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Labor and Economic Opportunity

IRS Revenue Ruling 87-41

PA 2012, Act 266 amended Section 161(n) of the Act:

418.161(n) Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. On and after January 1, 2013, services are employment if the services are performed by an individual whom the Michigan administrative hearing system determines to be in an employer-employee relationship using the 20-factor test announced by the internal revenue service of the United States department of treasury in revenue ruling 87-41, 1 C.B. 296. An individual for whom an employer is required to withhold federal income tax is prima facie considered to perform service in employment under this act. If a business entity requests the Michigan administrative hearing system to determine whether 1 or more individuals performing service for the entity in this state are in covered employment, the Michigan administrative hearing system shall issue a determination of coverage of service performed by those individuals and any other individuals performing similar services under similar circumstances. [Emphasis added.]

Adjudication of employee/independent contractor issues on or after January 1, 2013 will be handled by MAHS as outlined in the statute section above. However, the agency receives numerous inquiries on the issue of employee/independent contractor. These questions arise frequently in inquiries regarding the need for employers to secure workers' compensation insurance coverage.


The revenue ruling referred to in the statute is no longer posted on the IRS website. We have located a copy of the ruling on the San Jose State University, School of Business website and have obtained their permission to post that document on this WCA website.


IRS Revenue Ruling 87-41