Thepublished a summary of a conference on misclassification of workers. It says:
The insurance industry loses more than $100 million per year in premiums when misclassified workers are added onto workers’ compensation policies. This RIMS 2016 session discussed the issues related to employee misclassification, including state and federal action on this matter and the impact on employer and insurer costs and risk. …
Risks of Employee Misclassification
There are significant risks to both the employer and insurance carrier.
Employer risks include:
- Payment of back wages.
- Civil penalties.
- Criminal prosecution.
- Stop work orders.
Insurer risks include:
- Uncertain workers’ compensation distributions relative to premiums collected.
- Differences in policies relative to state standards/regulation.
- Possible unintended liability exposure and risk.
- Unrealized revenue from employers impacted from misclassification enforcement.
Ways to minimize risk:
- Avoid contracting with former employees.
- Limited contractor access to employer facilities.
- Avoid use of uniforms, business cards.
- Contractors working off site of under their own on-site management.
- Contractors self trained or trained elsewhere.
- Project specific work with limited duration.
- Use of staffing agency.
- Clear and concise independent contractor agreements.
- Periodic self audits.