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Many people have come across a term called "statutory employer" while navigating their local workers' compensation law.
In a nutshell, statutory employment laws ensure protection for workers due to unclear work arrangements or a lack of insurance. Understanding what makes a statutory employer different from a regular one can make a person's case much easier to manage.
This page covers the general "statutory employer" meaning. It will also explain what it means to be a statutory employee and what benefits or disadvantages a person in this category can expect. Larrimer & Larrimer can also assist with questions like what does Arising out of and in the course of employment mean?
What Is a Statutory Employer?
A statutory employer is a person or business that employs a person to work. According to the law, people employed by these employers are eligible for workers' compensation.
In other words, statutory employers are liable to people who get injured while performing their work duties.
A common example of a statutory employer is a general contractor. These people often hire subcontractors to perform specific tasks as part of a contract. In these cases, the subcontractor can receive benefits if they get injured on the job.
Besides workers' compensation, there may be certain tax rules for those who engage in statutory employment. Employers, for example, can't withhold taxes for most independent contractors. However, since statutory employees aren't considered regular workers or independent contractors, they can receive a W-2 and 1099 tax form.
What Is a Statutory Employee?
Statutory employees are independent contractors treated as regular workers for tax withholding purposes.
A statutory employee can deduct work-related expenses on Schedule C at the time of filing their annual tax returns. They must, however, pay their income taxes every year. In other words, employers don't withhold federal, state, or local income taxes for these people.
Generally speaking, these people are between an independent contractor and a regular employee.
A benefit of being a statutory employee is that they don't often have to pay Medicare or Social Security taxes in their entirety. This is because the employer has to withhold them from the worker's paychecks. On another note, these workers aren't subject to self-employment taxes like independent contractors since their FICA taxes are withheld through an employer.
An employer doesn't have to give fringe or health benefits to statutory employees. The same applies to perks that they would normally give to a common-law employee, which could be a disadvantage for some.
Some examples of statutory employees include:
People who sell life insurance and/or annuity contracts for one primary life insurance business
Delivery drivers who distribute meat, vegetables, fruit, bakery items, or beverages (except milk)
Home-based workers who only work with materials temporarily provided by the employer
Traveling salespeople who sell supplies to other businesses.
To be a statutory employee, the person must comply with the following requirements:
Personally perform "a substantial amount" of all their work. These tasks can either be stated or implied in the contract.
Not invest a large amount of money in the space or tools required to work. According to the Internal Revenue Service, this is classified as "facilities."
Perform work for a single employer on a continuous and long-term basis. If this isn't the case, the person would be considered an independent contractor.
While being a statutory employee has many benefits like tax deductions on work-related expenses, the lack of certain perks may make it less worth it.
Are Statutory Employers Liable for Paying Workers' Compensation Benefits?
Can statutory employees receive benefits? The short answer is it depends.
In the case of workers' compensation, statutory employees may receive money if they get injured, even if the person isn't directly employed by the statutory employer. This is because the employer is responsible for providing benefits to them, according to the law. For more information, a workers comp attorney in Columbus may be able to help.
What Elements Do People Need to Establish in a Workers' Compensation Case?
Statutory employers are required to cover workers' compensation benefits, but how do they know if their employee is eligible?
Essentially, the employee must prove that the injuries occurred while they were on the job. Also, they must file the claim within their statute of limitations. In Ohio, this period is usually one year. The clock starts on the day of the injury. If the injury didn't show symptoms until later, the time starts the day the person discovered it.
People wanting to build a workers' compensation case should get a medical examination as soon as possible and keep a record of every document they get. This will help them when filing their claim.
Is Seeking Legal Assistance Necessary?
Most of the time, it's hard to navigate a relationship between a statutory employer and an employee. Since there are many factors affecting an accident case, it's possible to make mistakes while handling it, leading to lost time and money for all parties involved.
When it comes to workers' compensation cases, the best thing to do is hire an attorney. These professionals have a thorough understanding of Ohio law, which will ensure that everyone's rights are protected if a workers' compensation claim arises.
While the "statutory" relationship was designed to protect employees who may not be covered by workers' compensation benefits, it's also important for employers to understand when they're liable for another person's injuries.
An attorney will help their client walk through every step of their claim, especially when gathering evidence, negotiating with insurance companies, and getting legal representation if necessary.
Most workers' compensation cases are straightforward if the person has all the resources to build their claim. However, it's always a great idea to get assistance from a legal expert who can take care of the details.
Bottom Line
Statutory employers are people who are legally responsible for certain employees. These employees, on the other hand, are subject to many benefits, such as tax deductions and workers' compensation perks.
Understanding whether there's a "statutory" relationship between an employer and employee is necessary when building a workers' compensation case. It gives both parties a clearer idea of what their rights and duties are.
In some cases, it may not be clear whether someone is a statutory employee/employer. Here, it's always best to contact a professional attorney who can evaluate the case and figure everything out.
The team at Larrimer & Larrimer is willing to help those who may be struggling with their workers' compensation case. By scheduling a free consultation today, anyone can learn more about these topics and how to cover their specific needs.
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