A law passed in Delaware in January requires all businesses, including Independent Contractors and Sole Proprietors, to cover all employees with workers’-compensation insurance, even if they are a one-person operation.
The legislation, Senate Bill 1, was designed to tackle Delaware’s notoriously high workers compensation premiums. However, rather address the root causes of high premiums in Delaware, which most commonly involve workers’-compensation judges who are excessively compassionate with other people’s money and award excessive amounts to dubious claims, or grant benefits to individuals who were not engaged as covered employees, that state’s General Assembly opted to force additional groups, including ICs, to pay workers’-comp insurance, presumably to lower the costs to the already covered groups.
This redistributionist scheme is not only patently un-capitalistic but also eliminates one more freedom which ICs have historically enjoyed, namely, the right to decide the most cost-effective means for insuring themselves. The new mandated coverage will force the most responsible ICs to effectively pay twice for insurance coverage against workplace injuries, as they pay first by purchasing health insurance for their families and disability insurance for themselves, and pay again by purchasing the now-mandated worker’s-compensation premiums.
Delaware’s lawmakers concede that legitimate ICs were never intended to be included in the legislation, but were swept up in efforts to prevent employers from using IC status to avoid paying workers’ comp. This is another classic case of punishing legitimate ICs for the bad (and already illegal) actions of others. The correct – and most equitable – way to target abusers of IC status is to enforce existing laws, rather than to impose additional burdens on legitimate, law-abiding entrepreneurs.
Notwithstanding the original intent of lawmakers (itself questionable), supporters of the enacted legislation now insist that all ICs and Sole Proprietors should in fact be included under the new mandate. Such after-the-fact rationalization betrays a deplorable lack of candor. Moreover, this action reveals an apparent complete lack of understanding among Delaware legislators about the struggling entrepreneurs in Delaware who, in the midst of an uncertain national economy, can ill-afford a new costly mandate.
Implementation of the law has been delayed until mid-July, to allow time for ICs to shop for insurance. In the meantime, an amendment known as Senate Bill 68 has been introduced, ostensibly to clarify coverage under the law and exempt legitimate ICs. However, there remains some controversy over whether or not S.B. 68 will in fact exempt legitimate ICs and others who were never intended to be included under the original bill.
