HOFFMANN LAW FIRM, PC

SMALL BUSINESS ISSUES:

Q: I'm an owner and officer of a corporation of which I am also an employee. I was injured at work. My insurance agent has told me that I am not eligible for workers' compensation benefits. Is this correct?

A: It depends. Iowa Code §85.1 does allow exclusion of some types of employees from coverage under the State's workers' compensation law.

§85.1(5) states, "The president, vice president, secretary, and treasurer of a corporation other than a family farm corporation, not to exceed four officers per corporation, if such an officer knowingly and voluntarily rejects workers' compensation coverage pursuant to section 87.22." (emphasis added).

§87.22 requires that the rejection be in writing and either attached to an actual policy or, if no policy exists, filed with the workers' compensation commissioner. The rejection can not be a requirement of employment, if it was then it is not enforceable. The rejection form must substantially follow the form provided by §87.22.

Whether or not you have coverage will depend upon the facts of your case, you should consult a lawyer for advice. (top)

Q: I am setting up a small business, I have not finalized whether it will be a corporation or a limited liability company. I will be heavily involved in the day to day operations, which includes running heavy machinery and construction. My insurance agent has told me that I can exclude myself from the workers compensation coverage and save myself a sizable portion of the premium cost. Is this correct? What are the risks and benefits of excluding myself?

A: Your insurance agent may be correct that under certain circumstances, you can be excluded from workers compensation coverage. Because every situation is factually different, you should consult a lawyer for an analysis of your particular situation.

Iowa Code §85.1 allows exclusion of some types of employees from coverage. §85.1(5) states, "The president, vice president, secretary, and treasurer of a corporation other than a family farm corporation, not to exceed four officers per corporation, if such an officer knowingly and voluntarily rejects workers' compensation coverage pursuant to section 87.22." (emphasis added).

§87.22 requires that the rejection be in writing and either attached to an actual policy or, if no policy exists, filed with the workers' compensation commissioner. The rejection can not be a requirement of employment, if it was then it is not enforceable. The rejection form must substantially follow the form provided by §87.22. §87.22 also provides a means to terminate the rejection.

But, if you are a member of a limited liability company, or you are a proprietor, or limited liability partner, or a partner, who is actively engaged in the business on a substantially full time basis the law is significantly different. Under §85.1A, you must elect to be covered under the workers' compensation coverage. §85.1A requires that the coverage specifically include the proprietor, limited liability company member, limited liability partner, or partner.

So, whether you are included or excluded automatically, or whether you must elect to 'opt out' or 'opt in', will depend on the form of the business entity you choose.

There are both advantages and disadvantages to excluding yourself from the workers' compensation coverage. One advantage may be a lower premium. Disadvantages may include the fact that you perform work which may be dangerous and may increase the likelihood of a serious work related accident. There may, or may not, be other legal avenues open to you to recover for a work injury. (top)

Q: Are injured employees who work on commission eligible for workers' compensation?

A: Yes, the manner in which an employee is paid does not determine whether they are eligible for workers' compensation. If they were independent contractors (a whole set of other factors to consider), they are not eligible for workers' compensation, but if they are employees who are simply paid on commission, then they are eligible for workers' compensation. (top)

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