Risk-Sharing
Effective July 1, 2015, SDCL 62-1-19-22 allows some independent contractors the option to provide an Affidavit of Exempt Status to your City in lieu of carrying workers’ compensation coverage. This only applies to independent contractors who meet the following criteria:
INDEPENDENT CONTRACTORS and the Work Comp Affidavit of Exempt Status Back in 2015, I wrote two articles on a new law that affects workers’ compensation and some independent contractors. Nearly two years after SDCL 62.1.19-22 became law, we still received questions about what the affidavit really does and when should it be used. In response to questions from our membership, we developed a Bulletin to help educate our members on how and when to use the Affidavit of Exempt Status with independent contractors. The SDML Workers’ Compensation Fund has always recommended that our members should require all independent contractors to provide proof of workers’ compensation insurance coverage before performing work for their City. The reason is to protect your City from the risk of a potential work comp claim. It also protects you from paying for the cost of the work comp coverage for the independent contractor after a payroll audit is performed.
1. They are a sole proprietor. (Not incorporated and not an employee of your City) 2. They do not have employees. (This includes paid temporary help from family, friends or any other person) 3. They contract directly with your City. (There is no General Contractor for the project) For example, it is common for a City to hire a janitor to clean City Hall each week. If the janitor is a sole proprietor, meaning that they do not have employees (including family members that are paid to help perform the janitorial duties) and are not set up as a corporation, an LLC or another type of business entity, then they are not required to carry workers’ compensation coverage under SD work comp law. So how can your City protect itself from a potential work comp claim or a payroll audit invoice? Here is how it works. Prior to the janitor beginning the work, the Affidavit must be signed and notarized by both the City and the Independent Contractor (the Janitor). The Affidavit requires that the contractor complete the Exempt Status Fact Sheet and attach it to the Affidavit. If the contractor would bring any employee to the job, including temporary, seasonal, part-time, a family member or friend, this Affidavit may not protect the City, therefore, the contractor would need to carry workers’ compensation coverage and provide proof that coverage is in force. Please keep in mind that per SDCL 62-1-22, you are not required to accept an Affidavit of Exempt Status as a
SOUTH DAKOTA BASIC CODE Affordable Codification for Small and Mid-Sized South Dakota Municipalities A comprehensive model code of ordinances for municipalities featuring: x Subject matter encountered by municipalities x Annual state law updates x
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A comprehensive index and a title devoted to your unique local ordinances Published by American Legal and the South Dakota Municipal League For more information call or e-mail deRicci Getty at 1-800-445-5588 or dgetty@amlegal.com SOUTH DAKOTA MUNICIPALITIES
