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When is an injured worker disqualified from receiving No Fault benefits after a car crash?

December 29, 2014 by Steven M. Gursten

Michigan Supreme Court clarifies when a worker is an ‘employee’ and thus, limited to workers’ compensation benefits in Auto- Owners v. All Star Lawn

accident on the job, no fault or work comp

No Fault or workers’ compensation?

The answer to the question of where benefits – such as medical and wage loss – after a worker is injured in an on-the-job Michigan auto accident depends on whether the worker was an “employee” at the time of the crash.

In Auto-Owners Insurance Company v. All Star Lawn Specialists Plus, Inc., et al., the Michigan Supreme Court clarified the requirements of the three-part test used for making the “employee” determination.

Generally speaking, a Michigan auto accident victim is entitled to collect No Fault benefits – such as reimbursement for medical expenses and wage loss benefits – under Michigan’s No Fault auto insurance system.

However, if the victim was an “employee” – i.e., on-the-job – at the time of the collision, then she is limited to collecting benefits under the workers’ compensation system. Workers’ comp benefits are less extensive and involve the draconian “wage earning capacity” rule (which employers and insurers use to slash and/or deny injured workers’ lost wages benefits).

In the Auto-Owners case, the state’s high court ruled that an injured worker is an “employee” when – as provided for in MCL 418.161(1)(n) of the workers’ compensation law – she is “performing [a] service in the course of the trade, business, profession, or occupation of an employer at the time of the injury” and:

  • She “does not maintain a separate business … in relation to this service”;
  • She “does not hold … herself out to and render service to the public;” and,
  • She “is not an employer subject to” the Michigan Workers Compensation Law.

Importantly, the Supreme Court clarified that, contrary to an erroneous conclusion reached by the Michigan Court of Appeals:

“Each criterion of MCL 418.161(1)(n) [the three-part “employee” test] must be satisfied for an individual to be considered an employee; conversely” and, thus, subject to Michigan’s Workers Compensation Law.

*    *    *

“[F]ailure to satisfy any one of the three [“employee”] criteria [in MCL 418.161(1)(n)] will exclude an individual from employee status” and, thus, bring her under the protections of Michigan’s No Fault Law.

To get a workers’ compensation perspective on the Supreme Court’s ruling, take a look at the excellent blog post, “Employee? Independent Contractor? Who really knows?,” by our friend attorney Jeffrey Kaufman at Alex Berman, PC.

NOTE: The Michigan Supreme Court’s ruling in Auto-Owners Insurance Company v. All Star Lawn Specialists Plus, Inc., et al., involved the pre-2011 amendment version of MCL 418.161(1)(n). In 2011, the Workers Compensation Law’s definition of “employee” was modified to provide as follows:

“[S]ervices are employment if the services are performed by an individual whom the Michigan administrative hearing system determines to be in an employer-employee relationship using the 20-factor test announced by the internal revenue service of the United States department of treasury in revenue ruling 87-41, 1 C.B. 296. An individual for whom an employer is required to withhold federal income tax is prima facie considered to perform service in employment under this act.”]

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