Risk & Insurance: Why Hiring Independent Contractors is Now an Increasingly Risky Business

Topics: Small Business

AmTrust Financial’s Matt Zender, SVP of Workers’ Comp Product Management, recently shared some thoughts regarding the misclassification of independent contractors in an article on Risk & Insurance.

In April 2018, the California Supreme Court issued a landmark decision in the matter of Dynamex Operations West, Inc. v. Superior Court of Los Angeles regarding the definition of “employee” and “independent contractor.” Prior to 2004, Dynamex, a nationwide same-day courier and delivery service, classified its California drivers as employees, but then later, as a means of saving money, converted all drivers to independent contractors. Shortly after, the delivery drivers claimed they should be classified as employees, not independent contractors, the superior court agreed, ruling against Dynamex.

A recent poll from NPR reveals the upward trend of the independent contractor in the United States, finding that one in five jobs in the country are held by a worker under contract. From 2005 to 2017, the share of independent contractors in industries like transportation and utilities has increased by 50 percent. As the gig economy grows and employers continue to keep a large independent contractor base, it’s important that they have solid knowledge of their worker base and that they’re accurately classifying these workers. Additionally, agents should be aware of how much their small business clients utilize independent contractors so they can help them accurately identify the risks involved.

However, according to Zender, “If Dynamex becomes the standard, the population of ‘employees’ will inevitably expand, resulting in more covered employees and expanded premiums. Losses will scale to the larger covered population, but the expense load from premiums will increase business costs, which employers will pass along to their customers.”

Read the entire Risk and Insurance article here.

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This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by state/location. Check with your local RSM for more information​.

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