Becoming an Independent Contractor
A worker must be:
- Free from control or direction from hiring agent
- Engaged in their own independently established business, occupation, trade or profession
- Hold an Independent Contractor Exemption Certificate (ICEC) or carry workers’ compensation (WC) insurance on themselves
How to obtain an ICEC:
- Read, complete, and submit the entire original and notarized application and waiver form with non-refundable $125 fee to the Department
- Also submit business documentation that demonstrates you have an established business for each occupation listed on you application
Independent contractors can be fined up to $1,000 per violation for:
- Performing work without an ICEC
- Performing work with a revoked or suspended ICEC
- Transferring their ICEC to another person
- Misrepresentation of the independent contractor status
When Hiring an Independent Contractor
Make sure you:
- Do not control the method and means of how they perform their work, i.e., providing equipment and training
- Have a written contract that states what is to be performed, materials used, start and completion dates, payment based on completed project and liability for failure to complete the project
- Obtain references and check them out to ensure they are experts in their field of work
- Check periodically to confirm that they have valid ICEC or WC insurance on themselves
- Ask for proof of their ICEC and verify it is in good standing by searching on our website; or calling our office at (406) 444-9029
Hiring agent can be fined up to $1,000 per violation for:
- Exercising control to create an employee/employer relationship
- Requiring an employee to assume an independent contractor status
Independent Contractor Administrative Rules of Montana
Montana Code Annotated
IC Statutes 39.71.401-441
Independent Contractor Central Unit - (406) 444-9029
Supervisor/ Program Manager - Dallas Cox - (406) 444-9586
Independent Contractor Central Unit
PO Box 8011
Helena, MT 59604-8011
Physical Location (in Helena for overnight mailing and same day processing for walk-in customers):
1805 Prospect Ave
Helena, MT 59601
History of the ICEC program
Senate Bill 108
IC Laws Explained
The Montana State Supreme Court, in its 2003 decision
Kelly Wild vs. Fregein Construction, significantly changed the status of independent contractor exemption certificates (ICEC) that have been issued by the Montana Department of Labor since 1984. Until 2003, ICECs were considered to be conclusive, that is to say, legally determining, in cases of injury and other liability issues. Put another way, if you as an IC had an ICEC, you were personally liable for any accidents you were involved in, and in contrast those who employed you were free of liability. With the Supreme Court decision in 2003, however, suddenly IC liability became a much broader and more complex legal issue, so the 2003 Montana Legislature established a study committee through Senate Bill 270 to recommend ways to clarify IC relationships and thereby minimize litigation. By creating a strengthened set of new IC laws, the 2005 Montana Legislature re-established the conclusive status of the ICEC.
2005 Legislative Changes to IC Law
Based on over a year of research, discussions and committee recommendations on how to deal with the impact of the Supreme Court's Wild vs. Fregein decision, the 2005 Montana Legislature strengthened our state's independent contractor (IC) statutes. Senate Bill 108 became effective on April 28, 2005, and its associated statutes clarify who is actually operating as an IC.
Research findings used to write these new IC statutes identified Montana as having the highest percentage (eight percent) of independent contractors as a portion of the state workforce of any state that registers independent contractors.
During the public hearings on IC rules, several business owners talked about the problems created by a process that was too relaxed in the way it issued IC exemption certificates, pitting the contract bids of employers who were properly covered with workers' compensation insurance against the contract bids of others not properly covered but who thereby had an unfair competitive advantage. These kinds of issues should be resolved by the Legislature's new IC law.
Important Elements of the IC Law
The law requires independent contractors to either have an ICEC or purchase workers' compensation insurance coverage on themselves. Failure to obtain an ICEC or workers' compensation insurance will result in the state treating the worker as an employee of the hiring agent. Hiring agents will be responsible for claims for injuries or occupational diseases and for payment of premium on the wages of those considered their employees.
To be conclusively presumed to be an independent contractor, the Department of Labor & Industry (DLI) must approve an application for an ICEC based upon a submission of a complete application, and the person must be working under the ICEC. To be “working under” an ICEC, the worker must be performing the occupation listed on the certificate and the hiring agent and the independent contractor must not have a written or an oral agreement that the independent contractor's certificate holder's status is that of an employee.
The Department has the authority to investigate the working relationship between an independent contractor and his/her hiring agent. The Department may suspend or revoke an independent contractor exemption certificate. Fines may be assessed against the hiring agent if control is exerted to the extent it creates an employer/employee relationship.
The AB Test
How can you tell if an individual is an independent contractor (IC) or an employee? An IC is a worker who has an ICEC and meets the following conditions when he or she renders service in the course of an occupation: he or she (A) has been and will continue to be free from control or direction over the performance of the services, both under contract and in fact; and (B) is engaged in an independently established trade, occupation, profession or business, and further acknowledges no coverage under the Workers' Compensation and Occupational Disease Act.
To obtain an ICEC, each applicant needs to supply sufficient business documentation to the Department that B requirements are satisfied. Through monitoring and auditing, the Department determines that A requirements are satisfied. This two-pronged determination of IC status is commonly referred to as the AB test.
The 2005 Legislature strengthened and clarified the process for determining how individuals are measured by the AB test, including putting in place an objective point system to rank the individual business components of IC applicants. The AB test is more objective, specific and documented, and the new IC law also specifically re-establishes the conclusive status of the IC exemption certificate.
Thursday, June 19, 2014