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December 05, 2013

Special conflicts panel overrules 20-year-old standard for who qualifies as an "employee" under the worker's comp statute

Section 161(n) of the Worker's Disability Compensation Act (WDCA) defines an employee as "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."  In 1992, the Court of Appeals, in Amerisure Insurance Cos. v. Time Auto Transportation, Inc., held that under the WDCA, the person in question was an independent contractor, not an "employee," if any one of three criteria were met:  1. they maintained a separate business; 2. they served the public; 3. they qualified as an employer.  196 Mich App 569; 493 NW2d 482 (1992).  Earlier this year, a panel in Auto-Owners Ins Co v. All Star Lawn Specialists Plus, Inc. followed Amerisure but disagreed with its reasoning, stating that unless the person maintains a separate business, holds themselves out to the public, and is an employer, they should qualify as an "employee" under the WDCA.  A special 7-judge panel convened under MCR 7.215(J) to resolve the conflict.  In an opinion joined by 4 of the judges, the special panel overruled Amerisure and held that all three of Amerisure's criteria must be met before a person is "divested of 'employee' status."  The 4-judge majority reasoned that the statute's use of the word "and" linked the three criteria and demonstrated legislative intent that all three conditions must be met if the exception to the "employee" designation is to apply.  A 3-judge minority disagreed, arguing that Section 161(n) is not about divesting a person of "employee" status, but whether a person qualifies an "employee" to begin with.  According to the dissent, when read as a whole with the rest of the Section 161, all subsection (n) pre-conditions (not a separate business, not serving the public, and not an employer) must be satisfied before a person can be considered an employee under the WDCA.  Thus, according to the dissent, if a person maintains a separate business, holds himself out to render service to the public, or is an employer subject to the WDCA, then that person is not an employee under the WDCA. Given this polarized decision, and the resulting dramatic change in longstanding worker's comp law, it would be surprising if the Michigan Supreme Court did not opine on this issue in short order.

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