their load&uot; by shrugging off the responsibilities of providing workers’ compensation coverage, filing unemployment tax or dealing with other state and federal tax issues. In 1996, the Minnesota Legislature enacted M.S.&167; 176.042, which specifies all nine points must be met in order to consider a construction worker as an independent contractor. If one of those factors is not met, the worker is deemed an employee.