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HOUSE BILL NO. 381
INTRODUCED BY B. MOLNAR
A BILL FOR AN ACT ENTITLED: "AN ACT ELIMINATING THE CONTRACTOR REGISTRATION REQUIREMENTS; EXEMPTING FROM WORKERS' COMPENSATION COVERAGE A SOLE PROPRIETOR WORKING AS A CONSTRUCTION CONTRACTOR; AMENDING SECTIONS 39-71-118, 39-71-120, 39-71-401, AND 39-71-405, MCA; REPEALING SECTIONS 39-9-101, 39-9-103, 39-9-201, 39-9-204, 39-9-205, 39-9-206, 39-9-207, 39-9-211, 39-9-301, 39-9-303, 39-9-304, AND 39-9-401, MCA; AND PROVIDING AN EFFECTIVE DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. 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, except as provided in subsection (9), 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;
(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; and
(h) a person placed at the employer's worksite as a participant in a public assistance program authorized by Title 53, chapter 4, parts 6 and 7, for workers' compensation purposes only. A person placed at an employer's worksite under Title 53, chapter 4, parts 6 and 7, may not be considered an independent contractor under 39-71-120. An employer may be reimbursed for the premium cost as provided in 53-4-603.
(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;
(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.
(d) serving as a foster parent, licensed as a foster care provider in accordance with 41-3-1141, and providing care without wage compensation to no more than six foster children in the provider's own residence. The person may receive reimbursement for providing room and board, obtaining training, respite care, leisure and recreational activities, and providing for other needs and activities arising in the provision of in-home foster care.
(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 (5)(d). 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 (6)(d). 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) A student currently enrolled in an elementary, secondary, or postsecondary educational institution who is participating in work-based learning activities and who is paid wages by the educational institution or business partner is the employee of the entity that pays the student's wages for all purposes under this chapter. A student who is not paid wages by the business partner or the educational institution is a volunteer and is subject to the provisions of this chapter.
(10) 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 (10)(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.
(11) An insurer may require coverage for all nonresident employees of a Montana employer who do not meet the requirements of subsection (10)(b) or (10)(d) as a condition of approving the election under subsection (10)(d)."
Section 2. Section 39-71-120, MCA, is amended to read:
"39-71-120. Independent contractor defined. (1) An "independent contractor" is one who renders service in the course of an occupation and:
(a) has been and will continue to be free from control or direction over the performance of the services, both under the contract and in fact; and
(b) is engaged in an independently established trade, occupation, profession, or business.
(2) An individual performing services for remuneration who represents to the public that the individual is an
independent contractor is considered to be an independent contractor and is not an employee under this chapter
requirements of subsection (1) are met. The department may not take action against a person relying on a claim of
independent contractor status pursuant to this subsection.
(3) The department may not adopt rules to implement this section."
Section 3. 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 salesperson performing under a license issued by the board of realty regulation;
(f) employment as a direct seller as defined by 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 freelance 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, "freelance 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)(e);
(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 that the jockey reports to the scale room prior to a race through the time that 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 either:
(A) 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
(B) owns less than 20% of the number of shares of stock in the corporation or limited liability company if the officer's or manager's shares when aggregated with the shares owned by a person or persons listed in subsection (2)(q)(iv) total 20% or more of the number of shares in the corporation or 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 meets the requirements of subsection (2)(q)(iii)(A) or
(r) a person who is an officer or a manager of a ditch company as defined in 27-1-731;
(s) service performed by an ordained, commissioned, or licensed minister of a church in the exercise of the church's ministry or by a member of a religious order in the exercise of duties required by the order;
(t) a sole proprietor working as a construction contractor as defined in 39-9-102.
(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 a $25 fee for the initial application. Any subsequent application renewal 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 or when the contracting parties agree to an independent contractor status, 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 3 years following the date of the department's approval. To maintain the independent contractor status, an independent contractor shall every 3 years submit a renewal application. A renewal application must be submitted for all independent contractor exemptions approved on or after July 1, 1995. The renewal application and the $25 renewal application fee must be received by the department at least 30 days before the anniversary date of the previously approved exemption.
(e) A person who purposely 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 4. Section 39-71-405, MCA, is amended to read:
"39-71-405. Liability of employer who contracts work out. (1) An employer who contracts with a contractor or an
independent contractor to have work performed of a kind
which that is a regular or a recurrent part of the work of the trade,
business, occupation, or profession of such the employer is not liable for the payment of benefits under this chapter to the
employees of the contractor or to the independent contractor if the contractor or independent contractor has not properly
complied with the coverage requirements of the Worker's Compensation Act. Any insurer who becomes liable for payment
of benefits may recover the amount of benefits paid and to be paid and necessary expenses from the contractor primarily
Where When an employer contracts to have any work to be done by a contractor other than or an independent
contractor, and the work so contracted to be done is a part or process in the trade or business of the employer, then the
employer is not liable to pay all benefits under this chapter to the same extent as if the work were done without the
intervention of the contractor, and the work so contracted to be done shall not be construed to be casual employment even if
the work contracted to be done is a part or process in the trade, business, occupation, or profession of the employer. Where
an employer contracts work to be done as specified in this subsection, the contractor and the contractor's employees shall
come under that plan of compensation adopted by the employer.
Where When an employer contracts any work to be done, wholly or in part for the employer, by an independent
contractor , where and the work so contracted to be done is casual employment as to such the employer, then the contractor
shall become the is not an employee of the employer for the purposes of this chapter."
NEW SECTION. Section 5. Repealer. Sections 39-9-101, 39-9-103, 39-9-201, 39-9-204, 39-9-205, 39-9-206, 39-9-207, 39-9-211, 39-9-301, 39-9-303, 39-9-304, and 39-9-401, MCA, are repealed.
NEW SECTION. Section 6. Effective date. [This act] is effective July 1, 1999.
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Latest Version of HB 381 (HB0381.01)
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