Up North--October 2008

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October 2008

SFM Up North
A publication from the Duluth offices of SFM Companies
Editor: Kathleen S. Bray, Attorney

THIS MONTH'S TOPICS:

Reminder: New Minnesota benefit changes effective Oct. 1, 2008
Independent contractor exemption certificates
"Direct threat" under the Americans with Disabilities Act (ADA)

Reminder: New Minnesota benefit changes effective Oct. 1, 2008

For injuries covered by the Minnesota Workers’ Compensation Act that occur on or after Oct. 1, 2008, the maximum weekly compensation benefit rate increases from $750.00 to $850.00. The maximum entitlement for temporary total disability benefits increases from 104 weeks to 130 weeks.

Independent contractor exemption certificates

Effective Jan. 1, 2009 in Minnesota, persons who are working as independent contractors must obtain an Independent Contractor Exemption Certificate from the Minnesota Department of Labor and Industry if they are performing commercial or residential building construction or improvement services. The Department already has begun accepting exemption certificate applications, under the new law, Minnesota Statutes Sec. 181.723.

The person seeking approval as an independent contractor must satisfy a nine-factor test, showing that the proposed independent contractor:

Maintains a separate business with the individual's own office, equipment, materials and other facilities;
Holds or has applied for a federal employer identification number or has filed business or self-employment income tax returns with the federal Internal Revenue Service if the person has performed services in the previous year for which the individual is seeking the independent contractor exemption certificate;
Operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means of performing the services;
Incurs the main expenses related to the service that the individual performs under contract;
Is responsible for the satisfactory completion of services that the individual contracts to perform and is liable for a failure to complete the service;
Receives compensation for service performed under a contract on a commission or per-job or competitive bid basis and not on any other basis;
May realize a profit or suffer a loss under contracts to perform service;
Has continuing or recurring business liabilities or obligations; and
The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

Significantly, if a person is performing services in the course of his or her trade, business, profession or occupation, that person will be deemed an employee of another entity for workers' compensation purposes unless the person performing the services holds a current independent contractor exemption certificate and the services performed fall under that exemption certificate. The statute lists the criteria that a person must satisfy to establish that he or she is "performing services for the person under the independent contractor exemption certificate," largely reflecting the nine-factor test required to qualify for the exemption certificate. The work performed by the independent contractor must be listed on the exemption certificate as the services for which the person qualified as an independent contractor. The person performing the services also must establish that the nine-factor test listed above was satisfied at the time those services were performed.

A contractor who hires an individual representing himself as an independent contractor but who does not have a proper exemption certificate is subject to civil penalties of up to $5,000 per violation, in addition to potential exposure for failing to provide workers' compensation insurance, unemployment insurance, and related obligations of the employment relationship.

A list of independent contractor exemption certificate holders is on the Department of Labor and Industry website at www.doli.state.mn.us/ic. Contractors must maintain copies of the certificates for five years.

For more detailed information, consult the October-November-December issue of SFM's Companion.

"Direct threat" under the Americans with Disabilities Act (ADA)

An employer is not required to accommodate an employee who poses a "direct threat" of harm to others, or direct threat harm to the employee himself or herself. An employee, in order to be a qualified employee with a disability entitled to the ADA's protectons, must be able to perform the work without risk to him or herself, as well as without direct threat to the health or safety of other individuals in the workplace. However, in asserting a "direct threat" defense, the likelihood of success is very fact-dependent, and turns significantly on the medical evidence available.

The EEOC's interpretation has been more expansive than the language of the Act itself. The Act limits "direct threats" to the health or safety of others, while the Interpretive Guidance issued by the EEOC and Regulations implementing the Act define direct threat, as follows:

Direct threat "means a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation. The determination that an individual poses a 'direct threat' shall be based on an individualized assessment of the individual's present ability to safely perform the essential functions of the job. This assessment shall be based on a reasonable medical judgment that relies on the most current medical knowledge and/or on the best available objective evidence."

The Regulation, 29 CFR Part 1630.2(r), also provides criteria for evaluating "direct threats." In determining whether an individual would pose a direct threat, the factors to be considered include:

The duration of the risk;
The nature and severity of the potential harm;
The likelihood that the potential harm will occur; and
The imminence of the potential harm.

Almost every employer has been confronted with the miracle recovery--off work completely one day, and then when the employee's job security is threatened, the employee is "healed" with a clean report of work ability, and no restrictions (or dramatic improvement in functional abilities). Making an employment decision on the fear of reinjury may subject an employer to a retaliation claim or discrimination claim--tread carefully! Generalized fears are insufficient to terminate an employee based on safety concerns.

While the recent 2008 Amendments to the ADA do not appear at this point to affect this issue, SFM will keep employers advised regarding any new developments.

NOTICE: The distribution and receipt of the information provided in this newsletter does not create or continue any attorney-client relationship. The information provided is general in nature and should not be treated as legal advice concerning any particular set of facts or circumstances. Recipients should consult with their attorney before acting on any information discussed in each issue.