A Guide to Michigan Workers' Compensation for Painting Contractors

The Rules: When You Need Workers' Comp

The Basics of the Law

In Michigan, the law says that most businesses with employees must have workers' compensation insurance. It's a system designed to help employees who get hurt on the job, no matter who was at fault. This insurance pays for an employee's medical care and lost wages if they get injured or sick because of their work.

For you, the business owner, this insurance is like a shield. If you have the required workers' comp, an injured employee cannot sue you in a regular court for their injury.Their only option is to go through the workers' comp system, which protects your business from expensive lawsuits.

When to Buy a Policy

A painting company in Michigan must have workers' compensation insurance if it meets one of these two rules:

You have three or more employees at one time.
You have fewer than three employees, but at least one has worked for you for 35 hours or more per week for at least 13 weeks in the last year.

This second rule is important for small businesses. Even if you only have one full-time helper, you may be required to have coverage.

Who is Excluded from Coverage?

Some people are not automatically covered by workers' comp.

Sole Proprietors: If you are the only owner of your business, you don't have to cover yourself. However, if you hire anyone else, you still need to follow the rules and cover them .
Partners and Owners: In some cases, partners or owners of a corporation or LLC can choose to be left off the policy. To do this, you must file a special form with the state and your insurance company.

Employee vs. Independent Contractor: A Big Difference

The Dangers of Getting it Wrong

It can be very risky to call a worker an independent contractor when they are legally an employee.If a misclassified worker gets hurt, they can still file a claim with the state. A judge will then look at their job to decide if they were really an employee .

If the judge finds you were wrong, you could be forced to pay all of the worker's medical bills and lost wages . You may also face large fines and other penalties for not having insurance . This can cost you a lot more than a simple workers’ comp insurance policy.

The Test for Independent Contractors

Michigan uses a test with 20 factors to decide if a worker is an employee or a contractor.This test looks at the full picture of the job, not just one thing. The factors fall into three main groups:

Behavioral Control: Does the business tell the worker how, when, and where to do the work?
Financial Control: Does the business control the money side of the job? For example, who provides the tools and materials?
Relationship Factors: How does the business and worker view the relationship? Is it a one-time project or a continuous job?

Employee vs. Independent Contractor Checklist

Factor	Worker is Likely an Employee	Worker is Likely an Independent Contractor
Instructions & Control	The business dictates when, where, and how the work is performed, including methods and materials.	The worker controls the means and methods of the work and sets their own hours and schedule.
Furnishing Tools/Materials	The business provides the majority of the tools, supplies, and equipment needed to do the job.	The worker buys their own tools, equipment, and materials.
Payment Method	The worker is paid a regular wage, such as an hourly rate or salary, regardless of the job's outcome.	The worker is paid a fixed amount for the entire job or project, with an opportunity for profit or risk of loss.
Permanence of Relationship	The relationship is continuous and indefinite, not tied to a specific project with a fixed ending date.	The work is sporadic or project-based, and the worker may take on other jobs from different clients.
Separate Business Identity	The worker operates solely under the business's name and brand.	The worker holds themselves out to the public as an independent business, using their own name and marketing.

What Workers' Comp Covers

Workers' comp is a safety net for everyone. When an employee is hurt, the policy provides key benefits.

Medical Care: The insurance pays for all necessary medical services, like doctor visits, hospital stays, and medicine. The employee doesn't have to pay anything out of pocket.
Lost Wages: If an injury prevents an employee from working, they can get weekly payments equal to 80% of their after-tax average weekly wage.There's a waiting period of seven days, but if the injury keeps them out for at least 14 days, they can get paid for that first week too.
Rehabilitation: The system can also help an injured employee get new training or education if they can't go back to their old job.
Death Benefits: If an employee dies from a work-related injury, the policy can pay for funeral costs and provide weekly payments to their family .

How to Get and Manage Your Policy

Your Options for Getting Coverage

You can get workers' comp insurance in a few different ways.

Private Insurers: Most businesses buy a policy from a private insurance company. An insurance agent, like Redwood Insurance Solutions, can help you find the best coverage.
Self-Insurance: Larger, more stable companies can choose to pay for their own claims.This requires approval from the state and proof that you have enough money to cover the costs.
Group Funds: Some groups of businesses pool their money to share the cost and risk.
Assigned Risk Pool: If you can't get coverage from a private company, you can get it from the Michigan Workers' Compensation Placement Facility. This is an "insurer of last resort".

How to Save Money on Your Premium

You can't change the business Class Code which drives much of the rate, but you can control your EMR (Experience Modification Rate) which gauges your claims history and safety record. The best way to lower your insurance costs is to focus on safety and claims management.

Safety Programs: Stop injuries before they happen by training your team on safety rules and doing regular inspections.
Manage Claims Quickly: When an injury does happen, file the claim quickly and accurately.
Return-to-Work Programs: Offer an injured employee a light-duty or modified job they can do while they heal.This helps them get back on their feet and can lower the cost of the claim.

Factors Influencing Your Premium

Factor	Description	Impact on Premium
Payroll	The total annual wages paid to all employees.	A higher payroll generally leads to a higher premium.
Number of Employees	The size of the workforce.	A larger workforce increases the overall exposure to risk and can lead to a higher premium.
Industry & Class Code	The type of work performed, identified by a specific classification code (e.g., Code 5474 for painting).	A higher-risk industry, such as painting, will have a higher base rate than a lower-risk industry, such as consulting.
Claims History (EMR)	A business's record of past workers' compensation claims, reflected in its Experience Modification Rate.	An EMR above 1.0 increases premiums, while an EMR below 1.0 results in a premium discount.
Location	The geographic location of the business, as rates can vary by state and sometimes by city.	Premiums are affected by state-specific regulations and local market conditions.

Conclusion

Knowing when to get workers' compensation insurance is a key part of running a painting business in Michigan. It's not just a legal requirement; it's a smart business choice that protects you from serious financial risks like fines and lawsuits. By correctly classifying your workers, following the law, and focusing on safety, you can keep your business and your employees safe while also managing your insurance costs.

Need help finding a workers’ compensation policy for your painting business? Reach out to Redwood Insurance Solutions for help finding the best solution for your painting company’s needs.

Bennett Allen