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Workers’ comp confusion

Donna Ryun
information services

There’s no doubt about it ... workers’ compensation laws are confusing, particularly for professional truck drivers who own and operate their own trucks. Here’s an example of the questions we receive on this subject:

Question: I’m a leased owner-operator, and my company is telling me I’ve got to get workers’ comp insurance. My insurance agent tells me that if I’m an independent contractor, I don’t fall under my state’s workers’ comp laws. When I went back to the company and told the boss what my agent said, he told me if I wanted to haul for his company, I had to have workers’ comp. What’s the real deal on this?

Answer: First, I’d like to clarify that workers’ compensation is not actually an insurance coverage ... it is more of a system of laws that are supposed to protect workers who are injured on the job.

Workers’ comp laws are meant to ensure that injured workers receive appropriate medical care and compensation for lost wages, along with rehabilitation and any retraining that may be necessary to enable them to return to the job. In addition, if the worst happens and a worker is killed on the job, his or her family may be eligible for benefits under the workers’ comp laws.

Part of the confusion goes back to the way you referred to your carrier as “the boss.” If you’re an owner-operator who controls his or her own business, I think you’re the boss. In some cases, your carrier may try to make you think he’s the boss, but I’d be willing to bet the contract you signed when you leased on with him identifies you as an independent contractor. “Does it really matter what I think or what it says in the lease?” Well, the answer is maybe or maybe not. I’ll try to explain.

In nearly all states, independent contractors are not required to be protected under workers’ compensation laws because they are not company employees. However, whether an owner-operator is considered to be a covered employee or a non-covered independent contractor is the real issue here.

Many states use a “right of control” test to make this determination, while others leave it up to the courts to decide on a case-by-case basis whenever an owner-operator makes a claim against a carrier. For most carriers, the latter method is risky business, and they don’t want to take the chance they may have misclassified you because it could cost them big bucks. Consequently, more and more carriers are requiring owner-operators to provide proof of self-coverage or coverage under the company’s policy. (Remember ... if this is the case, it must be stated within your lease contract, and they can’t force you to buy their coverage.)

It’s also worth mentioning that just because your lease states you are to be considered an independent contractor, there’s no guarantee a court will uphold this classification if push comes to shove in litigation. Although stating independent contractor status within the lease would definitely be helpful, there have been cases where it hasn’t held up in court. This is just another reason why carriers become somewhat “paranoid” and tend to lean toward requiring leased owner-operators to acquire coverage.

As if all this confusion isn’t enough, there is really no “one size fits all” test for classification because various government agencies each have their own concerns, biases and procedures for determining status, and they don’t have to necessarily jive with each other.

For example, the Internal Revenue Service may find that a worker is an employee, while the state workers’ comp authority deems the worker is an independent contractor. The state’s unemployment compensation insurance agency may make a determination that differs from the state’s tax department, and to complicate matters further, in some rare instances, a worker in one state could be classified as an employee while another state says that same worker is an independent contractor. It all depends on the entity of concern, and in this case, it’s your workers’ comp authority, so it should be this agency’s determination test that applies.

Another reason motor carriers require leased owner-operators to acquire coverage may stem from the fact some states’ workers’ comp authorities think the courts typically view owner-operators as uninsured subcontractors. It follows that if leased owner-operators are viewed as subcontractors, then their authorized motor carriers are seen as general contractors, potentially making them responsible for any workers employed by their subcontractors. Simply stated, if an owner-operator hires a driver, and that driver gets hurt on the job, he or she could file a claim against the authorized motor carrier and be awarded benefits, particularly if the owner-operator doesn’t carry workers’ comp.

Although this may explain why more authorized motor carriers are requiring their leased owner-operators to obtain self-coverage or be covered under the company policy, it doesn’t make the system any less confusing.

Other concerns that muddy the waters include whether a motor carrier that insists its leased owner-operators have workers’ comp should be allowed to require them to pay for their own protection. The fairness of this practice has, and continues to be challenged in the courts. After all, workers’ comp is not just to protect the workers ... it also protects employers from lawsuits arising from a worker’s injuries. Why should you have to pay for your motor carrier’s protection? Many states prohibit this practice, but others do not.

In addition, problems can arise when insurers who base workers’ comp premiums on the carrier’s gross receipts decide to audit the company and determine that many of the workers are not employees, but are instead independent contractors who are actually exempt from workers’ comp laws. What happens to the premiums that you paid in when the insurer decides you are an independent contractor and therefore not covered under workers’ comp?

Until these questions are answered, and workers’ comp laws and status determination tests become more uniform between and within the states, motor carriers and owner-operators will likely remain unclear on this issue.

If your motor carrier requires you to provide proof of self-coverage, make sure this is stipulated within the lease per the federal truth-in-leasing regulations. Also be aware that your carrier cannot require you to secure coverage from or through them as a condition of the lease.

If you don’t have or don’t intend to employ a driver(s), check to see whether your motor carrier will accept an occupational accident insurance policy in lieu of workers’ comp, as this coverage is generally less expensive while still providing the protection you need.

Although motor carriers may say you have to have workers’ comp, they may be using the term generically, so always ask whether an alternative would be accepted. If so, contact an OOIDA medical benefits representative by calling 1-800-444-5791 to discuss your specific needs.

If you have questions that you’d like answered, please e-mail them to or send them to me at PO Box 1000, Grain Valley, MO 64029. Although we won’t be able to publish all questions in Land Line, you will receive a response.