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Implementing Compliant Independent Contractor Programs

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by

Ben Droessler

on 29 May 2013

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Transcript of Implementing Compliant Independent Contractor Programs

Why Utilize
Contractors? Insurance Contingent Liability Legal & Compliance Independent Contractor Operating Agreement Administration Deduction Name Implementing Compliant Independent Contractor Programs Capacity Fluctuation Equipment Taxes No State Exclusions NV CO NC NJ MA NH Work Comp Audit Sunset Clause Other Occ/Acc Liability Work Comp Motor Carrier Coverage Form Pre-Existing Conditions Work Comp "opt-out" Forms MT UT KS OK TX AR IL Work Accident Insurance Requirements State Work Comp Laws Small Fleets Occ/Acc v. Work Comp No ICs on EE Health Plan $1,215,270 Outside Certificate Management Participation Billing / Settlement Integration Topics for discussion Why utilize contractors? Elements of compliant contractor programs I am an independent owner/operator. I own my own truck and have no employees. I subcontract with a motor/carrier to carry loads out of the state of North Carolina under that trucking company’s ICC license. I pick up these loads in North Carolina. My insurance agent has told me that it will cost me a minimum of $4488.00 to purchase workers’ compensation coverage based on a minimum payroll of $30,000.00. I currently have a much cheaper “accidental occupational injury policy” to cover injuries I sustain during the operation of my truck. Does my “accidental occupational injury policy” substitute for the more expensive workers’ compensation policy?

Answer: No. If you deliver loads with your truck pursuant to a subcontract with a motor carrier, then the “accidental occupational injury policy” does not provide workers compensation coverage required by the North Carolina Workers’ Compensation Act. If you sustain an injury while operating your vehicle under the subcontract and you do not have a workers’ compensation coverage, the motor carrier will be liable for the payment of benefits required under the North Carolina Workers’ Compensation Act. “Accidental occupational injury policies” do not meet the requirements of the North Carolina Workers’ Compensation Act. Excerpt from a North Carolina Industrial Commission white paper published by Stephen T. Gheen, Chief Deputy Commissioner and Douglas E. Berger, Deputy Commissioner in regards to responsibilities of motor carriers and owner operators under the North Carolina Workers' Compensation Act after enactment of N.C. Gen. Stat. §97-19.1 Equipment Leasing Unemployment Workers Compensation Cost Age Restrictions Voluntary Benefits UTBA Enrollment Percentage Average is twice as high as other associations… Why?
Tenured Enrollers
Better Benefits and Rates
Understand Unique Driver Needs *According to American Truck Business Services survey Why Offer Voluntary Benefits to Contractors? Recruiting & Retention
Competition
Contractor Shortage
No cost to Motor Carrier
Health related events are 3rd leading cause of contractors going out of business* Administrative Fees Policy Structures Contractor Operating Models Traditional Lease Purchase Broker Settlement Carrier Owns truck
Signs operating lease to use motor carrier's authority
Exclusively operate for motor carrier leased to
Bill of laden in motor carrier's name
Insurance
Motor carrier
Auto Liability
Cargo
Contractor
Non-Trucking Liability
Physical Damage
Work Accident (WC or Occ/Acc) Leases truck from motor carrier or related leasing entity
Signs operating lease to use motor carrier's authority
Exclusively operate for motor carrier leased to
Bill of laden in motor carrier's name
Insurance
Motor carrier
Auto Liability
Cargo
Contractor
Non-Trucking Liability
Physical Damage
Work Accident (WC or Occ/Acc) Leases truck from motor carrier or related leasing entity Owns truck
Signs agreement with brokerage and uses own authority
May operate for several brokerages
Bill of laden in contractor's name
Insurance
Brokerage
Contingent Auto or Broker Liability
Contingent Cargo
Contractor
Auto Liability
Physical Damage
Work Accident (WC or Occ/Acc) Owns truck
Signs dedicated carriage agreement with freight forwarder and uses own authority
Exclusively operate for freight forwarder
Bill of laden in freight forwarder's name
Insurance
Freight Forwarder
Auto Liability
Contingent Auto or Broker Liability
Contingent Cargo
Contractor
Auto Liability
Physical Damage
Work Accident (WC or Occ/Acc) Companies may utilize multiple contractor operating models depending on their needs Signs agreement with brokerage and uses own authority
May operate for several brokerages
Bill of laden in contractor's name Signs dedicated carriage agreement with freight forwarder and uses own authority
Exclusively operate for freight forwarder
Bill of laden in freight forwarder's name Contractor Popularity
on the Rise Health Care Reform Profitability Used Truck Prices moderating Lender Appetite Motor Carriers Contractors Smart Capacity Growth Diversify Revenue Channels Independent +$4,339 to $54,239
Dry +$3,688 to $48,556
Reefer -$535 to $46,756
Flat +$6,665 to $60,150 2010 vs 2012: +11.3% up $3,556 to $50,896 Net Income – Avg All Market Segments $50,896 32 hours Pay $47,806 $47,630 35 hours 32 hours 40 hours Work $52,048 Data from American Truck Business Services Data from American Truck Business Services Federal Leasing Regulations Reviewed every 2 years Common Expiration Date Proper allocation of Risk Protect IC Status Lease Purchase Brokerage Settlement Carrier Separation from Motor Carrier State Work Comp & Unemployment Laws IRS Market Segment Understanding Guidelines Equipment Buy-Out Provision Owner Operator Tools to evaluate... Complexity of properly structured contractor programs may seem overwhelming Where to start? www.cottinghambutler.com/riskscorecard Tools to evaluate your contractor exposures Occ/Acc Contingent
Liability Corporate
Work Comp Damage Deductibles Statutory Benefits All 1099s Employers Liability match Corporate Work Comp Duty to Defend Defense Costs Outside Policy Limits Occupational Accident Physical Damage Passenger Accident Cottingham & Butler
Contractor Services Representatives Cottingham & Butler
Contractor Services Representatives Question & Answer Session
Full transcript