BEFORE THE DEPARTMENT OF LABOR AND INDUSTRY

STATE OF MONTANA

 

In the matter of the amendment of ARM 24.11.203, 24.11.315, 24.11.2407, 24.16.7520, 24.16.7527, 24.35.111, 24.35.121, 24.35.131, 24.35.133, 24.35.141, 24.35.202, 24.35.205, 24.35.206, 24.35.207, 24.35.302, 24.35.303, the adoption of NEW RULES I and II, and the repeal of ARM 24.35.201 all related to independent contractor exemption certificates and employment status determinations by the department

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT, ADOPTION, AND REPEAL

 

TO:  All Concerned Persons

 

            1.  On June 7, 2010, at 10:00 a.m., the Department of Labor and Industry (department) will hold a public hearing to be held in the first floor conference room (room 104), 1327 Lockey Avenue, Walt Sullivan Building, Helena, Montana to consider the proposed amendment, adoption, and repeal of the above-stated rules.

 

            2.  The department will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice.  If you require an accommodation, contact the department no later than 5:00 p.m., on June 1, 2010, to advise us of the nature of the accommodation that you need.  Please contact the Employment Relations Division, Department of Labor and Industry, Attn: Dallas Cox, 1805 Prospect Avenue, P.O. Box 8011, Helena, Montana 59604-8011, fax to the department at (406) 444-9586, TDD (406) 444-5549; or e-mail dcox@mt.gov.

 

            3.  GENERAL STATEMENT OF REASONABLE NECESSITY:  There is reasonable necessity to amend the following rules in order to update and clarify the rules of the Independent Contractor Central Unit (ICCU) and to ensure that the various substantive programs in the department have administrative rules that appropriately coordinate with the department's overall rules concerning independent contractors.  The ICCU rules are being updated to reflect recent statutory changes and to incorporate the experiences of the past five years of operations.  There is reasonable necessity to amend the rules to generally update language by using consistent terminology throughout the rules.  In addition, there is reasonable necessity to amend or correct authorization and implementation citations as appropriate in the various rules to match the provisions of those rules.  This statement of reasonable necessity applies to all of the rules proposed for amendment.  More specific reasons or other information are provided with each individual rule proposed for amendment.

 

            4.  The rules proposed to be amended provide as follows, stricken material interlined, new material underlined:

 

            24.11.203  DETERMINATION OF EMPLOYMENT STATUS, INCLUDING REGARDING THAT OF INDEPENDENT CONTRACTOR CONTRACTORS

            (1)  Disputes regarding the employment status of an individual for unemployment insurance, workers' compensation coverage, wage protection and certain tax purposes, including whether that individual is acting as an independent contractor, are regulated by the provisions contained in ARM Title 24, chapter 35, subchapters 2 and 3.

            (2)  The test for determining whether an individual is acting as an independent contractor for unemployment insurance purposes is that found at ARM 24.35.301 through 24.35.303.

 

AUTH:  39-51-302, MCA

IMP:  39-51-201, 39-51-204, MCA

 

REASON:  The proposed amendments to the ICCU rules regarding independent contractor certification require amendment to this unemployment insurance division rule to clarify that the ICCU rules govern the resolution of disputes regarding an individual's employment status.  The entire of ARM Title 24, chapter 35, is devoted to explication of independent contractor eligibility, certification, and appeals processes.  Consequently, the department determined that the more general reference to chapter 35 in this rule, rather the specific reference to subchapters 2 and 3, is appropriate.  The traditional two-part, A-B test for determining whether an individual is acting as an independent contractor for unemployment insurance purposes is incorporated in the unemployment division rules at ARM 24.11.2407.  The amendments to the ICCU rules propose to incorporate the same two-part test at ARM 24.35.202.  Therefore, due to the proposed amendments to the ICCU rules included in this notice, the reference in subsection (2) of this rule to ARM 24.35.301 and 24.35.303 is inaccurate and misleading, and, therefore, is proposed for deletion.  The proposed amendments to the ICCU rules appropriately characterize ARM 24.35.301 and 24.35.303 as general guidelines regarding employment status and not as "the test for determining" employment status.

 

            24.11.315  APPEAL OF DEPARTMENT DETERMINATIONS  (1)  An interested party appealing who chooses to appeal a department decision, determination, or redetermination under 39-51-1109 or 39-51-2402, MCA, must file with the department a written notice of appeal within ten days after the department mails the decision was mailed to the interested party's last known address.

            (a)  If the appeal is of an a determination that an individual is an employee rather than an independent contractor, or vice versa, the department shall forward the appeal to the Independent Contractor Central Unit (ICCU) for a decision, in accordance with determination provided for at ARM Title 24, chapter 35, subchapters 2 and 3, the appeal must be filed with the ICCU.

            (2)  The notice of appeal should must contain reasons for the appeal.

            (3)  The notice of a benefits appeal, other than that referenced in ARM 24.11.315(1)(a), must be filed in writing with at the department's office in Helena, either in person, by mail, by facsimile, or by e-mail.  Benefit appeal forms may be used and are available upon request.

            (4)  The notice of a tax appeal, other than that referenced in ARM 24.11.315(1)(a), must be filed in writing with the department's office in Helena, either in person, by mail, by facsimile, or by e-mail.

 

AUTH:  39-51-301, 39-51-302, MCA

IMP:  2-4-201, 39-51-1109, 39-51-2402, 39-51-2407, MCA

 

REASON:  The proposed amendments seek to clarify that all appeals of initial determinations and redeterminations made by the Unemployment Insurance Division must be filed with the Unemployment Insurance Division of the department.  However, the amendment distinguishes between the appeal process for disputes regarding unemployment insurance tax contributions and/or benefits from disputes involving determinations of the employment status of workers.  The amendment clarifies that the current practice of the department is to forward all appeals disputing the employment status of workers to the ICCU for an ICCU decision.  Because the department requires notice when an appeal involves a question of employment status in order to forward those appeals appropriately to the ICCU, the proposed amendment places the burden upon the appellant to ensure that each notice of appeal states the reason(s) for the appeal.

 

            24.11.2407  DETERMINATION OF INDEPENDENT CONTRACTORS--DEPARTMENT PROCEDURES  (1)  As provided in 39-51-201 39-51-204, MCA, an individual found to be an independent contractor pursuant to 39-71-417, MCA, is considered to be an independent contractor for the purposes of unemployment insurance.  The department shall use the following two-part test is used to determine whether an individual is an independent contractor or an employee:

            (a)  whether an individual is and will shall continue to be free from control or direction over the performance of the services, both under contract and in fact; and

            (b)  whether an individual is engaged in an independently established trade, occupation, profession, or business.

            (2)  To determine whether a hiring agent exerts control over an individual, the department shall evaluate:

            (a)  direct evidence of right or exercise of control;

            (b)  method of payment;

            (c)  furnishing of equipment; and

            (d)  right to fire.

            (2) (3)  For purposes of this rule, "individual" means a worker who renders service in the course of an a trade, occupation, profession, or business, and "employing unit" means the individual or other legal entity as described in the definition of "employing unit" in 39-51-201, MCA, that hired one or more individuals.

            (3) (4)  To determine whether an independent contractor or employment relationship exists, the department may:

            (a)  review written contracts between the individual and the employing unit;

            (b)  interview the individual, co-workers, or the employing unit;

            (c)  obtain statements from third parties;

            (d)  examine the books and records of the employing unit;

            (e)  review filing status on income tax returns; and

            (f)  make any other investigation necessary to determine if an independent contractor relationship exists employment status.

            (4) (5)  After investigation, the department may issue an initial written determination on whether an individual is an independent contractor.  Any person or employing unit aggrieved by this initial determination may request investigation and a determination decision by the department's Independent Contractor Central Unit (ICCU) pursuant to ARM 24.11.203 and ARM Title 24, chapter 35, subchapters 2 and 3, within ten days of notice of the initial determination.

            (a)  A party is considered to have been given notice on the date a written notice is personally delivered or three days after a written notice is mailed to the party.

            (b)  The time limits set forth above may be extended for good cause as provided in 39-51-2402(4), MCA.

            (5) (6)  Thereafter, the process set out in ARM Title 24, chapter 35, subchapters 2 and 3 controls.

 

AUTH:  39-51-301, 39-51-302, MCA

IMP:  39-51-201, 39‑51‑1103 39-51-1109, 39-51-2402, MCA

 

REASON:  The proposed amendment to ARM 24.35.206 incorporates the traditional two-part test for determining whether an individual works as an independent contractor or an employee.  The department determined that it is reasonable and necessary to repeat the two-part test in the rules governing the administration of the unemployment insurance division in order to affirm that the exact same test for employment status is used by all divisions of the department.  In other words, the unemployment insurance division uses the same test for making initial determinations of employment status that the ICCU uses for making employment status decisions.  To this end, the four factors used by the Workers' Compensation Court to evaluate whether a hiring agent exerts control over an individual are added to this rule to establish parallel rule construction with ARM 24.35.206.

 

Inaccurate statutory references and grammatical errors are corrected by this proposed amendment.  To bring the language of this rule into conformity with the governing statute, 39-71-415, MCA, the department proposes to replace the term "determination" with the term "decision."

 

            24.16.7520  PROCEDURE FOR ISSUING WAGE CLAIM DETERMINATIONS REGARDING EMPLOYMENT STATUS, INCLUDING THAT OF INDEPENDENT CONTRACTOR  (1) Disputes Only disputes regarding the employment status of an individual for wage claim purposes, including whether that individual is acting as an independent contractor, shall be forwarded by the department to the Independent Contractor Central Unit (ICCU) for a decision pursuant to are regulated by the provisions contained in ARM Title 24, chapter 35, subchapters 2 and 3.

            (2)  The test for determining whether an individual is acting as an independent contractor for wage claim purposes is that found at ARM 24.35.301 through 24.35.303 24.35.202.

            (3)  An independent contractor is not an employee, as defined by 39-3-201 and 39-3-402, MCA, and, therefore, is not subject to wage and hour provisions.

 

AUTH:  39-3-202, 39-3-403, MCA

IMP:  39-3-201, 39-3-402, MCA

 

REASON:  The proposed amendment is necessary to clarify that the department will forward only those disputes involving independent contractor status to the ICCU for a decision.  Disputes over other issues are governed by other rules.  The amendment corrects the citation to the rule outlining the test used by the ICCU to determine employment status.  The department determined that additional clarity on the distinction between an independent contractor and employee could be achieved by reference to the statutory definitions of "employee" and reiteration of the principle that independent contractors are not subject to wage and hour protections.

 

            24.16.7527  EMPLOYER RESPONSE TO CLAIM  (1)  through (3)  remain the same.

            (4)  In the event the employer's response contains an allegation that the wage claimant is an independent contractor, a partner, part of a joint venture, or any other employment status other than that of employee, the employment status issue will be referred to the department's Independent Contractor Central Unit for determination a decision pursuant to ARM 24.16.7520 24.35.202.

            (5)  remains the same.

 

AUTH:  39-3-202, 39-3-403, MCA

IMP:  39-3-209, 39-3-210, 39-3-407, MCA

 

REASON:  With the proposed amendment to ARM 24.35.202, which incorporates the traditional two-part test used by the ICCU to determine whether a worker is an independent contractor or an employee, this proposed amendment corrects the citation to the appropriate ICCU rule.  To bring the language of this rule into conformance with the governing statute, 39-71-415, MCA, the department proposes to replace the term "determination" with the term "decision."

 

            24.35.111  APPLICATION FOR INDEPENDENT CONTRACTOR EXEMPTION CERTIFICATE  (1)  As provided in 39-71-417 , MCA, a A person who regularly and customarily performs services at locations other than the person's own fixed business location and who has not elected to be personally bound by the provisions of workers' compensation plan 1, 2, or 3, shall apply for an independent contractor exemption certificate (ICEC).  In order to obtain an independent contractor exemption certificate, an The applicant for an ICEC shall submit:

            (a)  submit a completed department  ICEC application affidavit form on a department-approved form bearing the applicant's original notarized signature.  The applicant shall swear or affirm in which the applicant swears or affirms under oath that the statements contained in the form and attached documentation are true and accurate to the best of the applicant's ability, knowledge.  The application affidavit must include, which includes, but is not limited to:

            (i)  the applicant's correct name and mailing address;

            (ii)  the applicant's correct social security number;

            (iii)  list identifying each trade, occupation, profession, or business for which the applicant is applying; and seeks an ICEC, including:

            (iv)  for each occupation listed, the:

            (A)  business name used;

            (B)  business structure (entity type);

            (C)  business mailing address and business physical address; and

            (D)  business telephone number;

            (iv)  supporting documentation for applicant's independent contractor status in each trade, occupation, profession, or business for which applicant seeks exemption from the Workers' Compensation Act, as set forth by (2);

            (b)  pay a fee, as required by ARM 24.35.121; and

            (c)  submit an executed, notarized waiver bearing the applicant's original notarized signature and conforming to the requirements of (3); and.

            (d)  submit documentation with the affidavit confirming the applicant is engaged in one or more independently established trades, occupations, professions, or businesses.  The applicant's documentation for each trade, occupation, profession, or business must receive 15 points or more to qualify the applicant for an exemption certificate for that trade, occupation, profession, or business.  The value awarded to various types of documentation is as set out in (2).

            (2)  Documentation supporting the applicant as independently established in a trade, occupation, profession, or business is divided into point groups as designated below.  Each point group is made up of separate categories of documentation.  A maximum of two items may be submitted to receive the total points for each category.  The applicant shall submit supporting documentation to prove applicant's qualification for an ICEC.  The department has the discretion to assess the reliability of the documentation and to award points for the items submitted up to the total points for each category each item of proof as outlined by this rule.  Each item of documentation submitted may only count toward points in more than one category. No more than two items of proof may be submitted under each category.  To qualify for an ICEC, an applicant's documentation must be awarded a minimum of 15 points by the department for each independently established trade, occupation, profession, or business listed on the ICEC application.

            (a)  The department may award up to ten point group includes points for proof that the applicant has current workers' compensation, unemployment insurance, and Department of Revenue accounts for employees in each independently established trade, occupation, profession, or business.  This documentation is worth up to ten points for all three types of proof submitted together, up to six points for two types of proof, and up to three points for one type of proof.  The department may award up to six points for proof of two insurance policies or accounts and may award up to three points for proof of one insurance policy or account.

            (b)  The department may award up to six point group includes points for each of the following proofs for each independently established trade, occupation, profession, or business:

            (i)  a contract or memo of understanding.  Elements of the contract that may show proof of that demonstrates applicant's independent contractor status.  If the applicant can end a contract at any time without incurring any liability for failing to complete the project that is the subject of the contract, the department cannot award points for the contract under this rule.  Separate contracts with different hiring agents may qualify for a maximum of six points.  Each contract must include but are not limited to:

            (A)  payment based on a completed project basis;

            (B)  an beginning and ending date dates of the contract;

            (C)  liability for failure to complete the project;

            (D)  identification of who provides the materials and supplies;

            (E)  signatures by both parties; and

            (F)  a defined body of work, complete project, or end result;

            (ii)  a signed and dated list of equipment and tools owned or controlled by the applicant with approximate value values.  This may be demonstrated The equipment or tool list may be documented by a rental or lease agreement, county documents verifying the business equipment tax paid, or other means;

            (iii)  proof of business location ownership, rent or lease.  This may be demonstrated by an IRS form filed for claiming use of the home as a business, otherwise known as Form 8829;

            (iv) (iii)  a commercial general liability insurance policy or bonding;

            (v) (iv)  filed most recent business tax forms filed within past two years;

            (vi) (v)  two business tax receipts and/or IRS Form 1099s (miscellaneous income) from multiple hiring agents or two quarterly self-employment tax payments (IRS form 1040ES) within past two years; or

            (vii) (vi)  a trucking company lease agreement.

            (c)  The department may award up to three point group includes points for each of the following proofs for each independently established trade, occupation, profession, or business:

            (i)  two or more bids, or estimates, proposals, or completed billing invoices issued by the business;

            (ii)  a partnership or limited liability partnership agreement signed and dated by all partners that demonstrates.  An applicant that is a working partner in a partnership or limited liability partnership must submit a written partnership agreement signed by all partners.  Elements of the agreement that show proof of independent contractor status by virtue of a valid partnership include at least:

            (A)  intent to form the partnership;

            (B)  contribution by all partners;

            (C)  a proprietary interest and right of control by the working partner applying for an exemption certificate applicant; and

            (D)  the sharing of profit/loss;

            (iii)  application for, or an issued current business license or building permit;

            (iv)  certificate of registration for the business entity issued by the Montana secretary of state;

            (v)  articles of incorporation, annual report, articles of organization, or other documentation that verifies the applicant is an officer in a corporation or a manager in a manager-managed limited liability company with a minimum of 20 percent ownership held by the applicant;

            (vi)  proof of ownership, rent, or lease of business location or proof of IRS filing for use of home as a business (IRS Form 8829);

            (iv) (vii)  educational certification for unlicensed occupations or current a professional license relevant to the trade, occupation, or profession for which the applicant seeks the ICEC.  Applicants who are in a licensed profession must submit proof of compliance with the licensing requirements of that profession;

            (v)  a certificate demonstrating the business structure is registered with the Montana Secretary of State;

            (vi)  a certificate demonstrating the business has a registered name with the Montana Secretary of State;

            (vii)  educational certification;

            (viii)  membership in a relevant professional association or affiliation; or

            (ix)  current motor carrier (MC) authority number in applicant's personal or business name;

            (x)  business bank account; or

            (ix) (xi)  copies of advertising in a newspaper, phone book, or on the internet, or other venue.

            (d)  The department may award up to one-and-one-half point group includes points for each of the following proofs for each independently established trade, occupation, profession, or business:

            (i)  a federal employer identification number (FEIN) (EIN);

            (ii)  a business bank account Dunn and Bradstreet number;

            (iii)  a telephone or utility bill(s) in the business name;

            (iv)  a credit card card(s) or charge account purchase account(s) in the business name;

            (v)  printed preprinted business invoices, cards, or brochures;

            (vi)  proof of orders order(s) for printed hats, or shirts, or other promotional items for the business;

            (vii)  proof of business advertising using a vehicle sign on vehicle, in yard sign, bulletin boards, corner lamp post, or posted flyers; or

            (viii)  printed billing invoices billed to the business name;

            (ix)  vehicle registration(s) in the business name; or

            (x)  international fuel tax account number (IFTA) in applicant's personal or business name.

            (e)  The applicant may submit any other supporting documentation.  The department has discretion to assess the reliability of and determine the point value of any documentation not listed in this rule.

            (3)  The department waiver requires the applicant to make the following representations for each trade, occupation, profession, or business for which the applicant is seeking an independent contractor exemption certificate:  To execute a waiver, the applicant shall complete the department-approved waiver form.  The waiver form must be signed by the applicant and notarized.  The applicant shall represent on the waiver form that:

            (a)  that the applicant is engaged in each independently established trade, occupation, profession, or business which that is specifically identified on the affidavit application form;

            (b)  that the applicant is responsible for all taxes related to the applicant's work as an independent contractor;

            (c)  that the applicant controls the details of how to perform the contracted for services are performed, both under contract and in fact, and that the hiring agent retains only the control necessary to ensure the bargained for end result; and

            (d)  that the applicant understands and agrees that if the independent contractor exemption certificate ICEC is granted, the applicant waives the applicant's right to and is not eligible for and waives the right to workers' compensation benefits or occupational disease benefits for an injury or occupational disease related to work performed as an independent contractor in each independently established trade, occupation, profession, or business for which the exemption certificate ICEC is granted.

            (4)  An application that is approved, and for which the exemption certificate is issued, shall be ICEC issued by the department remains in effect for two years unless the department revokes or suspends the exemption certificate ICEC or is notified in writing prior to the expiration date that the exemption certificate holder wishes to have the exemption certificate cancelled the applicant requests in writing that the department cancel the ICEC.

            (5)  The department shall approve or deny an ICEC application within 30 days of receipt and notify the applicant in writing.

            (6)  The department shall retain an incomplete or denied application for a period of six months from the date of receipt and allow the applicant the opportunity to supplement supporting documentation or submit missing components.  Upon the written request of applicant, the department shall re-evaluate an application, taking into consideration the supplemental information submitted by applicant.  Incomplete applications that have not been approved within six months of receipt by the department will remain denied.

 

AUTH:  39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-51-201, 39-51-204, 39-71-105, 39-71-409, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed rule amendment is reasonably necessary to clarify the process for ICEC application.  The department determined that, in addition to requiring an applicant to provide a business mailing address, the physical location of a business where actual contact with customers occurs is an important and necessary proof of an independently established business.

 

The department evaluated the proofs submitted as documentation of independent contractor status and found that one proof may serve as evidence under multiple categories.  For example, business tax filings (up to six points) often include a federal employer identification number (up to one and one-half points).  The amendment affirms the practice of the ICCU staff to award points in all appropriate categories for each item of proof submitted to the department.

 

To further cut down on unnecessary paperwork, the amendment clarifies that no more than two items of proof may be submitted under any single category of proof for each trade, occupation, business, or profession listed on an individual's ICEC application.  For example, the amendment notes that qualifying contracts submitted as proof of independent contractor status may be awarded a maximum of six points, regardless of the number of qualifying contracts submitted for a particular trade, occupation, profession, or business.

 

After meeting with stakeholders, the department determined it is prudent and necessary to adjust the point values of certain proofs of independent contractor status.  The point value for proof of a business location is decreased from six to three points because the IRS now allows a person to deduct use of a home as a business expense when the home is used for inventory storage only.  Conversely, with the increased financial scrutiny spurred by the Homeland Security Act, the department determined that proof of a business banking account deserves three points rather than the prior one and one-half points.  The department found that the award of six points for business registration with the Secretary of State to be excessive.  Consequently, the proposed amendment replaces the dual provisions, which awarded three points for registration of a business name and three points for registering a business entity with the Montana Secretary of State, with a single provision that awards a total of three points for registration of both business name and business entity.

 

Proof of professional licensure continues to earn three points.  The department determined that parity was needed for occupations that do not require a license, and proposes to award three points for educational certification relevant to an unlicensed trade, occupation, or profession.  For truckers, a current motor carrier number in the applicant's personal or business name will be awarded up to three points as clear indicia of independent contractor status.

 

A Dunn and Bradstreet number will earn an applicant one and one-half points as an indicator that the applicant meets the requirements for federal and state government contracting.  Additionally, the department determined that vehicle registration in a business name and an international fuel tax account each deserved one and one-half points as solid indicators of independent business status.

 

The proposed amendment to ARM 24.35.141 affirms that persons exempt from the provisions of the Workers' Compensation Act may apply for an ICEC, even though they are not required by law to apply.  For example, pursuant to Chapter 120, Laws of 2009 (HB204), corporate officers and managers of manager-managed limited liability companies who meet the exemption criteria of 39-41-401(2)(r), MCA, may obtain ICECs from the department if they desire.  The rule explicitly allows the department to award three points for proof that an individual is exempt from the mandate of coverage under the Workers' Compensation Act.

 

The department found that the majority of ICEC applications are denied due to incomplete documentation.  The amendment proposes a 30-day deadline for the department to respond to an applicant in writing.  In addition, the amendment establishes a six-month window within which an applicant may supplement documentation of independent contractor status submitted to the department in order to qualify for 15 points without needing to reapply.  At the end of six months, if a denied application remains incomplete, the applicant may submit a new application with the required fee to start the process over again.

 

The department considered, but rejected, a proposed rule amendment to award extra points for past possession of an ICEC by the applicant.  The department reasoned that a past holder of ICEC has provided sufficient documentation to demonstrate independent contractor status.  Because the department is now scanning and retaining ICEC application documentation and, upon renewal, an ICEC holder is required only to update the proof on file with the department, the proposed extra points do little to relieve the already lightened burden upon the applicant.  The department determined that an award of extra points for past possession of an ICEC would undermine the integrity of the program, which is based to the extent possible on clear proof of current independent contractor status.

 

            24.35.121  APPLICATION AND RENEWAL FEE FOR INDEPENDENT CONTRACTOR EXEMPTION CERTIFICATE  (1)  For the purposes of this rule, the following definitions apply:

            (a)  "Initial application" means a person's first-time application for exemption as an independent contractor in a particular trade(s), occupation(s), profession(s), or business(es).

            (b)  "Renewal application" means an application for renewal of an existing independent contractor exemption certificate held by that person.

            (c)  "Subsequent application" means:

            (i)  an application submitted for reconsideration following the department's denial of an initial application or renewal application;

            (ii)  an application submitted during a current exemption certificate period requesting the deletion, revision, or addition of the trades, occupations, professions, or businesses for which the current exemption certificate was issued; or

            (iii)  an application to reinstate an independent contractor exemption certificate that has been suspended, revoked, or terminated.

            (2) (1)  A nonrefundable fee of $125 is charged for must be submitted with each initial application, subsequent, each application for reinstatement of a revoked ICEC, and each renewal application affidavit.

            (3) (2)  Exemption certificates ICECs are issued for a two-year period, as provided by law.

            (4) (3)  The department may charge a $10 fee for the reissuance of a current certificate.

 

AUTH:  39-71-203, 39-71-401, MCA

IMP:  39-71-120, 39-71-401, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is reasonably necessary to relocate all definitions to NEW RULE I.  Section 39-71-417(3), MCA, requires that the ICEC program be supported entirely by the fees paid by applicants.  The proposed amendment clarifies that the fee for the ICEC application is nonrefundable.  The department determined that the costs involved in processing a denied application are virtually the same as the costs involved in processing an approved application.  The department further determined that "subsequent" applications were no longer necessary due to the proposed amendment to ARM 24.35.111, which allows an applicant to supplement information for department consideration without additional charge during the six-month period following initial submission of an application.  Also, during the period that an ICEC is active, an ICEC holder may supplement, amend, or alter an ICEC without charge by adding or deleting specific trades, occupations, professions, or businesses, as necessary.  Therefore, the provision related to "subsequent" applications has been deleted.  Processing an application for reinstatement involves the same level of effort as an initial application or renewal application.  Consequently, the same fee is proposed for reinstatement applications.

 

Section 39-71-401, MCA, mandates that ICEC application and renewal fees must offset the cost of the administration of the independent contractor certification program.  The department analyzed the program costs based upon an average of 8,772 ICEC applications per year since program implementation in 2005 and found that the nonrefundable application fee of $125 remains commensurate with the projected costs of staff time to assist prospective ICEC applicants and to process and administer ICEC applications.

 

            24.35.131  SUSPENSION OR REVOCATION OF INDEPENDENT CONTRACTOR EXEMPTION CERTIFICATE  (1)  An independent contractor exemption certificate ICEC may be suspended or revoked by the department pursuant to 39-71-418, MCA.  The department shall apply the two-part test pursuant to ARM 24.35.202 to determine whether an individual is an independent contractor or an employee.

            (2)  Regarding suspensions, The department may suspend an ICEC as it applies to a particular hiring agent for whom the ICEC holder works when the department will consider the factors defined in ARM 24.35.302 in order to determine whether an employing unit determines that a hiring agent is either exerting control or retains a right to control to a degree that causes a certificate holder to violate the provisions of 39-71-417, MCA.

            (3)  Regarding revocations, The department may revoke an ICEC when the department will determine whether determines that a certificate holder fails to meet the test for independent contractor status, set forth by ARM 24.35.202.

(4)  The department may revoke an ICEC when the department determines that a certificate holder is uncooperative by considering in light of the following factors:

            (a)  the department is unable to locate the certificate holder;

            (b)  the certificate holder refuses to provide information to the department, including, but not limited to, updated contact information for the certificate holder and contact information for each of the certificate holder's hiring agents;

            (c)  mail sent to the certificate holder is returned to the department; or

            (d)  any reason the department determines sufficiently egregious to warrant revocation of the exemption certificate ICEC.

            (4) (5)  Certificate holders A person may appeal a department suspension or revocation of the certificate an ICEC in the same manner as that provided for denial of an application pursuant to 39-71-417, MCA.

            (5)  As used in this rule, the following definitions apply:

            (a)  "Revoked" and "revocation" mean that the independent contractor exemption certificate is no longer in force or effect.

            (b)  "Suspended" and "suspension" mean that the independent contractor exemption certificate is not applicable to a particular job or to a series of jobs for a particular employing unit.

            (6)  A person with a suspended ICEC as applied to a particular hiring agent may apply for reinstatement of the ICEC by submitting proof to the department of the ICEC holder's independent contractor status in relation to the identified hiring agent. The department shall investigate prior to reinstatement of an ICEC to ascertain that independent contractor status is established in fact.

            (7)  A person whose ICEC has been cancelled by the ICEC holder or revoked by the department may apply for a new ICEC pursuant to ARM 24.35.111.

 

AUTH:  39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-51-201, 39-51-204, 39-71-417, 39-71-418, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.35.131 to remove definitions to NEW RULE I as set forth in this notice.  The proposed amendments describe the procedure for reapplication when an ICEC has been revoked or suspended.  The department determined that it is necessary to include explicit reference to the two-part test for determining employment status, as set forth by the proposed amendment to ARM 24.35.202.  While prior ICCU rules referenced a similar two-part test in the administrative rules of the department's unemployment insurance division, the proposed amendment references the new ICCU rule setting for the two-part test.  The department determined that it is reasonable for the ICCU rules to incorporate the two-part employment status test because the ICCU is the entity primarily responsible for decision-making on issues of employment status within the department.

 

Department investigations may reveal that a hiring agent has exerted control or has the right to exert control over a contract worker, thereby undermining the independent contractor status of that worker.  The amendment affirms the authority of the department to suspend or revoke an ICEC as it applies to a particular hiring agent.  The amendment further provides a mechanism for the suspended ICEC to be reinstated when the ICEC holder rectifies his or her work relationship with a hiring agent by submitting proof to the department that a true independent contractor – hiring agent work relationship exists, subject to verification by a department investigation.

 

            24.35.133  NOTICE OF SUSPENSION OR REVOCATION OF INDEPENDENT CONTRACTOR EXEMPTION CERTIFICATE  (1)  When the department suspends or revokes an independent contractor exemption certificate pursuant to 39-71-417, MCA, ICEC, the certificate holder's waiver of worker's workers' compensation benefits is no longer effective upon departmental notice to the hiring agent(s) agents as designated in this rule.

            (2)  Regarding a suspension, a A hiring agent is considered to have been given notice of the suspension of the exemption certificate an ICEC on the date a written notice is personally delivered to the hiring agent, or three days after the department mails a written notice is mailed to the hiring agent, whichever is earlier.

            (3)  Regarding a revocation, if the department has contact information for a given hiring agent, that hiring agent is considered to have been given notice of the revocation of the exemption certificate an ICEC on the date a written notice is personally delivered to the hiring agent, or three days after the department mails a written notice is mailed to the hiring agent, whichever is earlier.

            (a)  With respect to unknown hiring Hiring agents unknown to the department or potential future hiring agents, such hiring agents are deemed to have notice that an exemption certificate ICEC is revoked at the earlier of when:

            (i)  the department posts notice of the revoked certificate ICEC at its web site; or

            (ii)  the hiring agent has actual knowledge of the department's revocation of the exemption certificate ICEC.

            (4)  The web site address for the department's independent contractor information is www.mtcontractor.com.  The telephone number for verifying the status of an independent contractor exemption certificate ICEC is (406) 444-7734 444‑9029.

 

AUTH:  39-71-203, 39-71-417, 39-71-418, MCA

IMP:  39-71-418, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.35.133 to correct the contact information for the ICCU.

 

            24.35.141  GUIDELINES FOR DETERMINING WHETHER WHEN AN INDEPENDENT CONTRACTOR EXEMPTION CERTIFICATE IS NOT NEEDED REQUIRED  (1)  The independent contractor exemption from the coverage requirements of the Workers' Compensation Act is available only to individual persons, not to business entities such as corporations or manager-managed limited liability companies.  The independent contractor exemption certificate ICEC relieves the person holding the independent contractor exemption certificate ICEC from having to be personally covered by workers' compensation insurance.  The independent contractor exemption certificate ICEC does not relieve the owner(s) of a business from having the mandate to provide workers' compensation coverage for all of the employees of the business.

            (2)  Notwithstanding this rule, any Any person who wishes to obtain apply for an independent contractor exemption certificate ICEC and meets the requirements set forth by ARM 24.35.111 for having an independent contractor exemption certificate may obtain one an ICEC.

            (a)  persons who regularly and customarily perform services at their own fixed business location may elect to apply for an ICEC even though they are not required by law to do so; and

            (b)  persons who are exempt from the requirements of the Workers' Compensation Act under 39-71-401, MCA, or excluded from the definition of "employee" at 39-71-118, MCA, may elect to apply for an ICEC even though they are not required by law to do so.

            (3)  As used in this rule, "person" means a sole proprietor, working member of a partnership, working member of a limited liability partnership, or working member of a member-managed limited liability company.

            (4) (3)  The following persons generally do not need to obtain the independent contractor exemption certificate provided in 39-71-417, MCA an ICEC:

            (a)  any a person who is covered by a workers' compensation insurance policy for the work performed; or

            (b)  persons a person who provide operates their own fixed regular commercial business location where they render the person renders services to the public at large; and is free from the control of a hiring agent.

            (c)  persons who use their home as their fixed regular commercial business location where they render services to the public, if the person is able to meet the IRS criteria to claim a business deduction for their home business location on their federal and state tax returns; and

            (d)  persons who practice in the traditional learned professions such as medicine, law, and accounting, who provide their own business location but may periodically be called upon to render services to their customers at the customer's location.

            (5)  The following persons generally do need to obtain the independent contractor exemption certificate provided in 39-71-417, MCA:

            (a)  a person who regularly and customarily performs services at locations other than the person's own fixed business location;

            (b)  a person not falling within the provisions of (4) where the person primarily provides personal services for commercial customers at the customer's place of business; and

            (c)  a person not falling within the provisions of (4), where the person primarily provides personal services for commercial customers, where the services provided are substantially similar to the customer's business operations.

 

AUTH:  39-71-203, 39-71-417, MCA

IMP:  39-71-417, MCA

 

REASON:  The proposed amendment is reasonably necessary to move all definitions to NEW RULE I.  The proposed amendment deletes the provision stating that persons who practice "traditional learned professions" are exempt from the requirement of obtaining an ICEC because those professions are not specifically exempt by statute.  In fact, a physician, lawyer, or accountant may need to apply for an ICEC if the person meets the criteria of 39-71-417, MCA.  The department further proposes to eliminate the misleading provision that an ICEC is generally needed by the person who "primarily provides personal services for commercial customers, where the services provided are substantially similar to the customer's business operations."  Because such a person is usually an employee of a business and because an employee does not qualify for an ICEC, it is reasonable to delete this confounding direction.

 

Due to the significant number of individuals who are exempt from the requirements of the Workers' Compensation Act, but who nevertheless elect to apply for an ICEC, the proposed amendment affirms that these individuals are welcome to apply.  The supporting documentation submitted by all applicants, whether exempt by operation of law or not, will be evaluated and awarded points by the ICCU in accordance with ARM 24.35.111.

 

            24.35.202  DETERMINATIONS DECISIONS REGARDING EMPLOYMENT STATUS  (1)  When the ICCU or another unit of the department evaluates an individual's employment status, the department shall apply a two-part test to determine whether an individual is an independent contractor or an employee.  The department shall evaluate:

            (a)  whether the individual is and shall continue to be free from control or direction over the performance of the services, both under contract and in fact; and

            (b)  whether the individual is engaged in an independently established trade, occupation, profession, or business.

            (2)  To determine whether a hiring agent exerts control over an individual, the department shall evaluate:

            (a)  direct evidence of right or exercise of control;

            (b)  method of payment;

            (c)  furnishing of equipment; and

            (d)  right to fire.

            (1) (3)  To determine the employment status of an individual, the department may:

            (a)  review written contracts between the individual and the hiring agent;

            (b)  interview and obtain statements from the individual, co-workers, and the hiring agent;

            (c)  obtain statements from third parties;

            (d)  examine the books and records of the hiring agent;

            (e)  review filing status on income tax returns;

            (f)  perform onsite visits; and

            (g)  make any other investigation necessary to determine employment status.

            (2) (4)  Determinations regarding employment status must comply with the criteria for an independent contractor found at 39-71-417, MCA, as well as with existing law on partnership, joint ventures, and other employment entities.  The department will use the criteria in ARM 24.35.302 and 24.35.303 to assess employment status.

            (3) (5)  Initial dDeterminations regarding employment status will generally may be issued by the department's Independent Contractor Central Unit (ICCU). Unemployment Insurance Division or the uninsured employers unit of the department or by the Department of Revenue.  Initial determinations of employment status by the department are binding on the parties unless a party disputes the determination, pursuant to ARM 24.11.2407, 24.16.7527, or 42.17.210.

            (4) (6) ICCU determinations "decisions"  regarding employment must be called "determinations" "decisions" and are separate and distinct from both the initial determinations of the department and "orders" defined at ARM 24.29.205.

(5) (7)  ICCU determinations decisions regarding employment status are binding on the department and on any other agency which elects to be included as a member of the department's ICCU, subject to the limitations contained in ARM 24.35.205(3).  This does not include any agency which is merely appearing before the ICCU as a party in an employment status case (for example the state compensation insurance fund), and has not elected to be included as a member of the ICCU.

            (8)  The department may apply its decisions regarding employment status to similarly situated individuals.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-3-208, 39-3-209, 39-3-210, 39-51-201, 39-51-203, 39-71-415, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is reasonably necessary in order to explicate the two-part test used by the ICCU and other units of the department to determine a person's employment status.  The two-part test was formerly set forth by statute at 39-71-120, MCA, which was repealed by the 2005 Legislature (Sec. 13, Chap. 448, L. 2005).  The two-part test remained in the administrative rules of the department's Unemployment Insurance Division at ARM 24.11.2407.  Although the two-part test has been used as a basis for ICCU decision-making since the ICCU was established in 2005, the test was not referenced in the ICCU's rules.  Therefore, the proposed rule amendment reflects current practice of the department.

 

The proposed amendment deletes reference to the criteria outlined by ARM 24.35.302 and 24.35.303.  Both ARM 24.35.302 and 24.35.303 are proposed for amendment in this notice to clarify that the enumerated criteria presented by these two rules provides only general guidance to the public and ICCU on employment status issues.  The ICCU does not rely solely upon the elements indentified in ARM 24.35.302 and 24.35.303 for ICCU decision-making regarding employment status.  Instead, the ICCU employs the traditional two-part test and the four-part test for control currently used by the Workers' Compensation Court, which are both set forth by this proposed amendment.  Elsewhere in this notice, the two-part test in the unemployment insurance rules at ARM 24.11.2407 is amended to bring the language into conformity with the proposed ICCU rule.

 

The unemployment insurance and uninsured employers units of the department customarily make initial determinations of employment status when conducting an audit of a putative employer.  When a worker or employer disputes the initial determination by the UI auditor, these units will refer the question of employment status to the ICCU for investigation and a decision.  However, if the initial determination of employment status is not disputed, the initial determination stands.  The amendment acknowledges the binding nature of the initial determinations in the absence of a dispute.

 

To bring the language of this rule into conformity with the governing statute, 39‑71‑415, MCA, the department proposes to replace the term "determination" with the term "decision."

 

            24.35.205  BINDING NATURE OF DETERMINATIONS ICCU DECISIONS REGARDING EMPLOYMENT STATUS  (1)  Unless appealed following mediation pursuant to ARM 24.35.206 39-71-415, MCA, written determinations decisions issued by the ICCU are binding on all parties with respect to employment status issues under the jurisdiction of the Department of Labor and Industry department and the jurisdiction of any other agency which elects to be included as a member of the ICCU.  These determinations decisions may affect a party's liability in matters related to unemployment insurance, the Uninsured Employer's Fund, wage and hour issues, the Human Rights Commission, and state income tax withholding.

            (2)  Neither the department nor any other agency which elects to be included as a member of the ICCU may appeal the ICCU's employment status determination decision.

            (3)  If When a party appeals the ICCU's employment status determination decision is appealed by a party which has not elected to be included as a member of the ICCU, the determination decision is not binding on any party until all appeal rights are exhausted.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-3-212, 39-51-1109, 39-71-415, 39-71-417, MCA

 

REASON:  The proposed amendment is necessary because the governing statute, 39-71-415, MCA, uses the term "decision" when referencing a determination of employment status made by the ICCU.

 

            24.35.206  MEDIATION AND APPEAL OF DETERMINATIONS DECISIONS REGARDING EMPLOYMENT STATUS  (1)  A complaint received by the department or a department request for a decision regarding employment status is may be investigated by the ICCU.  The ICCU will shall issue a determination of decision on employment status.

            (2)  Except as provided in (3) and (4), disputes over an ICCU determination regarding employment status must be mediated by the department, and then, if mediation does not resolve the dispute, may proceed to the Workers' Compensation Court.  A party to a dispute, which does not involve workers' compensation benefits, may appeal an ICCU decision on employment status or the denial, revocation, or suspension of an ICEC.

            (3)  The first step in the appeal process is mandatory mediation.  The party requesting mediation shall file a written request for mediation with the ICCU within ten 15 days of notice of the ICCU's determination decision.  The request for mediation is effective upon receipt by the department, not upon mailing.

            (4)  A party is considered to have been given notice of the ICCU decision on the date a written notice is personally delivered or three days after the department mails a written notice is mailed to the party.  The ICCU may extend the time limits for a party to submit a written request for mediation may be extended by the ICCU for good cause shown.

            (3)  Disputes regarding the denial, revocation, or suspension of an independent contractor exemption certificate by an applicant or certificate holder must be appealed to the Workers' Compensation Court without mediation as provided by 39-71-417, MCA.

            (4)  A dispute between a hiring agent and the department involving the issue of whether a worker is an independent contractor or an employee, but not involving workers' compensation benefits, must be appealed to the Workers' Compensation Court without mediation as provided by 39-71-415, MCA.

            (5)  Whenever a party appeals to Following mediation, a party may appeal an ICCU decision by filing a petition for appeal with the Workers' Compensation Court.  The appellant shall serve a copy of the petition by mail under this rule, the party must serve its notice of appeal on all interested parties of record.

            (6)  A petition for appeal must be received by the Workers' Compensation Court within 30 days of the date the department mailed the mediator's report to the parties.  Notice of appeal is effective upon the actual receipt of the petition by the Workers' Compensation Court, not upon mailing.

            (7)  When a dispute is not resolved through mediation and no petition for appeal is filed with the Workers' Compensation Court, the ICCU's employment status decision is binding on the parties.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  2-4-201, 39-3-216, 39-51-1109, 39-71-415, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is necessary because the governing statute, 39-71-415, MCA, was substantively amended by Sec. 3, Chapter 117, L. 2007 (SB 108).  Section 39-71-415, MCA, now requires parties, first, to bring all disputes regarding the decisions of the ICCU on employment status to the department for mediation and further mandates that, following mediation, a party may appeal an ICCU decision to the Workers' Compensation Court by filing a petition for appeal with the court.  The time frames for filings also were changed by the 2007 Legislature.  The new filing deadlines are incorporated in the proposed rule amendment.

 

A petition for appeal to the Workers' Compensation Court initiates de novo proceedings.  Consequently, the ICCU shall not transfer the administrative record to the Workers' Compensation Court.  The proposed rule amendment clarifies that the party seeking to appeal an ICCU decision must attach a copy of the ICCU decision to the petition for appeal and serve that petition on all parties.

 

Section 39-71-415, MCA, uses the term "decision" when referencing a determination of employment status made by the ICCU.  The proposed amendment brings the rule language into conformity with the statutory language.

 

            24.35.207  TRANSFER OF FILE  (1)  Upon receiving a notice of request for appeal or mediation, the ICCU shall identify and mark all exhibits relied on in making the employment status determination decision and send copies of its the consecutively numbered administrative record, including the marked exhibits, to the Workers' Compensation Court or the mediator, whichever applies, and to the parties of record.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  2-4-201, 39-3-216, 39-51-1109, 39-71-415, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is necessary to clarify that the administrative record will be numbered and transferred to the department mediator upon a request for mediation.  Because the ICCU customarily presents the administrative record with consecutively numbered pages, that format has been memorialized in the proposed rule amendment.  Because proceedings in the Workers' Compensation Court are de novo, the ICCU will not prepare and send an administrative record to the court.

 

            24.35.302  INDEPENDENT CONTRACTOR -- GUIDELINES REGARDING EVIDENCE OF CONTROL  (1)  An individual is an employee and not an independent contractor if the hiring agent controls or retains the right to control the way the individual renders services.  The following factors must be considered to determine serve as general guidelines when the department evaluates whether control exists:

            (a)  The the individual is required to follow written or oral instructions concerning when, where, or how work is to be done.  Although some individuals, because of skill or expertise, work without receiving instructions, they may still be employees if the employer has the right to give instructions on work performance;

            (b)  The the success or continuation of a business depends in great part upon the services performed by the individual;

            (c)  The the hiring agent directs the hiring, supervising, or payment of the individuals assistants;

            (d)  The the relationship between the individual and the hiring agent is on a frequent, recurring basis, even if irregular or part time;

            (e)  The the individual is required to perform services at certain established times;

            (f)  The the work is performed on the business premises or jobsite of the hiring agent.  This factor is especially important if the work could be performed elsewhere;

            (g)  The the hiring agent requires, or has the right to require, the individual to perform services in a certain manner, or in a certain order or sequence;

            (h)  The the hiring agent requires the individual to submit oral or written reports;

            (i)  The the individual is paid based on the time spent doing the work rather than a payment for a completed project or end result;

            (j)  The the individual is paid or reimbursed for travel or other business-related expenses;

            (k)  The the hiring agent furnishes the facilities, tools, materials, or other equipment to the individual;

            (l)  The the individual may be discharged at the will of the hiring agent, including the right to discharge for the failure to follow specified rules or methods.  A union contract or statute which restricts the right of discharge does not indicate a lack of control;

            (m)  Training training is provided to the individual by the hiring agent;

            (n)  The the individual does not realize a profit or suffer a loss as a result of the services performed; or

            (o)  The the individual is prohibited or restricted from working for others or is required to devote primary attention to the hiring agent;

            (p)  the individual has signed an overly broad noncompetition clause in a contract with a hiring agent; or

(q)  other factors that indicate control of the individual by the hiring agent.

            (2)  remains the same.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-3-201, 39-51-201, 39-51-203, 39-51-204, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is reasonably necessary to clarify that the rule provides only general guidelines for department evaluation of employment status, not definitive criteria for evaluation.  The proposed amendment puts the public on notice that an overly-broad noncompetition clause in a contract between an individual and a hiring agent is considered by the department to be a strong indication of excessive control.  There also is reasonable necessity to amend the implementation citations to reflect an additional statute that is being implemented by the rule.

 

            24.35.303  INDEPENDENT CONTRACTOR — GUIDELINES REGARDING INDEPENDENTLY ESTABLISHED BUSINESS  (1)  To be an independent contractor, an individual must be engaged in an independently established trade, occupation, profession, or business.  The following factors serve as general guidelines when the department evaluates whether an An independently established business may exist if the individual exists:

            (a)  the individual has a place of business separate from the hiring agent's place of business;

            (b)  the individual supplies substantially all of the tools, equipment, supplies, or materials necessary to perform the services;

            (c)  the individual pays all expenses associated with performing the services, and is not reimbursed by the hiring agent;

            (d)  the individual has two or more effective contracts to perform services for several different hiring agents;

            (e)  the individual is paid based on a billing statement or invoice at completion of the services;

            (f)  the individual performs the services under a written contract that requires complete or partial payment after a certain amount of work is performed, and the contract terminates after a definite time period;

            (g)  the individual advertises services in telephone books, newspapers, or other media;

            (h)  the individual files federal or state business tax forms;

            (i)  the individual has the required customary licenses, registrations, or permits to maintain a business;

            (j)  the individual may realize a profit or suffer a loss from performing the services for the hiring agent.  This factor may be shown if the individual:

            (i)  hires or pays assistants to perform the services;

            (ii)  performs the services at facilities owned or leased by the individual;

            (iii)  has continuing or recurring liabilities associated with performing the services; or

            (iv)  agrees to perform specific jobs for prices agreed upon in advance and pays expenses associated with the performance of the services;

            (k)  the individual has an independent contractor exemption certificate;

            (l)  the individual may not end the relationship at will without incurring liability. An independent contractor agrees to complete a specific job, is responsible for its completion, and may be subject to liability for failing to complete the job in accordance with agreed upon specification; or

            (m)  the individual is not prohibited or restricted from working for others; or

            (n)  another factor that indicates the existence of an independently established trade, occupation, profession, or business.

            (2)  The department shall evaluate and weigh the above factors are weighed and evaluated depending on the circumstances of for each case.  A combination of these factors may indicate that the individual is customarily engaged in an independently established trade, occupation, profession, or business.  Service performed by an individual for pay is considered to be employment until it is shown to the satisfaction of the department that the individual is an independent contractor.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, 39‑71‑417, MCA

IMP:  39-3-201, 39-51-201, 39-51-203, 39-51-204, 39-71-417, 39-71-418, MCA

 

REASON:  The proposed amendment is necessary to clarify that the rule provides only general guidelines for department evaluation of employment status, not definitive criteria for evaluation whether an individual has established an independent business.  There also is reasonable necessity to amend the implementation citations to reflect an additional statute that is being implemented by the rule.

 

            5.  The proposed new rules provide as follows:

 

            NEW RULE I  DEFINITIONS  For the purposes of ARM Title 24, chapter 35, the following definitions apply:

            (1)  "Department" means the Montana Department of Labor and Industry.

            (2)  "Employment status" means the employment relationship between an individual and a hiring agent.

            (3)  "Fixed business location" means a principle place of business for any trade, occupation, profession, or business that is designated by the owner as the physical location where customers are directed for any physical contacts with the business and is the actual location where the majority of the business work is regularly performed.  More than a place to store inventory or product samples, a fixed business location is where a person engages in work intended for commerce.

            (4)  "Hiring agent" means the entity that hires an individual to perform services.  A hiring agent may be an "employer" as defined in 39-3-201, MCA; 39‑51‑202, MCA; 39-71-117, MCA; or other legal entity as defined by an "employing unit" in 39-51-201, MCA.

            (5)  "Incomplete application" means an application submitted for an exemption as an independent contractor that fails to qualify for a minimum of 15 points due to insufficient, missing, unverifiable, or incorrect information; or due to failure to submit an essential component, such as a signed and notarized waiver or required fee.

            (6)  "Independent Contractor Central Unit" or "ICCU" means the unit located within the department which is responsible for making employment status decisions for the entire department and other agencies that elect to participate in the ICCU.  The ICCU evaluates ICEC applications and investigates working relationships identified in complaints and referrals.

            (7)  "Independent Contractor Exemption Certificate" or "ICEC" means a certificate issued by the department that signifies a person meets the criteria for an exemption from the provisions of the Workers' Compensation Act for a specific trade, occupation, profession, or business.

            (8)  "Individual" means a person who renders service in the course of a trade, occupation, profession, or business.

            (9)  "Initial application" means a person's first-time application for exemption as an independent contractor for a particular trade(s), occupation(s), profession(s), or business(es).

            (10)  "Party" means a person or entity designated by the department as plaintiff or respondent in an ICCU decision-making proceeding.  The department, the claimant, employer(s), hiring agent(s), ICEC holders, insurer(s), or agencies of state government may be a party to an ICCU decision-making proceeding or appeal of an ICCU decision to the Workers' Compensation Court.

            (11)  "Person" means an individual.  A person may be a sole proprietor, working member of a partnership, working member of a limited liability partnership, or working member of a member-managed limited liability company.  An officer or manager who has elected to apply for an ICEC pursuant to 39-71-417, MCA, is a person for the purposes of these rules.

            (12)  "Renewal affidavit" means an application for renewal of an existing ICEC held by that person.

            (13)  "Revoked" and "revocation" mean that an ICEC is no longer in force or effect.

            (14)  "Similarly situated individuals" means people who render services for an employer under circumstances substantially the same as those under which the subject individual's services were performed.

            (15)  "Suspended" and "suspension" mean that a person's ICEC is not applicable to a particular job or to a series of jobs for a particular hiring agent.

 

AUTH:  39-51-301, 39-51-302, 39-71-203, 39-71-417, MCA

IMP:  39-51-201, 39-51-204, 39-71-105, 39-71-409, 39-71-417, 39-71-418, MCA

 

REASON:  There is reasonable necessity to adopt NEW RULE I to gather all definitions used in ARM Title 24, chapter 35, in a single location.  The department determined that a definition for "fixed business location" is necessary to more clearly delineate that physical contact with customers at a defined location is a key component.  Consequently, a storage unit or a post office box cannot serve as a "fixed business location" because customer contact is completely absent.

 

            NEW RULE II  ICEC RENEWAL, AFFIDAVIT, AND WAIVER  (1)  Two months prior to the expiration date of an ICEC, the department shall mail an ICEC renewal affidavit and waiver to the ICEC holder at the address on file with the department.  The department shall prepare a renewal form for each ICEC holder that incorporates the most current information in the possession of the department regarding the ICEC holder's independent contractor status and lists the documentation on file with the department that supports independent contractor status.

            (2)  To renew an ICEC, the ICEC holder shall submit the following:

            (a)  signed and notarized ICEC renewal affidavit on the department-approved form that indicates any changes in independent contractor status;

            (b)  certification that previously submitted documentation remains valid;

            (c)  additional documentation supporting independent contractor status, as needed;

            (d)  a fee, as required by ARM 24.35.121; and

            (e)  an executed, notarized waiver on the department-approved form.

            (3)  The department will verify documentation on file and evaluate all new documentation submitted by the ICEC holder.  The department will assign point values to documentation, in accordance with ARM 24.35.111.

            (4)  The department has discretion to assess the reliability of and determine the point value of any documentation not listed in ARM 24.35.111.

            (5)  If the department is unable to verify any documentation needed to support independent contractor status, the department will notify the ICEC holder in writing within 30 days of receipt of the renewal affidavit.

            (6)  To qualify for an ICEC renewal, the ICEC holder's documentation must be awarded a minimum of 15 points by the department for each independently established trade, occupation, profession, or business listed on the ICEC renewal affidavit.

            (7)  An ICEC renewal issued by the department remains in effect for a two-year period unless the department revokes or suspends the ICEC or the ICEC holder requests in writing that the department cancel the ICEC.

            (8)  An ICEC holder may update the information on file with the department at any time during a current exemption certificate period by requesting in writing the revision of business name(s), business structure, phone number(s), or mailing address.

            (9)  An ICEC holder may add or change trade(s), occupation(s), profession(s), or business(es) to an ICEC, by executing an affidavit and waiver and submitting sufficient, relevant documentation to qualify for a minimum of 15 points, in accordance with the requirements of ARM 24.35.111.

 

AUTH:  39-51-301, 39-51-302, 39-71-203, 39-71-409, 39-71-417, MCA

IMP:  39-51-201, 39-51-204, 39-71-105, 39-71-409, 39-71-417, 39-71-418, MCA

 

REASON:  There is reasonable necessity to adopt NEW RULE II to implement Chapter 120, Laws of 2009 (HB 204).  Chapter 120 provides that the department shall adopt rules regarding the department's retention of documents submitted by applicants in support of an initial or renewal application for an ICEC, thereby reducing the burden on renewal applicants to supply information that has been previously provided to the department as part of the application process.

 

            6.  The rule proposed for repeal is as follows:

 

            24.35.201  DEFINITIONS found at ARM page 24-3551.

 

AUTH:  39-3-202, 39-3-403, 39-51-301, 39-51-302, 39-71-203, MCA

IMP:  39-3-208, 39-3-209, 39-3-210, 39-51-201, 39-51-203, 39-71-120, 39-71-415, MCA

 

REASON:  The repeal of this rule is reasonable and necessary for the purpose of adoption of definitions that apply to the entirety of ARM Title 24, chapter 35, as opposed to in a single subchapter.

 

            7.  Concerned persons may present their data, views, or arguments, either orally or in writing, at the hearing.  Written data, views, or arguments may also be submitted to:  Dallas Cox, 1805 Prospect Avenue, P.O. Box 8011, Helena, Montana 59604-8011, faxed to the department at (406) 444-9586, TDD (406) 444-5549; or e-mailed to dcox@mt.gov., and must be received no later than 5:00 p.m., June 14, 2010.

 

            8.  An electronic copy of this Notice of Public Hearing is available through the department's web site at http://dli.mt.gov/events/calendar.asp, under the Calendar of Events, Administrative Rules Hearings Section.  The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered.  In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems, and that a person's difficulties in sending an e-mail do not excuse late submission of comments.

 

            9.  The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency.  Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices, and specifies the particular subject matter or matters regarding which the person wishes to receive notices.  Such written request may be mailed or delivered to the Department of Labor and Industry, Employment Relations Division, attention:  Dallas Cox, 1805 Prospect Avenue, P.O. Box 8011, Helena, Montana 59604-8011, faxed to the department at (406) 444-9586, TDD (406) 444-5549; or e-mail dcox@mt.gov., or may be made by completing a request form at any rules hearing held by the agency.

 

            10.  The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled.  Representative Rob Ebinger, the primary sponsor of HB 204, was contacted by the department on August 19, 2009, in writing and by telephone.  Department counsel notified Rep. Ebinger that work was beginning on the substantive content and wording of the proposed amendments and new rules presented in this notice.  Senator John Esp, who carried HB 204 in the Senate during the 2009 session, was contacted by telephone during the rule drafting process.  Senator Vicki Cocchiarella, the primary sponsor in the 2007 Legislature for SB108, which revised the process for appealing an ICCU decision, was also contacted by telephone during the rule drafting phase.  The department shared electronic copies of the draft administrative rule amendments prior to publication with Rep. Ebinger, Sen. Esp, and Sen. Cocchiarella.  All comments received from bill sponsors were taken into account in drafting this rule notice.

 

            11.  The department's Hearings Bureau has been designated to preside over and conduct this hearing.

 

 

/s/ MARK CADWALLADER            /s/ KEITH KELLY

MARK CADWALLADER                 Keith Kelly, Commissioner

Alternate Rule Reviewer                   DEPARTMENT OF LABOR AND INDUSTRY

 

Certified to the Secretary of State May 3, 2010