Employer Frequently Asked Questions
- What is workers' compensation?
- Is my business covered by the Workers' Disability Compensation Act?
- Must my business purchase workers' compensation insurance?
- Can a partnership or small business be exempted from the Act?
- What if I am self-employed?
- Are family members covered?
- Are independent contractors I might hire for various jobs exempt from the Workers' Disability Compensation Act?
- What is self-insurance?
- Are there penalties for an employer to not obtain insurance or permission to be self-insured?
- Is there a penalty for the illegal employment of minors?
- How is the price of workers' compensation insurance premium set?
- What reports is an employer required to file concerning workers' compensation?
- Are employers required to post any information for their employees regarding workers' compensation?
A. Workers' compensation is the system Michigan uses to provide wage replacement, medical, and rehabilitation benefits to individuals who are injured while at work while protecting employers by limiting their liabilities.
A. Nearly all employers in Michigan are covered by workers' compensation. This includes both public and private employers. In fact, when talking about workers' compensation, it is easier to discuss the exceptions. There are a few classes of workers who are covered by federal laws and are not covered by the Workers' Disability Compensation Act of Michigan. Employees of the federal government (such as postal workers, employees at a veterans administration hospital, or members of the armed forces) are covered by federal laws. People who work on interstate railroads are covered by the Federal Employers Liability Act. Seamen on navigable waters are covered by the Merchant Marine Act of 1920, and people loading and unloading vessels are covered by the Longshore and Harbor Workers' Compensation Act. Virtually all other workers and employers are subject to Michigan's law.
A. The law requires that every employer subject to the Act must provide some way of assuring that it can pay benefits to its workers should they become injured. Most employers in Michigan provide this security by purchasing an insurance policy from a private insurance company. The insurance company then reports to the agency that it is providing coverage for that employer. Some employers, however, are "self-insured."
Following are the criteria for employers who must carry workers' compensation coverage:
All private employers regularly employing 1 or more employees 35 hours or more per week for 13 weeks or longer during the preceding 52 weeks.
All private employers regularly employing 3 or more employees at one time. (This includes part-time employees.)
Agricultural employers if they employ 3 or more employees 35 hours or more per week for 13 or more consecutive weeks.
Householders employing domestic servants if they employ anyone 35 hours or more per week for 13 weeks or longer during the preceding 52 weeks.
All public employers.
A. The employees of your partnership, limited liability company or small corporation are covered. However, Section 161 of the Act provides that under certain circumstances named partners and corporate officers who are also shareholders of small, closely-held corporations may exempt themselves from the Act. If your firm wishes to exclude partners or officers of a corporation but you have other employees, you can do this by making arrangements with your insurance company. If you have a firm in which all of the employees are either partners or owners of the small corporation, you may obtain a certificate allowing their exemption under the Act by contacting the Insurance Compliance Division of the agency at 517-284-8922.
A. If your business is not a partnership, limited liability company or a corporation but you are the only owner, it is called a "sole proprietorship." You, as the owner of that business, are considered to be "self-employed." The employees of a sole proprietorship are covered by the Workers' Disability Compensation Act, but the sole proprietor (the person who owns the business) is "self-employed." You are not considered to be an employee of anyone and accordingly you are not covered by the Act.
A.Section 161(2) of the Act provides that certain family members of an employer may be excluded from the Act.
A.If one company hires another company to come in and do some work for it, the second company is ordinarily an "independent contractor" and not an employee of the first company. Sometimes, however, a company hires one person to come in and perform a specific job and disputes arise as to whether or not that person is an employee or an independent contractor. Section 161(1)(n) of the Act states that if the worker does not maintain a separate business, does not hold himself or herself out to and render service to the public, and does not employ other workers, the worker will be considered an employee. As of December 19, 2011, the Act was amended to address this question. More information can be found in our publication Employer Insurance Requirements.
A. Some employers who are financially sound (and usually quite large) are "self-insured." An employer can only be self-insured if it obtains permission from the Agency. The Agency requires employers to demonstrate a reasonable position of solvency and ability to pay claims when due as a condition in order to be self-insured. Select to view the self-insured employer listing.
"Group self-insurance" is another option that is available. Under these plans multiple small employers which operate the same kind of business can band together to obtain approval for self-insurance as a group. Select to view the group self-insured listing.
To reach the Self-Insured Division, contact 517-284-8939.
A. There are severe penalties for the failure of an employer to provide workers' compensation coverage. First of all, if a worker is injured, he or she may sue the employer for damages in the civil court system. If the employer was at fault for the injury, this might result in the payment of a great deal of money by the employer.
Secondly, the Workers' Compensation Agency actively enforces the Workers' Disability Compensation Act. It has the authority to petition the court and seek an order prohibiting the company from employing any persons in their business until such time as proper workers' compensation insurance coverage is obtained.
Finally, the employer may be subject to a fine of $1,000 or imprisonment for no less than 30 days nor more than 6 months, or both. Each day for which the employer is uninsured is considered a separate offense.
A. Section 161(1)(l) provides that if an illegally employed minor is injured, he or she is entitled to double compensation. This does not apply if the minor fraudulently uses permits or certificates of age in order to obtain the job. All determinations on the legality or exemption of a minor's employment are determined by the Department of Education, Office of Career and Technical Education.
A. Workers' compensation insurance rates are based upon the "classification of your employees to be covered." The classification refers to the type of work the individuals perform. Insurance companies establish a premium rate for each classification. However, there are often many adjustments to these basic rates.
Since 1983 Michigan has had competitive pricing of workers' compensation insurance. In many states an insurance bureau sets uniform rates that insurance companies are required to follow in selling workers' compensation insurance. In Michigan, insurance rates are now set on a competitive basis in the marketplace.
Because insurance companies do not all charge the same rate for the same workers' compensation coverage, it is very important for your business, either directly or through its insurance agent, to shop around for the best price on workers' compensation insurance. In shopping for insurance, price is a very important consideration but you should also inquire concerning the services that the insurance company will provide. This includes the services concerning claims as well as prevention and loss control.
A. Benefits are ordinarily paid by the employer or its insurance carrier to the worker. Unless there is a dispute, the Workers' Compensation Agency does not get involved. Sections 801, 805, and Rules 1 and 2, however, require that certain events be reported to the agency.
If an injury results in death, a specific loss, or a disability of seven days or more, the employer is required to report that injury to the agency on a form WC-100. (Injuries that require medical treatment but do not result in a disability of seven days do not need to be reported.) In the case of death, a form WC-106 must also be filed.
When an employer begins paying benefits or the benefit amount is changed, or if benefits stop, this is reported to the agency on a form WC-701.
A. While the law does not require any type of postings, employers are encouraged to print and place the following publications in areas for employees to review: