Senate Bill No. 41

Introduced By benedict

By Request of the Department of Labor and Industry



A Bill for an Act entitled: "An Act transferring jurisdiction over disputes relating to wages paid for in property other than money, disputes relating to subrogation, and disputes relating to payment of compensation to beneficiaries to the Workers' Compensation Court; requiring mediation of certain types of disputes; including limited liability partnerships within the provisions of the Workers' Compensation Act; eliminating the underinsured employers' provisions of the Workers' Compensation Act; providing for transfer of surplus funds in the underinsured employers' fund to the uninsured employers' fund; amending sections 39-71-117, 39-71-118, 39-71-303, 39-71-401, 39-71-414, 39-71-432, 39-71-723, and 39-71-724, MCA; repealing sections 39-71-531, 39-71-532, 39-71-533, and 39-71-534, MCA; and providing effective dates."



Be it enacted by the Legislature of the State of Montana:



Section 1.  Section 39-71-117, MCA, is amended to read:

"39-71-117.   Employer defined. (1) "Employer" means:

(a)  the state and each county, city and county, city school district, and irrigation district; all other districts established by law; all public corporations and quasi-public corporations and public agencies; each person; each prime contractor; each firm, voluntary association, limited liability company, limited liability partnership, and private corporation, including any public service corporation and including an independent contractor who has any a person in service under any an appointment or contract of hire, expressed or implied, oral or written; and the legal representative of any deceased employer or the receiver or trustee of the deceased employer;

(b)  any association, corporation, limited liability company, limited liability partnership, or organization that seeks permission and meets the requirements set by the department by rule for a group of individual employers to operate as self-insured under plan No. 1 of this chapter; and

(c)  any nonprofit association, limited liability company, limited liability partnership, or corporation or other entity funded in whole or in part by federal, state, or local government funds that places community service participants, as described in 39-71-118(1)(e), with nonprofit organizations or associations or federal, state, or local government entities.

(2)  A temporary service contractor is the employer of a temporary worker for premium and loss experience purposes.

(3)  Except as provided in chapter 8 of this title, an employer defined in subsection (1) who uses the services of a worker furnished by another person, association, contractor, firm, limited liability company, limited liability partnership, or corporation, other than a temporary service contractor, is presumed to be the employer for workers' compensation premium and loss experience purposes for work performed by the worker. The presumption may be rebutted by substantial credible evidence of the following:

(a)  the person, association, contractor, firm, limited liability company, limited liability partnership, or corporation, other than a temporary service contractor, furnishing the services of a worker to another retains control over all aspects of the work performed by the worker, both at the inception of employment and during all phases of the work; and

(b)  the person, association, contractor, firm, limited liability company, limited liability partnership, or corporation, other than a temporary service contractor, furnishing the services of a worker to another has obtained workers' compensation insurance for the worker in Montana both at the inception of employment and during all phases of the work performed.

(4)  An interstate or intrastate common or contract motor carrier doing business in this state who uses drivers in this state is considered the employer, is liable for workers' compensation premiums, and is subject to loss experience rating in this state unless:

(a)  the driver in this state is certified as an independent contractor as provided in 39-71-401(3); or

(b)  the person, association, contractor, firm, limited liability company, limited liability partnership, or corporation furnishing drivers in this state to a motor carrier has obtained workers' compensation insurance on the drivers in Montana both at the inception of employment and during all phases of the work performed."



Section 2.  Section 39-71-118, MCA, is amended to read:

"39-71-118.   Employee, worker, volunteer, and volunteer firefighter defined. (1) The term "employee" or "worker" means:

(a)  each person in this state, including a contractor other than an independent contractor, who is in the service of an employer, as defined by 39-71-117, under any appointment or contract of hire, expressed or implied, oral or written. The terms include aliens and minors, whether lawfully or unlawfully employed, and all of the elected and appointed paid public officers and officers and members of boards of directors of quasi-public or private corporations, except those officers identified in 39-71-401(2), while rendering actual service for the corporations for pay. Casual employees, as defined by 39-71-116, are included as employees if they are not otherwise covered by workers' compensation and if an employer has elected to be bound by the provisions of the compensation law for these casual employments, as provided in 39-71-401(2). Household or domestic employment is excluded.

(b)  any juvenile who is performing work under authorization of a district court judge in a delinquency prevention or rehabilitation program;

(c)  a person who is receiving on-the-job vocational rehabilitation training or other on-the-job training under a state or federal vocational training program, whether or not under an appointment or contract of hire with an employer, as defined in this chapter, and whether or not receiving payment from a third party. However, this subsection does not apply to students enrolled in vocational training programs, as outlined in this subsection, while they are on the premises of a public school or community college.

(d)  an aircrew member or other person who is employed as a volunteer under 67-2-105;

(e)  a person, other than a juvenile as defined in subsection (1)(b), who is performing community service for a nonprofit organization or association or for a federal, state, or local government entity under a court order, or an order from a hearings officer as a result of a probation or parole violation, whether or not under appointment or contract of hire with an employer, as defined in this chapter, and whether or not receiving payment from a third party. For a person covered by the definition in this subsection (1)(e):

(i)  compensation benefits must be limited to medical expenses pursuant to 39-71-704 and an impairment award pursuant to 39-71-703 that is based upon the minimum wage established under Title 39, chapter 3, part 4, for a full-time employee at the time of the injury; and

(ii)  premiums must be paid by the employer, as defined in 39-71-117(3), and must be based upon the minimum wage established under Title 39, chapter 3, part 4, for the number of hours of community service required under the order from the court or hearings officer.

(f)  an inmate working in a federally certified prison industries program authorized under 53-1-301; and

(g)  a person who is an enrolled member of a volunteer fire department as described in 7-33-4109 or a person who provides ambulance services under Title 7, chapter 34, part 1.

(2)  The terms defined in subsection (1) do not include a person who is:

(a)  participating in recreational activity and who, at the time, is relieved of and is not performing prescribed duties, regardless of whether the person is using, by discount or otherwise, a pass, ticket, permit, device, or other emolument of employment;

(b)  performing voluntary service at a recreational facility and who receives no compensation for those services other than meals, lodging, or the use of the recreational facilities; or

(c)  performing services as a volunteer, except for a person who is otherwise entitled to coverage under the laws of this state. As used in this subsection (2)(c), "volunteer" means a person who performs services on behalf of an employer, as defined in 39-71-117, but who does not receive wages as defined in 39-71-123.

(3)  With the approval of the insurer, an employer may elect to include as an employee under the provisions of this chapter any volunteer as defined in subsection (2)(c).

(4)  (a) The term "volunteer firefighter" means a firefighter who is an enrolled and active member of a fire company organized and funded by a county, a rural fire district, or a fire service area.

(b)  The term "volunteer hours" means all the time spent by a volunteer firefighter in the service of an employer, including but not limited to training time, response time, and time spent at the employer's premises.

(5)  (a)  If the employer is a partnership, limited liability partnership, sole proprietor, or a member-managed limited liability company, the employer may elect to include as an employee within the provisions of this chapter any member of the partnership, or limited liability partnership, the owner of the sole proprietorship, or any member of the limited liability company devoting full time to the partnership, limited liability partnership, proprietorship, or limited liability company business.

(b)  In the event of an election, the employer shall serve upon the employer's insurer written notice naming the partners, sole proprietor, or members to be covered and stating the level of compensation coverage desired by electing the amount of wages to be reported, subject to the limitations in subsection (5)(d). A partner, sole proprietor, or member is not considered an employee within this chapter until notice has been given.

(c)  A change in elected wages must be in writing and is effective at the start of the next quarter following notification.

(d)  All weekly compensation benefits must be based on the amount of elected wages, subject to the minimum and maximum limitations of this subsection. For premium ratemaking and for the determination of weekly wage for weekly compensation benefits, the electing employer may elect not less than $900 a month and not more than 1 1/2 times the average weekly wage, as defined in this chapter.

(6)  (a) If the employer is a quasi-public or a private corporation or a manager-managed limited liability company, the employer may elect to include as an employee within the provisions of this chapter any corporate officer or manager exempted under 39-71-401(2).

(b)  In the event of an election, the employer shall serve upon the employer's insurer written notice naming the corporate officer or manager to be covered and stating the level of compensation coverage desired by electing the amount of wages to be reported, subject to the limitations in subsection (5)(d). A corporate officer or manager is not considered an employee within this chapter until notice has been given.

(c)  A change in elected wages must be in writing and is effective at the start of the next quarter following notification.

(d)  All weekly compensation benefits must be based on the amount of elected wages, subject to the minimum and maximum limitations of this subsection. For premium ratemaking and for the determination of the weekly wage for weekly compensation benefits, the electing employer may elect not less than $200 a week and not more than 1 1/2 times the average weekly wage, as defined in this chapter.

(7)  (a) The trustees of a rural fire district, a county governing body providing rural fire protection, or the county commissioners or trustees for a fire service area may elect to include as an employee within the provisions of this chapter any volunteer firefighter. A volunteer firefighter who receives workers' compensation coverage under this section may not receive disability benefits under Title 19, chapter 17.

(b)  In the event of an election, the employer shall report payroll for all volunteer firefighters for premium and weekly benefit purposes based on the number of volunteer hours of each firefighter times the average weekly wage divided by 40 hours, subject to a maximum of 1 1/2 times the average weekly wage.

(8)  Except as provided in chapter 8 of this title, an employee or worker in this state whose services are furnished by a person, association, contractor, firm, limited liability company, limited liability partnership, or corporation, other than a temporary service contractor, to an employer, as defined in 39-71-117, is presumed to be under the control and employment of the employer. This presumption may be rebutted as provided in 39-71-117(3).

(9)  For purposes of this section, an "employee or worker in this state" means:

(a)  a resident of Montana who is employed by an employer and whose employment duties are primarily carried out or controlled within this state;

(b)  a nonresident of Montana whose principal employment duties are conducted within this state on a regular basis for an employer;

(c)  a nonresident employee of an employer from another state engaged in the construction industry, as defined in 39-71-116, within this state; or

(d)  a nonresident of Montana who does not meet the requirements of subsection (9)(b) and whose employer elects coverage with an insurer that allows an election for an employer whose:

(i)  nonresident employees are hired in Montana;

(ii)  nonresident employees' wages are paid in Montana;

(iii)  nonresident employees are supervised in Montana; and

(iv)  business records are maintained in Montana.

(10) An insurer may require coverage for all nonresident employees of a Montana employer who do not meet the requirements of subsection (9)(b) or (9)(d) as a condition of approving the election under subsection (9)(d)."



Section 3.  Section 39-71-303, MCA, is amended to read:

"39-71-303.   Work paid for in property other than money -- wages to be determined by department. Where any When an employer procures any work to be done, payment for which is to be made in property other than money or its equivalent and the value of which that property is speculative or intangible, the wages of the employees receiving such the compensation shall must be determined by the department in accordance with the going wage for the same or similar work in the district or locality where the same work is to be performed."



Section 4.  Section 39-71-401, MCA, is amended to read:

"39-71-401.   Employments covered and employments exempted. (1) Except as provided in subsection (2), the Workers' Compensation Act applies to all employers, as defined in 39-71-117, and to all employees, as defined in 39-71-118. An employer who has any employee in service under any appointment or contract of hire, expressed or implied, oral or written, shall elect to be bound by the provisions of compensation plan No. 1, 2, or 3. Each employee whose employer is bound by the Workers' Compensation Act is subject to and bound by the compensation plan that has been elected by the employer.

(2)  Unless the employer elects coverage for these employments under this chapter and an insurer allows an election, the Workers' Compensation Act does not apply to any of the following employments:

(a)  household and domestic employment;

(b)  casual employment as defined in 39-71-116;

(c)  employment of a dependent member of an employer's family for whom an exemption may be claimed by the employer under the federal Internal Revenue Code;

(d)  employment of sole proprietors, working members of a partnership, working members of a limited liability partnership, or working members of a member-managed limited liability company, except as provided in subsection (3);

(e)  employment of a broker or salesman performing under a license issued by the board of realty regulation;

(f)  employment of a direct seller as defined in 26 U.S.C. 3508;

(g)  employment for which a rule of liability for injury, occupational disease, or death is provided under the laws of the United States;

(h)  employment of a person performing services in return for aid or sustenance only, except employment of a volunteer under 67-2-105;

(i)  employment with a railroad engaged in interstate commerce, except that railroad construction work is included in and subject to the provisions of this chapter;

(j)  employment as an official, including a timer, referee, or judge, at a school amateur athletic event, unless the person is otherwise employed by a school district;

(k)  employment of a person performing services as a newspaper carrier or free-lance correspondent if the person performing the services or a parent or guardian of the person performing the services in the case of a minor has acknowledged in writing that the person performing the services and the services are not covered. As used in this subsection, "free-lance correspondent" is a person who submits articles or photographs for publication and is paid by the article or by the photograph. As used in this subsection, "newspaper carrier":

(i)  is a person who provides a newspaper with the service of delivering newspapers singly or in bundles; but

(ii) does not include an employee of the paper who, incidentally to the employee's main duties, carries or delivers papers.

(l)  cosmetologist's services and barber's services as defined in 39-51-204(1)(l);

(m)  a person who is employed by an enrolled tribal member or an association, business, corporation, or other entity that is at least 51% owned by an enrolled tribal member or members, whose business is conducted solely within the exterior boundaries of an Indian reservation;

(n)  employment of a jockey who is performing under a license issued by the board of horseracing from the time the jockey reports to the scale room prior to a race through the time the jockey is weighed out after a race if the jockey has acknowledged in writing, as a condition of licensing by the board of horseracing, that the jockey is not covered under the Workers' Compensation Act while performing services as a jockey;

(o)  employment of an employer's spouse for whom an exemption based on marital status may be claimed by the employer under 26 U.S.C. 7703;

(p)  a person who performs services as a petroleum land professional. As used in this subsection, a "petroleum land professional" is a person who:

(i)  is engaged primarily in negotiating for the acquisition or divestiture of mineral rights or in negotiating a business agreement for the exploration or development of minerals;

(ii) is paid for services that are directly related to the completion of a contracted specific task rather than on an hourly wage basis; and

(iii) performs all services as an independent contractor pursuant to a written contract.

(q)  an officer of a quasi-public or a private corporation or manager of a manager-managed limited liability company who qualifies under one or more of the following provisions:

(i)  the officer or manager is not engaged in the ordinary duties of a worker for the corporation or the limited liability company and does not receive any pay from the corporation or the limited liability company for performance of the duties;

(ii) the officer or manager is engaged primarily in household employment for the corporation or the limited liability company;

(iii) the officer or manager owns 20% or more of the number of shares of stock in the corporation or owns 20% or more of the limited liability company; or

(iv) the officer or manager is the spouse, child, adopted child, stepchild, mother, father, son-in-law, daughter-in-law, nephew, niece, brother, or sister of a corporate officer who owns 20% or more of the number of shares of stock in the corporation or who owns 20% or more of the limited liability company.

(3)  (a) A sole proprietor, a working member of a partnership, a working member of a limited liability partnership, or a working member of a member-managed limited liability company who represents to the public that the person is an independent contractor shall elect to be bound personally and individually by the provisions of compensation plan No. 1, 2, or 3 but may apply to the department for an exemption from the Workers' Compensation Act.

(b)  The application must be made in accordance with the rules adopted by the department. There is no fee for the initial application. Any subsequent application must be accompanied by a $25 application fee. The application fee must be deposited in the administration fund established in 39-71-201 to offset the costs of administering the program.

(c)  When an application is approved by the department, it is conclusive as to the status of an independent contractor and precludes the applicant from obtaining benefits under this chapter.

(d)  The exemption, if approved, remains in effect for 1 year following the date of the department's approval. To maintain the independent contractor status, an independent contractor shall annually submit a renewal application. A renewal application must be submitted for all independent contractor exemptions approved as of on or after July 1, 1995, or thereafter. The renewal application and the $25 renewal application fee must be received by the department at least 30 days prior to before the anniversary date of the previously approved exemption.

(e)  A person who makes a false statement or misrepresentation concerning that person's status as an exempt independent contractor is subject to a civil penalty of $1,000. The department may impose the penalty for each false statement or misrepresentation. The penalty must be paid to the uninsured employers' fund. The lien provisions of 39-71-506 apply to the penalty imposed by this section.

(f)  If the department denies the application for exemption, the applicant may contest the denial by petitioning for review of the decision by an appeals referee in the manner provided for in 39-51-1109. An applicant dissatisfied with the decision of the appeals referee may appeal the decision in accordance with the procedure established in 39-51-2403 and 39-51-2404.

(4)  (a) A corporation or a manager-managed limited liability company shall provide coverage for its employees under the provisions of compensation plan No. 1, 2, or 3. A quasi-public corporation, a private corporation, or a manager-managed limited liability company may elect coverage for its corporate officers or managers, who are otherwise exempt under subsection (2), by giving a written notice in the following manner:

(i)  if the employer has elected to be bound by the provisions of compensation plan No. 1, by delivering the notice to the board of directors of the corporation or to the management organization of the manager-managed limited liability company; or

(ii) if the employer has elected to be bound by the provisions of compensation plan No. 2 or 3, by delivering the notice to the board of directors of the corporation or to the management organization of the manager-managed limited liability company and to the insurer.

(b)  If the employer changes plans or insurers, the employer's previous election is not effective and the employer shall again serve notice to its insurer and to its board of directors or the management organization of the manager-managed limited liability company if the employer elects to be bound.

(5)  The appointment or election of an employee as an officer of a corporation, a partner in a partnership, a partner in a limited liability partnership, or a member in or a manager of a limited liability company for the purpose of exempting the employee from coverage under this chapter does not entitle the officer, partner, member, or manager to exemption from coverage.

(6)  Each employer shall post a sign in the workplace at the locations where notices to employees are normally posted, informing employees about the employer's current provision of workers' compensation insurance. A workplace is any location where an employee performs any work-related act in the course of employment, regardless of whether the location is temporary or permanent, and includes the place of business or property of a third person while the employer has access to or control over the place of business or property for the purpose of carrying on the employer's usual trade, business, or occupation. The sign must be provided by the department, distributed through insurers or directly by the department, and posted by employers in accordance with rules adopted by the department. An employer who purposely or knowingly fails to post a sign as provided in this subsection is subject to a $50 fine for each citation."



Section 5.  Section 39-71-414, MCA, is amended to read:

"39-71-414.   Subrogation. (1) If an action is prosecuted as provided for in 39-71-412 or 39-71-413 and except as otherwise provided in this section, the insurer is entitled to subrogation for all compensation and benefits paid or to be paid under the Workers' Compensation Act. The insurer's right of subrogation is a first lien on the claim, judgment, or recovery.

(2)  (a) If the injured employee intends to institute the third-party action, the employee shall give the insurer reasonable notice of the intention to institute the action.

(b)  The injured employee may request that the insurer pay a proportionate share of the reasonable cost of the action, including attorney fees.

(c)  The insurer may elect not to participate in the cost of the action. If this election is made, the insurer waives 50% of its subrogation rights granted by this section.

(d)  If the injured employee or the employee's personal representative institutes the action, the employee is entitled to at least one-third of the amount recovered by judgment or settlement less a proportionate share of reasonable costs, including attorney fees, if the amount of recovery is insufficient to provide the employee with that amount after payment of subrogation.

(3)  If an injured employee refuses or fails to institute the third-party action within 1 year from the date of injury, the insurer may institute the action in the name of the employee and for the employee's benefit or that of the employee's personal representative. If the insurer institutes the action, it shall pay to the employee any amount received by judgment or settlement that is in excess of the amounts paid or to be paid under the Workers' Compensation Act after the insurer's reasonable costs, including attorney fees for prosecuting the action, have been deducted from the recovery.

(4)  An insurer may enter into compromise agreements in settlement of subrogation rights.

(5)  Regardless of whether the amount of compensation and other benefits payable under the Workers' Compensation Act have been fully determined, the insurer and the claimant's heirs or personal representative may stipulate the proportion of the third-party settlement to be allocated under subrogation. Upon review and approval by the department, the agreement constitutes a compromise settlement of the issue of subrogation and may not be reopened by the department A dispute between the insurer and claimant concerning subrogation is a dispute subject to the mediation requirements of 39-71-2401.

(6)  (a) The insurer is entitled to full subrogation rights under this section, unless the claimant is able to demonstrate damages in excess of the workers' compensation benefits and the third-party recovery combined. If the insurer is entitled to subrogation under this section, the insurer may subrogate against the entire settlement or award of a third-party claim brought by the claimant or the claimant's personal representative without regard to the nature of the damages.

(b)  If a survival action does not exist and the parties reach a settlement of a wrongful death claim without apportionment of damages by a court or jury, the insurer may subrogate against the entire settlement amount, without regard to the parties' apportionment of the damages, unless the insurer is a party to the settlement agreement.

(7)  Regardless of whether the amount of compensation and other benefits payable have been fully determined, the insurer and the claimant may stipulate the proportion of the third-party settlement to be allocated under subrogation. Upon review and approval by the department, the agreement constitutes a compromise settlement of the issue of subrogation and may not be reopened by the department."



Section 6.  Section 39-71-432, MCA, is amended to read:

"39-71-432.   Definitions. As used in 39-71-433, the following definitions apply:

(1)  "Business entity" means a business enterprise owned by a single person, corporation, organization, business trust, trust, partnership, limited liability company, limited liability partnership, joint venture, association, or other business entity.

(2)  "Group" means two or more business entities that join together, with the approval of the department, to purchase individual workers' compensation insurance policies covering each business entity that is part of a group."



Section 7.  Section 39-71-723, MCA, is amended to read:

"39-71-723.   How compensation to be divided among beneficiaries. Compensation that is due to beneficiaries must be paid to the surviving spouse, if any, or if none, then divided equally among or for the benefit of the children. In cases in which beneficiaries are a surviving spouse and stepchildren of the spouse, the compensation must be divided equally among all beneficiaries. Compensation that is due to beneficiaries, as defined in 39-71-116(5)(e) and (5)(f), if there is more than one, must be divided equitably among them, and the question of dependency and amount is a question of fact for determination by the department."



Section 8.  Section 39-71-724, MCA, is amended to read:

"39-71-724.   Payment of compensation to beneficiary not a resident of United States. (1) Before payment of compensation to a beneficiary who is not residing within the United States, satisfactory proof of such the relationship as to constitute a beneficiary under this chapter shall must be furnished by such the beneficiary, duly authenticated under seal of an officer of a court of law in the country where such the beneficiary resides, at such times and in such manner as may be required by the department. Such The proof shall be is conclusive as to the identity of such the beneficiary, and any other claim of any other person to any such compensation shall be is barred from and after the filing of such the proof.

(2)  Payment of compensation to a beneficiary not residing within the United States may be made to any plenipotentiary, or consul, or consular agent within the United States representing the country in which such the nonresident beneficiary resides, and the written receipt of such the plenipotentiary, or consul, or consular agent shall acquit acquits the employer, or the insurer, or the department, as the case may be."



NEW SECTION. Section 9.  Repealer. Sections 39-71-531, 39-71-532, 39-71-533, and 39-71-534, MCA, are repealed.



NEW SECTION. Section 10.  Transition. Any surplus funds remaining in the underinsured employers' fund on [the effective date of this section] must be deposited in the uninsured employers' fund provided in 39-71-502.



NEW SECTION. Section 11.  Saving clause. [Section 9] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of section 9].



NEW SECTION. Section 12.  Effective dates -- applicability. (1) [Sections 1 through 8] are effective July 1, 1997.

(2) [Sections 9 through 11 and this section] are effective on passage and approval.

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