Michigan Workers Compensation 101 - Who's Covered?

Mark Tarpinian, CLU, ChFC
Licensed Insurance Counselor
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mark@tfi4insurance.com

Michigan Workers Comp 101: Who's Covered?

This week's blog takes a look at who is covered by Michigan workers' compensation law ("The Act"). Legislation can be found as the WORKER'S DISABILITY COMPENSATION ACT OF 1969 as Act 317 of 1969. Using our running illustration of a lawn care business, let's say you are part owner and operator of a landscaping business in Michigan.  

During the course of removing snow from a private parking lots over the weekend, four “workers” were injured at separate job sites:

- One seasonal worker hurt their back picking up a snow blower
- A regular employee tripped over a trailer ramp and injured their knee
- An independent contractor, hired at the last minute to assist because of the unexpected 12 inch snowfall slipped and fell on a patch of ice on the job site and broke their elbow
- Your partner, while texting you about the other injuries, managed to walk head-first into the back of a pickup bed-mounted salter, resulting a concussion

Who should Expect to Receive Benefits?

Workers Comp law (The “Act”) includes all employers in Michigan both public and private employers. Many small employers are misled to believe they are automatically not subject to the law and are “exempt.” This for many businesses has been an incorrect and expensive misconception.

Let’s look at exceptions first: 
- Federal employees
- Railroad workers
- Seaman and sailors
- Dock workers
- Certain small Michigan employers
- Farm workers
- Specific named partners and corporate officers and shareholders
- Sole Proprietors
- Certain family members of business owners

The Michigan Workers Comp Act doesn’t apply to certain classes of workers, usually because they are covered by other law and programs. Federal disability law applies to employees of the federal government and its agencies, such as postal workers, veterans’ administration hospital employees, members of the army, navy, air force and other armed forces. The Federal Employers Liability Act of 1908 specifically covers railroad workers (cf §51). Seamen and sailors on navigable waters are covered by the Merchant Marine Act of 1920 (known as the Jones Act). The Longshoremen’s and Harbor Workers’ Compensation Act (cf §901ff) covers workers loading and unloading vessels on piers. Farm/agricultural workers are exempt unless the employer employs three or more regular employees paid hourly wages or salaries, not paid on a piecework basis, and who are employed 35 or more hours per week by the same employer for 13 or more consecutive weeks during the preceding 52 weeks (MI 418.115 [d]). Agricultural workers who are NOT legally authorized to work in the United States may receive mandated workers comp medical benefits but NOT wage loss replacement. .

Specific Provisions for Business Owners 

In Michigan, there are specific provisions for sole proprietors, business partners/partnerships, and corporate officers and shareholders. Sole proprietors, so called “self-employed persons,” cannot be covered for workers comp. Sole props are individuals usually doing business as a registered business name (example: Joe Smith d/b/a Joe’s Lawn Care and Landscaping). Sole Proprietors may secure a Michigan workers comp policy, but it will never include them, the owner, for coverage, only employees or workers of the business. Michigan partnerships, closely held corporations, and limited liability companies may exempt specific named persons:

- Partners of Partnerships
- Officer/Shareholders of C and S Corporations
- Members/Managers of LLCs
- Spouses of Sole Proprietors

So these “owners” may exempt themselves, but their employees are never excluded, and they will therefore be entitled to the full range of benefits previously discussed if they sustain a work related injury of disease. Certain small employers are exempt. Section 115 of the Act stipulates that as an employer you are not subject to providing workers comp benefits to workers if: You have two or less employees at any one time, or You employ one worker for 35 or fewer hours per week for less than 13 weeks You employ/contract a bone fide self-employed, independent contractor, sole proprietor with no employees.

What About Independent Contractors? When one company hires another to work for it, this second business is typically considered an “independent contractor” and not viewed as an employee of the hiring company. This category of “worker” is typically the biggest source of confusion and headache for Michigan employers, both for claims and for audit premium. Frequently over the last 30 years I have heard the following statement:

“I don’t have any employees: I’m an independent contractor, and all my workers are independent contractors, so I don’t need workers comp insurance.”

The assumption is that they don’t need it because they are not responsible for providing medical, wage loss, and/or rehab benefits if someone gets hurt on the job. Previously we have looked at how insurance companies handle these situations for premium audits and charges [link to my previous blog article]. When, how, and where do these independent contractors qualify for workers comp benefits? Essentially, if the independent contractor is deemed simply an uninsured (they don’t have their own workers comp policy and coverage) 1099 employee, they can be covered by and access benefits from the hiring company.